Lithium supply is under new pressure? Chilean lawmaker asked the court to terminate the tender for a 400000-ton lithium ore contract.

On Tuesday (January 4), Chilean lawmakers applied to the House of Representatives for an injunction aimed at preventing the outgoing government from accepting bids for lithium mining contracts.

Lawmakers from the centre-left opposition PPD asked the Santiago Court of Appeal to end the bid. Representative Ra ú l Soto, one of the sponsors, said that what the government of the current Chilean President Sebasti á n Piera is doing is to put the overall interests of the country at risk. Lithium is a strategic natural resource that is very important to Chile's future.

Chile, which has the largest lithium reserves in the world, announced in October last year that it would provide five quotas of 80, 000 tonnes to domestic and overseas companies, totaling 400000 tonnes of exploration and production contracts. The winning bidder will be given 7 years of exploration and development projects and 20 years of production time. Chile will charge mining rights fees for quota allocation and variable payments during the production period.

The bid will end in mid-January, with the participation of Chilean mining and chemical companies (SQM), the world's two largest lithium giants, and (Albemarle), an American company.

It should be noted that prior to this, the Chilean lithium industry basically only allowed its own enterprises to participate in the development. Data show that the global lithium supply in 2020 is about 443000 tons, which means that Chile's bid is close to global lithium production in 2020.

However, the Chilean authorities' tender for a 400000-tonne lithium mine has been criticized by those on the left. Chilean President-elect Gabriel Boric said Chile should not repeat the historic mistake of privatizing resources such as lithium. During his presidential campaign, Boric promised to raise taxes on mining companies and royalties for mining privileges to fund more social projects and reduce inequality.

Chile's current government has defended the bid, with mining and energy minister Juan Carlos Jobet saying that until 2016, Chile was the world's largest lithium producer, with a 37 per cent market share, but now it has fallen to 31 per cent, overtaken by Australia, and if it does not find ways to increase production, Chile's market share will fall further to 17 per cent by 2030.

The current government plans to hold talks with Boric's team to review the background to the bidding process, the official said. Boric and his team will take office in March.

If the Chilean authorities bid for a 400000-ton lithium mine contract and eventually go bankrupt, the shortage of global lithium supply will further intensify.

Standard & Poor's Global reported in December that there would be a lithium shortage in 2022 as the use of lithium exceeded production and depleted inventories as demand grew further.

The report predicts that the supply of lithium carbonate will climb to 636000 tons from 497000 tons in 2021, but demand will also jump from 504000 tons to 641000 tons.