Chile and EU sign memorandum of understanding to co-operate on lithium projects

Chile and the European Union have signed a memorandum of understanding to develop value-added lithium projects in Chile.

Announced by Ursula Von der Leyen, President of the European Commission, the memorandum of understanding will form a strategic partnership to expand lithium’s availability and boost supply chains.

This is yet another move by Chile to establish its place in the world as a leading lithium producer after the country announced in April that it would expand lithium mining in the country through state-controlled public-private partnerships.

The world demand for lithium

The global demand for lithium is predicted to rise over 40 times by 2040. Known as ‘white gold’, this commodity is the main element of electric car batteries and can fuel the green transition.

After announcing the memorandum of understanding, Von der Leyen stated: “The demand for lithium is expected to grow significantly on both our continents because we are working to decarbonise our economies.

“Here, critical raw materials play a great role. There are no wind turbines without lithium, for example, and there are no batteries without critical raw materials.”

Chile’s position as a lithium producer

Chile was the world leader in lithium production until six years ago. Then, Australia took the lead and began to extract lithium from hard rock.

In 2022, Australia mined approximately 47% of the world’s lithium supply, while Chile mined around 30%. China is third, followed by Argentina, which supplies roughly 5% of the world.

Despite South America’s market share remaining limited for now, a memorandum of understanding will make the continent an appealing place for the development of critical raw materials.

The importance of the memorandum of understanding

Von der Leyen explained: “We look at the demand for lithium, and this is why we have agreed we want to work on a strategic partnership on sustainable raw materials. The memorandum of understanding will increase the whole value chain.”

As part of the deal, the countries’ leaders also announced additional projects as part of the EU-Chile green hydrogen programme. The ‘Team Europe Fund for Renewable Hydrogen in Chile’ programme will fund a new renewable hydrogen project in Chile.

The fund will be given over €200m, with most of the funds coming from the European Investment Bank and KfW.

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