Lithium: Posco-Samsung, Fulin and Molymet win Corfo tender for discounted lithium

POSCO logo

Access to preferentially priced lithium carbonate produced from Albemarle’s Salar de Atacama – La Negra operation in Chile has been granted to a South Korean consortium of Posco-Samsung SDI, Chile’s Molymet and China’s Sichuan Fulin Industrial Group. Together, these companies could produce around 58,000tpy of cathode materials in Chile, with an investment of US$754M generating 650 new jobs.

Posco and Samsung SDI will initially invest US$54M to establish a plant to produce 3,200tpy of NMC and NCA cathode materials in the northern city of Mejillones, with expansion to 19,000tpy envisioned under the tender. The JV aims to start operation of the first facility in the latter half of 2021. Fulin’s tender was to construct a 20,000tpy cathode material plant in Chile, but making LFP, at a cost of US$100M. Molymet will produce LFP and also LMO, at another 19,000tpy cathode materials plant likely also to be sited in Mejillones.  Neither Fulin nor Molymet has yet outlined their full development plans, however.

With 21,250tpy of lithium carbonate currently available from Albemarle’s 85,000tpy quota, each party will gain access to around 7,000tpy, although the higher lithium loading per tonne of NMC/NCA versus LFP/LMO may skew more volume to Posco-Samsung SDI. It is unclear how the preferential price will be calculated, but one scenario is pricing will be FOB Chile basis, which is normally discounted from CIF/DDP due to shipping and country/regional sales price additions.

Roskill’s view:  In the case of NMC and NCA cathode materials, lithium is not a significant cost compared to nickel and cobalt, and each user would have had to consider the pros and cons of moving what is a dominately Asia-based business to Chile: access to skilled labour, production costs, proximity of end-users, and taxes. Roskill does not believe that a preferential price for lithium is the driving force for these companies’ decision to enter the tender; it is likely more about security of supply in what has become an increasingly competitive lithium market. Following the recent agreement with SQM, 25% of SQM’s production will also now be available via Corfo to companies investing in added value in Chile on the same basis; Chile could now become a significant participant in the global lithium-ion battery cathode market.