Chile’s Lithium Products May Get US Subsidies, Says Economy Chief
TL/DR –
Chile anticipates its lithium to qualify for subsidies under the US Inflation Reduction Act, potentially boosting investment in the country’s lithium reserves. Chile’s Economy Minister, Nicolas Grau, believes the law’s structure may allow for locally-manufactured lithium cathode to be incorporated into electric vehicles receiving US subsidies. The Inflation Reduction Act aims to motivate automakers to produce more electric vehicles in North America and source key minerals from nations with free-trade agreements, like Chile, while minimizing dependence on China.
Chile Bets on Lithium to Qualify for US Inflation Act Subsidies
Chile aims to make its lithium components qualify for subsidies under the US Inflation Reduction Act, potentially driving new investments from companies looking to exploit the nation’s abundant reserves of the crucial battery metal.
Economy Minister Nicolas Grau believes a successful outcome from talks with the Biden administration, expected to wrap up this year, would enable locally-manufactured lithium cathode to be incorporated into US-subsidized electric vehicles (EVs).
Chile’s Optimism On Lithium’s Role in Global Clean Energy Transition
“We’re expectant of a favorable outcome,” said Grau. Chile, a primary producer of crucial EV components like lithium and copper, is leading the global shift to clean energy. The government introduced a national lithium policy that aims to expand mining areas and spur investment in facilities processing the semi-refined metal into battery parts.
Should the subsidies encompass value-added Chilean lithium, US companies would find it more appealing to invest in Chile, noted Grau. While it’s clear that raw materials like lithium from US allies qualify for the subsidies, the situation remains murky for value-added products like battery cathodes.
The Goal of the Inflation Reduction Act
The Inflation Reduction Act aims to motivate automakers to increase EV production in North America and secure key minerals from free-trade partner nations like Chile and Australia, ensuring independence from economic competitor China.
During a recent Chile visit, US Treasury Secretary Janet Yellen indicated that the US anticipates boosting its lithium imports from the country. Companies like Tesla Inc., which started local operations this year, and LG Energy Solution Ltd. have engaged the Chilean government in lithium discussions recently.
According to government statistics, 65% of Chile’s lithium exports in 2023 went to China, while 25% went to South Korea. Despite a price slump last year, Grau remains optimistic, citing analyst forecasts indicating a promising medium-term outlook.
The recently implemented US-Chile tax treaty, aimed at preventing double taxation on the same income, will ease investment between both countries, added Grau.
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