Chile signs deal with USA to make lithium IRA-compliant

A Chilean delegation led by Economics Minister Nicolas Grau has negotiated an agreement with the US government, allowing lithium products made in Chile to meet US procurement requirements for electric vehicle batteries. To qualify for half of the tax credit ($3,750), 40% of the battery’s critical minerals must be sourced from the US or a free trade agreement country, increasing to 80% by 2027. Chile, holding the largest lithium reserves globally, sees this as a significant opportunity as the US heavily invests in electromobility, emphasizing the origin of raw materials. The agreement clarifies that Chilean-produced cathodes will be eligible for US subsidies, making investments in Chile’s lithium sector more appealing.

Previously, only Chilean lithium processed into cathode materials by US companies was clear for IRA funding, while Chilean-made cathodes imported into the US lacked clarity. The Chilean government aims to capitalize on the rising demand by offering preferential prices for producing lithium iron phosphate cathode materials, attracting investment from Chinese companies despite US efforts to exclude them from the market. Additionally, American and South Korean companies, like Hyundai, Kia, LGES, and SK On, are interested in Chilean lithium, with some already securing long-term purchase agreements with Chilean mining company SQM.

What do you think? How could the agreement between Chile and the US impact the global lithium supply chain, and what potential challenges might arise from the involvement of various international stakeholders?

Source: https://www.bnnbloomberg.ca/investing/2024/07/10/chile-wins-us-tax-credit-treatment-for-battery-component-made-from-lithium/

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