Centuries ago, European explorers sought spices in the Indonesian archipelago, monopolizing global spice trade and bringing immense wealth to those who came. Now, history repeats itself with lithium as the future spice.

The urgent demand for lithium in electric vehicle (EV) manufacturing has generated an unprecedented need for this alkali, causing its price to skyrocket. Lithium has evolved from being merely a catalyst for making glass and ceramics to an indispensable element for the global energy transition. Since 2020, lithium prices have surged more than tenfold, reaching record highs of nearly $85,000 per metric ton.

Argentina, Bolivia, and Chile are at the center of this transformative industry. There lies what is known as the Lithium Triangle, a region of the Andes that is abundant in lithium reserves. These countries hold 53 percent of the world's confirmed lithium reserves, with 21 million tons in Bolivia, 20 million tons in Argentina, and another 11 million tonnes in Chile, according to the 2023 US Geological Survey report.

What sets them apart from other lithium-producing countries like Australia, China, and the US is their expansive lithium brine source in salt flats. While hard rock lithium mining uses traditional ore techniques and thus requires a huge capital in the initial stages of the operation, lithium brine relies on solar evaporation and normally needs less capital to start. Lithium brine can also yield lithium carbonate, a product that is already in high demand in the battery market.

The emerging strategic importance of lithium has drawn significant foreign capital. Many countries are now aware that gaining control over the lithium supply chain is the key to maintaining technological edge and geopolitical influence. Lithium has become part of the great power competition, with the US and China at the forefront of this race.

Many global companies have attempted to gain control of this Triangle. China has surged ahead, securing a dominant position, with the US and other developed countries trailing behind. In Chile, concessions have already been made for SQM, a Chilean firm partially owned by China, and the US-based Albermarle. In Argentina, Ganfeng Lithium has become the majority stakeholder in Caucharí-Olaroz salt flats. China's reach in Argentina could widen in the future through its Belt and Road Initiative, which Argentina joined in 2022.

In contrast, the US is intensifying efforts to strengthen its domestic battery production in bid to achieve complete North American production for EV components. Despite its ambitions of achieving half of the EV sales by 2030, these efforts are predominantly limited within U.S. borders and among its North American partners.

Chile: Leading the Charge

Among the countries in the Lithium Triangle, Chile stands as the only country currently producing lithium on a competitive commercial scale. In 2022, Chile contributed around 25 percent of the world's lithium output, second only to Australia. Chile boasts an array of more than 40 salt flats, with dozens of them already in varying degrees of operational readiness. Coupled with its friendly investment climate, the country’s primacy in lithium production is driven by the ideal conditions it offers, such as the brine’s purity, a favorable climate, and the proximity of salt flats to the ports.

To bolster lithium production and the state’s interest, Chilean President Gabriel Boric announced the national strategy for lithium in April 2023. Central to this strategy is the establishment of a 100-percent state-owned lithium company, entrusted with coordinating public-private cooperation for salt flat exploitation. 

Although initially hinted at by the media as the nationalization or complete state control of the lithium resource, this move in fact does the contrary. The government-facilitated partnership can actually boost the investors’ confidence, knowing that they will receive government support and access to a more transparent regulatory framework. This will encourage more foreign companies to inject their capital in Chile’s lithium projects.

Chile is also gearing up for developing the downstream lithium industry, a strategic move that will position the country as the champion of the clean energy revolution. Plans are already underway, with Chile's salt flats concession authority Corfo announcing a partnership with China's BYD, the world’s largest EV producer. BYD, which manufactured 1.8 million EVs in 2022 --surpassing Tesla’s 1.3 million EVs-- will invest $290 million in a lithium cathode factory in Antofagasta.

In a mutually beneficial arrangement, 25 percent of the lithium produced in the Salar de Atacama, Chile's largest salt flat, will go to Corfo at lower prices. The produced lithium will serve as the raw materials for the partnership with BYD.

Argentina: Eyeing for the Runner-Up Position

Argentina is the world’s fourth-largest lithium producer, accounting for 6 percent of the global production. However, the country is projected to overtake Chile as the second-largest producer before the end of this decade. 

Argentina’s advantage lies in many advanced exploration phases. Argentina currently has six lithium projects under construction and dozens others in the advanced exploration or feasibility stages. Existing operations are expected to give a boost to Argentina’s lithium production. The US firm Livent's Fénix project and Australian Allkem Ltd's Salar de Olaroz project are set to double their lithium output to reach 42,500 tonnes. The Cauchari-Olaroz project, jointly owned by China and Canada, will commence production this year with a capacity of 40,000 tons of lithium carbonate.

What has also become Argentina’s uniqueness in the lithium competition is its flexibility, thanks to its federal system. Within this system, mineral resources fall under provincial jurisdiction, allowing lithium-rich provinces like Catamarca, Salta, and Jujuy, to manage their reserves separate from federal oversight. China has leveraged this regional approach, contributing to its triumph in establishing a presence in the region.

Provincial authorities hold the authority to issue concessions and permits, fostering joint ventures and exploration initiatives with foreign enterprises. In Catamarca’s case, this decentralized approach has led to numerous partnerships between its provincial firm, CAMYEN, with foreign companies in exploration and exploitation activities.

Bolivia: Still Largely Untapped Potential

Despite having the largest lithium reserve out of the three, Bolivia significantly lags behind Chile and Argentina in its lithium exploitation. Unlike those of its neighbors, Bolivia’s salt flats contain higher levels of impurities and frequently endure an extended rainy season, making it harder to achieve commercial feasibility.

To overcome this challenge, Bolivia's lithium company, YLB, has called foreign companies to develop Direct Lithium Extraction (DLE) technology. The DLE can bypass the need to evaporate lithium brine in huge evaporation pools by directly channeling the brine into a processing unit, where it undergoes chemical procedures to produce lithium carbonate or lithium hydroxide swiftly. This method will eliminate the dependency to weather changes.

Bolivia has recently inked agreements with Russia's Rosatom and China's Citic Guoan Group and CATL. These deals will enable the construction of two DLE processing plants that are expected to produce more than 45,000 tons of lithium carbonate annually. Rosatom, in particular, has committed a substantial $600 million to this project, marking Russia’s first large-scale lithium project abroad.

Opportunities for Indonesia?

At the recent 43rd ASEAN Summit, President Joko “Jokowi” Widodo underscored the importance of a sustainable supply chain for advancing the EV ecosystem. President Jokowi’s vision is clear: ASEAN must be able to boost its economic growth by riding the waves of the EV boom. Indonesia subsequently deals an agreement involving South Korea, Japan, and China to foster the EV industry.

Indonesia itself seeks to be the world’s leading car battery producer. The country’s automotive industry even aims to have EVs represent 20 percent of the manufactured vehicles by 2025. Despite Indonesia’s abundance in nickel, it is a different story for lithium. According to state-owned mining firm MIND ID, the domestic upstream mining industry in Indonesia still imports lithium hydroxide from China, Australia, and Chile, with an annual demand of around 70,000 tons. This import dependency encompasses 20 percent of the raw materials required for EV batteries.

Indonesia cannot fall behind the US, China, and other developed countries in the race for lithium. In this consideration, Latin America offers prospective and lucrative incentives for securing lithium. Indonesia should eye for more ambitious targets, including acquiring several lithium mines abroad through private-public partnerships with local enterprises.

Indonesia actually has taken encouraging initial actions. For instance, the recently signed memorandum of understanding (MoU) between Indonesia’s Chamber of Commerce and Industry (Kadin) and the Western Australian government to explore potential critical mineral cooperation to develop the EV industry. MIND ID's ongoing efforts to solidify plans for acquiring lithium mines abroad are also a positive development. 

However, more players from the mining sector are needed to explore this untapped potential. Acquisitions need capital, technology, and expertise in mineral extraction, particularly in the salt flats of Lithium Triangle -- the region that is expected to dominate the global source of lithium in the near future. Sending our engineers and mining experts to this region would enable them to research and participate in lithium brine projects. Indonesia should also consider supplying nickel to this region, given the growth potential in the downstream lithium industry.

As Indonesia embarks on the journey to become the world's leading EV battery producer, it is imperative for Indonesia to actively participate in the global race to secure these critical resources.

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Anindita Aji Pratama is an Indonesian diplomat with a passion for Latin American affairs and global political economy. He holds a Master's degree in Government and Commercial Law at the Australian National University (ANU). The views expressed are his own.