The trucks seem to never stop on a section of road north of Antofagasta. According to Albemarle’s count, 24 to 30 of them transport concentrated brine over more than 150 miles of desert each day before the liquid is refined into battery-grade lithium carbonate. The majority of buyers of electric vehicles are unlikely to learn about that drive. The evaporation ponds, those odd turquoise rectangles set into the salt flat like an unplanned Rothko painting, will never be visible to them. However, the financing of all the major EV manufacturers, including Tesla, Volkswagen, GM, Hyundai, and Stellantis, flows through that landscape in ways that are not readily apparent on any balance sheet.
Maybe that’s the whole idea. Lenders aren’t merely placing bets on Tennessee or Saxony factories when automakers issue equity linked to their EV transition plans or raise long-term debt. They are indirectly placing a wager on the ability of two businesses that operate under Chilean concessions to continue producing. For a global industrial pivot, that is an exceptionally limited base. The only two majors that are currently producing in Chile are Albemarle and SQM. Extraordinary royalties are paid by both. The day Boric announced the National Lithium Strategy in April 2023, both saw a decline in their stock prices.
Boric has been open about the fact that the strategy itself is a balancing act. His coalition is divided between a more market-oriented group that advocated for keeping private capital at the table and leftists who wanted complete nationalization. A system that mandates future contracts function as public-private partnerships with state involvement has emerged. Current contracts are in effect. The state’s largest copper company, Codelco, has already acquired the majority of SQM’s business and extended its contract until 2060. Even though they would never admit it during an earnings call, there’s a feeling that automakers are quietly relieved by that arrangement. Uncertainty is defeated by continuity, and Wall Street is more forgiving of structures that it can emulate.
The water question is something it finds difficult to model. The Atacama’s delicate hydrological system is used for brine extraction, and local communities have long opposed this practice. We still don’t fully understand the ecological cost. You can feel the conflict between the need for decarbonization and the cost the desert is being asked to bear as you watch this develop from the outside. Both are attempted to be addressed by Boric’s framework. Investors will only gradually learn whether it truly does, contract by contract.
Supply contracts are only one aspect of the financing implications. When Ford or BMW invest billions in EV platforms, their cost of capital is based on projections regarding the availability of lithium through 2035 and beyond. These presumptions are broken if Chilean output stalls due to regulatory obstacles, project cancellations, or just the lengthy development timelines of new salt flats. Already, Australia is the bigger producer. Argentina is expanding quickly and accepting foreign investment with fewer conditions. Open discussion about Argentina surpassing Chile in the next ten years has begun among some analysts.
Prices for lithium have fluctuated, dropping over 70% from their peak in 2022 before leveling off. Automakers have begun writing direct supply agreements and equity stakes into producer balance sheets because that type of swing is difficult for long-term project financing. These days, they purchase more than just lithium. The holes it emerges from are financed by them. And for the time being, nearly all of those holes are located in one nation.
It’s difficult to ignore how much of the EV narrative has come from Shanghai and Detroit, even though a large portion of its financial weight is actually located in a desert that the majority of consumers will never travel to. The true risk resides in that space between perception and structure.
