SAO PAULO -- Resource companies are expanding production at South America's lithium mines to meet growing demand for the key battery material as the Chinese government promotes electric vehicles as national policy.
Chilean mining company SQM has announced plans to invest $525 million at domestic refining facilities. The aim is to nearly quadruple annual lithium carbonate output to 180,000 tons from 48,000 tons by 2021.
"Over the past two years, we have been selling more lithium than our nameplate capacity pressuring our production and logistics, thus reducing inventories," the company said on Thursday.
The investment is seen as targeting demand from China, which now boasts the world's largest market for electric vehicles. The news also comes days after the May 17 announcement of an agreement to sell a 24% stake to China's Tianqi Lithium for about $4 billion.
In Argentina, U.S. chemical maker FMC will invest $300 million by 2019 to double lithium carbonate output to 40,000 tons. Japanese trading house Toyota Tsusho is also working to raise lithium carbonate output with an Australian mining partner in which it holds a stake.
Lithium prices have soared in recent years. The U.S. Geological Survey said lithium carbonate prices averaged $13,900 per ton in 2017 -- a doubling in two years.
"The Chinese government's promotion of electric vehicles has created a bubble," a Japanese battery maker said.
Some believe that demand for battery materials will remain firm as Europe also makes the switch from internal combustion engines to electrification.
Such South American countries as Chile and Argentina are home to 60% of the world's lithium deposits, according to the USGS. Solar evaporation is the main method they use to harvest lithium brine from salt lakes.