Argentina will start operations at the first lithium battery cell factory in Latin America before the end of the year. The country aims to boost its position in the region’s electric transport and energy storage markets, and go beyond simply producing the lithium that is critical to their growth.
The plant, and ambitions to add value to Argentina’s lithium industry through domestic processing of the metal, have been backed by the government of outgoing president Alberto Fernández. But optimism for these efforts is not shared by all industry players, with some seeing it as mere wishful thinking, in a challenging race to compete with the world’s battery production powerhouses such as China, the United States and Europe.
The majority-state-owned company Y-TEC is set to open its first industrial-scale lithium battery plant in the city of La Plata, in Buenos Aires province. The facility arrives after several years of research and US$10 million of investment that allowed the company to carry out laboratory work and first test the feasibility of the project at a pilot plant.
“This is a milestone for us,” Y-TEC president Roberto Salvarezza tells Diálogo Chino. The battery facility’s opening, he says, shows the progress the company has made to reach “total knowledge of the technology” and allow industrial-scale production.
The plant will have an annual capacity of 15 megawatt hours of battery power, which is equivalent to the amount of energy needed to run 2,500 homes or 400 electric vehicles for 12 months, Y-TEC says. However, the company will reportedly not target the auto industry initially, instead prioritising energy storage for mobile army radar and remote, rural locations not connected to the national grid.
“This is an historic event, as it settles the debate on the possibility of making batteries in Argentina,” says Hernán Letcher, vice-president of Y-TEC’s controlling company, YPF Litio. “Now we move on to another debate, which is in which market we are going to place them. I think we can make batteries for renewable energy storage in isolated communities and, in the future, target the regional electromobility market.”
Argentina currently has three operational plants to produce lithium carbonate, the key component of lithium-ion batteries. But as many as 38 projects concentrated in the country’s north-west are in the exploratory stage and could start production in the next five years. In 2022, some 33,000 tonnes of lithium carbonate were produced – around 5% of global production. Given the magnitude of Argentina’s resources, this position could escalate rapidly: the country is estimated to be home to nearly 25% of the world’s lithium resources, placing it second in the world after Bolivia.
According to data from Argentina’s economy ministry, 42% of the country’s lithium production in 2022 was exported to China, the world leader in electric vehicle manufacturing, which creates huge demand for the metal. In turn, China has so far played a significant role as an investor in lithium projects in Argentina. Chinese companies are part of various exploratory projects, and Ganfeng Lithium is an investor in the operational Cauchari-Olaroz plant in Jujuy province.
Private sector doubts
The government’s optimism over the prospect of adding value to Argentina’s lithium production is contrasted with caution, even scepticism, from mining companies. Figures in the industry told Diálogo Chino about the long-term nature of such developments, and that the country must first focus on establishing itself as a reliable producer of lithium carbonate. This alone will require large investments and technical improvements.
According to Jorge González, who heads up Argentina’s directorate for the mining economy and its promotion, setting up a project to produce lithium carbonate requires a minimum of two years – not including the prospecting period – and requires an average investment of $400 million, depending on its size.
Beyond the debates around the industrialisation of lithium, reluctance among mining companies is due to their mistrust of a national government that they argue has sought to take over part of their business. Representatives of such companies declined to comment, citing the sensitivity of the issue. Off the record however, some expressed opposition to several legal proposals that would set a quota for a share of production to be procured for the domestic market at a lower price than their export value.
The most recent of these proposals was presented in May by left-wing congress members of the outgoing coalition, Frente de Todos (now Union por la Patria). The bill proposed lithium as a “strategic resource” and of “national public interest”, and that the state should have the first say on acquiring extracted lithium, leaving only the surplus for the private sector. The initiative has been rejected by the provinces in which production is concentrated, which according to the Argentine constitution are the rightful owners of this resource; these provinces have set different regulations, notably less interventionist and more open to private capital.
One of the country’s leading academic experts on lithium is José Gustavo Castro, vice-president of the Chamber of Mines of Salta province. He has devised courses on lithium production and sustainable mining at several universities in Argentina.
While Castro welcomes Y-TEC’s progress in moving up the lithium chain via research and development, he warns that “it is very unlikely that Argentina will become a competitive country in the medium-term in battery manufacturing.”
Having lithium and making batteries is similar to saying that because we are producing aluminium in Puerto Madryn, we should be making Boeing 747sJosé Gustavo Castro, Chamber of Mines, Salta province
“Every day there are new developments in this area and we are far behind the mega-factories in China, Korea, Japan, the United States and Europe,” Castro adds. “For practical purposes, our advantage is the production of lithium carbonate and, from that, we can do a lot in terms of generating research, development and knowledge.”
For Castro, Argentina is potentially burdened by its industrialist heritage, which he says creates social pressure to manufacture batteries: “It is almost as if it were a sin not to do so, but this is not supported by reality.
“There is a technological gap between having lithium and making batteries that is almost similar to saying that because we are producing aluminium in Puerto Madryn [in Argentina’s south], we should be making Boeing 747s.”
Materials scientist Eleonora Erdmann is a researcher from the University of Salta. She says the attention on lithium processing often distracts from the importance of first achieving high-quality production of lithium carbonate, lithium hydroxide and lithium chloride. Should there be advances in the development of higher-energy technologies, such as solid-state batteries, then raising the quality of this production “would also bring a level of technological know-how that can quickly become resilient”. This know-how and resilience would “give time for technology transfer to adapt to changes that we cannot ignore in a globalised world,” Erdmann adds.
In addition to the question of whether the country can compete in the regional battery market, there is another debate surrounding the battery technology chosen for production at the La Plata facility. For Saúl Feilbogen, a lawyer specialising in lithium who chaired November’s Argentina & LATAM Lithium Summit in Buenos Aires, it is feasible that another technology will leapfrog the lithium-ion phosphate battery being produced by Y-TEC.
Currently, there are two main types of batteries in competition. Lithium-ion phosphate (LFP) batteries – based on lithium ferrophosphate – make use of small sheets of iron phosphate. This is a much cheaper material, but one which offers less range for electric vehicles. The other type is NCA: batteries that use a cathode made of nickel, cobalt and aluminium oxides. These materials are more expensive, difficult to obtain and have a greater environmental impact. Their great advantage, however, is the higher capacity they offer when compared to LFPs of the same size.
“The technology is leaning towards cobalt, nickel and aluminium oxide batteries. If these are imposed, Argentina will be left out of the race because they are very expensive and scarce materials,” Feilbogen warns.
When asked by Diálogo Chino, Y-TEC defended its choice of battery, pointing to LFP technology being chosen by Tesla, Volkswagen and Ford. “Europe is currently building large factories of this type. Nobody invests millions of dollars if they are thinking about a technological change in the short-term. It is the cheapest technology, the safest and the one with the longest lifespan,” says Salvarezza.
What next for Argentina?
However important it may be as the first link in Argentina’s technological development, one plant with a 15 MWh capacity is far below the magnitude that is planned – and operational – across the global industry, where installed capacity is often 100 times greater in order to gain cost efficiency through scale.
The total global lithium battery capacity in 2022 was 1.57 terawatt hours – 1.2 TWh of which was located in China – and China, the US and Europe all have lithium battery factories with capacities of multiple gigawatt hours per year.
Y-TEC acknowledges its early stage of development, and has drawn up a roadmap to reach a larger scale within several years. The next big step will be taken in 2024, when a second battery plant with a capacity of 75 MWh is set to enter operation in the northern city of Santiago del Estero. With this capacity, the company estimates that it will be able to meet the domestic demand for renewable energy storage in villages isolated from the national grid, as well as the armed forces’ mobile radars.
“For the next stage, we are talking to all the players in the industry who may be interested in carrying out the production of the cathodes, or with a partner for the production of the battery cells in order to scale up this production,” says Salvarezza.
Along the same lines, Hernán Letcher says that the next step will be improving the quality of the process and reducing its costs. He adds: “Argentina has an advantage in supplying the South American market because in addition to having lithium, it has car assembly plants.”
Y-TEC’s roadmap faces uncertainty following the victory of Javier Milei in the country’s second-round election on 19 November, with the radical libertarian set to assume the presidency on 10 December. During his campaign, Milei repeatedly announced his intention to divest the majority state-owned oil company YPF of all its non-profit business units – such as Y-TEC – in order to facilitate its privatisation.
The 51% state-owned YPF saw its shares surge in the wake of Milei’s victory, after which an anonymous source from the Milei team told Reuters: “We are still trying to see all the businesses or activities where YPF participates and which ones it should be concentrated on. But we are still in a preliminary stage.”
Milei has also advocated for no state intervention in the country’s lithium industry, meaning the process of value addition would be largely decided by private capital alone.