Chile's Lithium Pivot: Reading the SQM-Codelco Joint Venture Through a Trade and Tariff Lens

The strategy in plain language #

When President Gabriel Boric unveiled the National Lithium Strategy on April 20, 2023, the headline framing was nationalization. The reality is more nuanced and more interesting for trade analysts. Chile did not expropriate SQM or Albemarle. Instead the government set a rule that all future lithium projects in salars considered strategic must operate under public-private partnerships in which a state entity holds majority control or a controlling stake. Existing contracts run to their stated end dates, which is 2030 for SQM and 2043 for Albemarle, after which renewal is contingent on the new model.

Codelco, the state copper champion, was named lead negotiator for the Salar de Atacama, and ENAMI took the lead for several smaller salars including Salares Altoandinos. The strategy also created a National Lithium Company as a longer term holding vehicle, although that entity remains in formation as of the first quarter of 2026. For trade compliance teams the practical takeaway is that Chilean export licenses, royalty schedules, and offtake terms are now negotiated through a state intermediary, which changes documentation, timing, and counterparty risk in ways our TradeWeave platform tracks at the shipment level.

Inside the SQM and Codelco joint venture #

The binding agreement signed in May 2024 and ratified through 2025 created a joint venture covering SQM's Salar de Atacama operations from January 1, 2025 through December 31, 2060. From 2025 through 2030 SQM continues to operate under its existing CORFO lease while the JV prepares the transition. From 2031 through 2060 Codelco holds 50 percent plus one share of the JV, granting the state operational control while SQM contributes its mining know how, the Carmen lithium chemical plant in Antofagasta, and a substantial share of working capital.

Production caps were also reset. The JV is authorized to extract a cumulative 2.5 million metric tons of lithium metal equivalent through 2060, with annual production allowed to rise to roughly 280,000 to 300,000 tons of lithium carbonate equivalent, up from the previous CORFO ceiling. The deal also commits the JV to deploy direct lithium extraction technology in at least one production module by 2031, with the explicit policy goal of cutting brine consumption in the Salar by between 50 and 65 percent relative to current evaporation pond methods.

Public stake mechanics and revenue capture #

Understanding who captures what dollar of lithium revenue is central to any tariff analysis. Under the legacy SQM lease, CORFO collected a sliding scale royalty that ranged from 6.8 percent at prices below 4,000 dollars per ton to 40 percent at prices above 10,000 dollars per ton. That structure delivered very large windfalls during the 2022 and 2023 price spike, with CORFO receipts exceeding 5 billion dollars in 2022 alone according to Banco Central de Chile balance of payments data.

Under the JV, the state's revenue mix shifts from royalty heavy to equity heavy. Codelco receives its share of operating profit, plus a continued but lower royalty band, plus a community benefit transfer earmarked for the Atacama indigenous communities and the Antofagasta region. Our modeling suggests that at a sustained carbonate price of 18,000 dollars per ton the Chilean state captures roughly 55 to 60 percent of project free cash flow, compared with about 45 percent under the legacy royalty regime. At depressed prices near 11,000 dollars per ton the state share falls to roughly 40 percent, but the volatility is dampened relative to the pure royalty model. Treasury teams hedging Chilean fiscal exposure through copper and lithium baskets should recalibrate their beta assumptions accordingly.

Direct lithium extraction pilots #

Direct lithium extraction, or DLE, sits at the technological core of the strategy. Unlike conventional evaporation, which pumps brine into solar ponds for 12 to 24 months, DLE uses sorbents, ion exchange resins, or membranes to selectively pull lithium from brine and return depleted brine to the salar. For a country whose mining sector is constantly under water stress litigation, the appeal is obvious. The Salar de Atacama sits in one of the driest places on earth, and the indigenous communities of the Atacama have been increasingly vocal about hydrological impact.

As of the first quarter of 2026 there are at least four publicly disclosed DLE pilots in Chile. SQM is piloting a sorbent based system at Salar del Carmen with reported lithium recoveries above 80 percent, well above the 50 to 55 percent typical of pond operations. Codelco is running a separate pilot in collaboration with a Korean technology partner. Albemarle has expanded its La Negra pilot. ENAMI has tendered a technology agnostic pilot for Salares Altoandinos. None of these have crossed into commercial scale, and the gap between pilot recoveries and operating cost at scale remains the central uncertainty. For trade analysts, DLE matters because it shifts the cost curve, the carbon intensity disclosed under EU Battery Regulation passport rules, and the timing of new Chilean tonnage hitting global markets.

Comparing Chile, Argentina, and Bolivia #

The Lithium Triangle is often discussed as a single bloc, but the three countries now sit on three very different points along the public to private spectrum. Argentina under the Milei administration has reinforced an open regime with low federal royalties, provincial autonomy, and the RIGI investment incentive that offers tax stability for projects above 200 million dollars. Bolivia has retained its state company YLB as the sole operator, with foreign technology providers acting as service contractors rather than equity partners. Chile now occupies a middle ground in which the state is a controlling shareholder rather than the sole operator or a passive royalty collector.

These institutional differences flow through to project timelines, capital cost, and country risk premiums. Argentine projects are reaching commercial production roughly two to three years faster than comparable Chilean projects, but at higher water and community risk. Bolivian projects continue to face execution challenges, with YLB delivering well below stated capacity. Chilean projects benefit from infrastructure and a deep technical labor pool but carry the negotiation overhead of state co control. For sourcing teams the practical implication is that diversification across the three jurisdictions is now a function not just of geology but of three very different political economies.

Cathode grade carbonate against battery grade hydroxide #

The product mix flowing out of Chile is shifting in parallel with the institutional changes. Historically Chile has been a carbonate heavy exporter, with carbonate suited for LFP cathodes and for many NMC formulations. Hydroxide, which is preferred for high nickel NMC and certain solid state cathode designs, has been a smaller share. As global cell chemistry continues to bifurcate, with LFP dominating mass market electric vehicles and stationary storage while high nickel chemistries hold the premium and long range segments, Chilean producers face a choice. SQM has expanded hydroxide capacity at Carmen and is targeting roughly 40 percent hydroxide in the 2027 product mix, up from about 25 percent in 2023.

Tariff treatment differs across these products. The United States Inflation Reduction Act offtake rules, the EU Critical Raw Materials Act benchmarks, and several Asian free trade agreements treat carbonate and hydroxide differently in terms of origin rules, processing credits, and downstream value capture. Our TradeWeave platform tracks the harmonized system codes 2836.91 and 2825.20 separately and reports landed cost differentials at the contract level. Procurement teams that anchor their cell chemistry roadmap to a fixed Chilean carbonate hydroxide ratio should re plan against the JV's 2026 to 2030 product slate rather than against historical averages.

Three scenarios for 2026 to 2028 #

Our Promethean policy engine and TradeWeave shipment data combine to produce three scenarios for Chilean lithium through 2028. The base case, which we assign 55 percent probability, sees the SQM Codelco JV operating smoothly under transitional governance, with cumulative output of roughly 870 thousand tons of LCE across 2026 to 2028, hydroxide share rising to 38 percent, and DLE deployment confined to pilot scale. Carbonate prices stabilize in a 14 to 19 thousand dollar per ton band, and Chilean fiscal receipts from lithium settle near 4 billion dollars per year.

The upside case, at 25 percent probability, has DLE crossing into early commercial deployment by late 2027, the National Lithium Company becoming operational, and a successful tender for Salares Altoandinos under a Codelco or ENAMI led consortium. Output would lift toward 950 thousand tons of LCE across the three years and Chilean share of global supply would rise back above 30 percent. The downside case, at 20 percent probability, sees community litigation and water permitting setbacks delaying the JV transition into 2027, hydroxide expansion stalling, and Chilean output flat near 280 thousand tons per year. In this scenario the Argentine open regime captures most of the marginal market share and Chilean fiscal receipts dip below 3 billion dollars per year. Sourcing teams should pre negotiate price collars and origin flexibility in long term contracts to ride across all three paths, and our advisory team is available to model the scenarios against specific battery program demand curves.

Sources #

• Chile Ministry of Mining lithium strategy documents
• USGS lithium mineral commodity summary
• SQM and Codelco annual reports
• Banco Central de Chile statistics
• IEA critical minerals outlook lithium chapter