Mexico to reserve future lithium production for government

International

MEXICO CITY (AP) — Mexico said Friday it wants to declare lithium a “strategic mineral” and reserve any future exploration and mining for the government.

The move is likely to leave Mexico’s only privately exploited mine, expected to start production in 2023, in the hands of a Chinese lithium company.

The changes are contained in a bill that President Andrés Manuel López Obrador has sent to congress. The bill also changes the Constitution to strengthen government control over electricity production and distribution.

The bill would eliminate much of the framework of private sector openings in Mexico’s electrical power market, giving the state-owned utility a guarantee majority market share and allowing it to buy power from private plants if it so chooses.

Because it changes the Constitution, the bill requires a two-thirds majority and approval from a majority of state legislatures.

“This bill establishes that only the government will be able to mine lithium,” López Obrador said. “That is, all the lithium in the nation’s soils, in our territory, belongs to Mexicans, the nation.”

However, Secretary of the Interior Adán López Hernández said that the eight concessions for mining lithium that have already been granted in Mexico would be respected, as long as they are well on the way to producing the metal, which is used in batteries.

López Hernández said it appears only one private mining company meets those criteria.

That appears to be a reference to Bacanora Lithium, a project in the northern border state of Sonora that hopes to produce 35,000 tons of lithium annually starting in 2023. That company recently accepted a buyout offer from Chinese lithium giant Ganfeng International.

Still, he left out some hope for other companies. “Up to now, there is information that only one of these eight concession holders, these eight companies, meets these standards, but if the eight manage to meet them, the concessions will remain valid,” López Hernández said.

López Obrador’s previous efforts to strengthen Mexico’s state-owned utility, the Federal Electricity Commission, have been blocked in courts because they appeared to violate a constitutional requirement for free competition in the sector.

López Obrador is a firm proponent of fossil fuels and large, state-run projects in the energy sector, and has made building new oil refineries a priority. He has never liked a 2013 market reform instituted by his predecessor that created a regulated electrical power market in which private power generators could sell into the national grid on an equal basis.

López Obrador claims the private companies were given an unfair advantage over the state-run utility because they were guaranteed higher prices or did not have to pay for the cost of transmission.

But the new private plants are cleaner, more modern and more aimed at renewable power sources, while the federal utility relies heavily on older, more polluting plants that burn coal, diesel or excess fuel oil from state-owned refineries. The Federal Electricity Commission has also been plagued by corruption, high costs, an unwieldy bureaucracy and insufficient capacity.

Earlier this year, López Obrador managed to pass a law that didn’t change the Constitution, but mandated that electricity must first be bought from government-owned generating plants, and if any demand remains, power was to be purchased from renewable and private natural gas-fired plants.

Courts blocked that law, saying it violated the Constitution. So the new bill grants the Commission a guaranteed 54% share of the market. It simply dissolves the old regulatory agencies aimed at guaranteeing competition in energy markets, and gives their responsibilities to the Commission.

“The former policy strengthened private, for-profit companies, mainly foreign ones, that were taking over the whole market,” López Obrador said. He referred to winter storms in Texas temporarily cut off supplies of imported natural gas early this year as an argument for his position.

“Do you remember when there were frosts and blackouts and Texas lost power?” he said. “We re-established service in a week because we still had a state-run company like the Federal Electricity Commission which controls all the transmission lines, something that doesn’t happen in Texas, where all the lines are privatized.”

López Obrador’s moves have drawn complaints from investors, many of them foreign, who say it violates the U.S.-Mexico-Canada free trade pact and Mexico’s commitments to cut carbon emissions. Many wind, solar and gas-fired power stations were built in Mexico by foreign companies following the previous administration’s 2013 energy reform.

The companies claim the president’s plan creates a de facto government monopoly, hurts competition and will make Mexicans buy dirtier, more expensive electricity.

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