Introduction: An Abrupt Exit from a Strategic Partnership
In a move that reverberated through the global battery and electric vehicle (EV) supply chain, Chinese electric vehicle manufacturer BYD and metals conglomerate Tsingshan have both withdrawn from ambitious plans to build lithium cathode material plants in Chile. The Chilean government’s economic development agency, Corfo, confirmed the exits, which represent a significant retreat from an initiative intended to strengthen domestic lithium value-added processing and turn Chile from a raw material exporter into a high-tech battery materials hub.
The total value of the two projects exceeded half a billion dollars and was part of Chile’s effort to leverage its position as the world’s second-largest lithium producer. The decision by BYD and Tsingshan to withdraw underscores the fragility of global clean energy supply chains when exposed to commodity price volatility and uncertain policy execution.
Lithium Market Crash: A Game-Changer
Both BYD and Tsingshan had signed preferential agreements with Corfo in 2023 to receive lithium at discounted prices from SQM, one of Chile’s largest lithium miners, through the year 2030. These agreements were designed to anchor long-term investment in lithium value-added processing within Chile, particularly the manufacturing of lithium iron phosphate (LFP) cathodes—an essential component in the global shift toward cheaper and safer EV batteries.
However, since their selection, the global lithium market has taken a dramatic turn. The price of lithium carbonate has plunged nearly 80% from its 2022 highs due to oversupply, demand normalization in the Chinese EV market, and aggressive new mining capacity coming online from Australia, China, and Argentina.
In its statement, Corfo said:
“The companies selected by Corfo have been affected in their investment decisions by the global market conditions, which have shown a sharp drop in prices.”
This severe price drop has made it difficult for new industrial projects—especially those with long investment horizons and narrow margins—to justify their capital commitments. The projects now appear economically unviable without additional government incentives or long-term price stabilization guarantees.
Project Details: Unfulfilled Ambitions
Tsingshan’s plan involved building a $233 million facility capable of producing 120,000 metric tons per year of LFP cathode material. The project had progressed into the planning and permitting phases when the company informed Corfo and Reuters of its withdrawal. Corfo further revealed that Tsingshan attempted to reassign the project to a subsidiary that was not part of the original bidding process, a move Corfo rejected on procedural grounds.
BYD, meanwhile, intended to invest $290 million in a separate LFP plant with a planned output of 50,000 metric tons annually. However, the company had already flagged delays in 2024 due to market conditions. According to Chile’s Ministry of National Assets, BYD officially submitted its intention to withdraw as early as January 2025. The automaker has declined public comment on the matter.
Not the First Collapse: A History of Unrealized Lithium Dreams
The recent announcements are not the first time lithium-related industrial projects have failed to materialize in Chile. Back in 2018, Corfo initiated a similar scheme to entice international players with low-cost lithium supply in exchange for local processing investments. That program also fell apart as companies like Chilean chemical firm Molymet, China’s Sichuan Fulin Transportation Group, and a joint venture between Korean giants Posco and Samsung all exited their proposed ventures due to various financial and strategic challenges.
These repeated failures suggest deeper structural issues within Chile’s industrial policy and risk management frameworks. While the country boasts abundant natural resources, its regulatory, logistical, and market volatility constraints continue to undermine efforts to build a domestic value-added lithium ecosystem.
Corfo’s Response: New Bidding Round with Albemarle
Unfazed by the latest exits, Corfo has launched a second bidding round for lithium-related projects. This time, it will partner with U.S. lithium producer Albemarle, which also operates in Chile. The new scheme will extend purchasing agreements through 2043 for selected companies that commit to establishing lithium-processing operations within Chile.
Unlike the previous agreements that fixed pricing formulas, Corfo has stated that the Albemarle deal will include a more “flexible alternative pricing mechanism,” potentially offering investors better protection from global price swings.
This redesign appears to acknowledge that rigid pricing models, while favorable to buyers during market booms, can become liabilities during downturns. Corfo’s updated approach may attract a different set of investors—those looking for adaptive contracts and risk-sharing models in a turbulent commodity environment.
Implications for Chile’s Economic Strategy
Chile’s long-standing ambition to move beyond raw lithium exports and enter the higher-value processing segment has once again been delayed. While the country’s “Lithium National Strategy” seeks to balance environmental sustainability with economic diversification, the repeated collapse of foreign investment projects highlights the challenge of aligning public-sector visions with private-sector realities.
For companies like BYD and Tsingshan, their exits are unlikely to dampen their global ambitions. BYD continues to expand battery and EV production across Asia, Europe, and Latin America, while Tsingshan remains a key player in the global stainless steel and battery materials sectors.
For Chile, however, the stakes are different. The country must now reevaluate how to de-risk its investment environment and design more attractive, adaptable frameworks if it hopes to truly capitalize on the global EV and clean energy transition.
Conclusion: The Long Road Ahead
The withdrawal of BYD and Tsingshan from Chile’s flagship lithium processing initiatives is a sobering moment for a country that has long aspired to climb the battery value chain. While global lithium demand is projected to grow steadily over the next decade, short-term market crashes and inflexible government strategies can still derail even the most promising collaborations.
Corfo’s pivot toward a more flexible pricing model in its next round of bids may prove more resilient. However, whether Chile can establish itself as more than a commodity supplier will depend on its ability to build trust, policy stability, and industrial competitiveness.
For now, the retreat of two Chinese industrial giants serves as a cautionary tale in the high-stakes global race for battery dominance.
