Codelco to benefit from entry into lithium business, says Moody’s

Salting the lithium fields (Stock image by jobi_pro.)

Moody’s on Wednesday said Codelco will have the chance to diversify its business, boost cash flow, and reshape its business profile by entering the lithium market.

Chile’s government last year tasked Codelco with boosting state control of the country’s lithium industry through partnerships with private companies.

On Tuesday, Codelco chief executive Ruben Alvarado said that the company made progress in negotiating with local communities over lithium mining and will keep working to win their support.

The miner has been in dialogue with indigenous groups on the details of a new, state-mandated joint venture in the Atacama salt flat with SQM.

Chile accounted for an estimated 24% of global lithium mine production in 2023.

Moody’s says the EV industry will keep interest in lithium high despite the recent decrease in prices.

“Codelco is going to be a significant producer of two commodities that are crucial for the energy transition worldwide,” Barbara Mattos, a corporate analyst at Moody’s, said in a statement.

She added, however, that entering the lithium market would eventual require capital and that could put pressure on Codelco’s credit quality.

Last October, Moody’s downgraded its credit ratings for Codelco because of lower production volumes and higher costs, while giving the state-owned copper producer a negative outlook.

In December, the miner had its credit rating cut two notches by S&P Global Ratings. 

Martina Gallardo, a lithium analyst for Moody’s, said that while a surplus of lithium could lead to a further decline in prices for the rest of the year, she expects a supply-demand rebalance in 2025.

“Despite this short-term volatility, the long-term outlook remains positive,” Gallardo said, adding that lithium demand could jump by 150% by the end of the decade and almost fourfold by 2050.

(With files from Reuters)