Strategic Lithium Supply Chain Developments: Implications for Investors in 2025 and Beyond

The global lithium supply chain is undergoing a seismic shift as nations and corporations race to secure resources critical to the energy transition. With electric vehicle (EV) demand surging and battery manufacturing capacity expanding, lithium has become a geopolitical and industrial battleground. For investors, understanding the interplay of geopolitical risks, operational challenges, and strategic partnerships is essential to navigating this volatile landscape.

The China-Codelco-SQM Joint Venture: A Model of Strategic Control

China's conditional approval of the Codelco-SQM lithium joint venture in 2025 underscores its determination to dominate the downstream battery materials sector. The partnership, which aims to produce 300,000 tons of lithium carbonate equivalent annually by 2030, includes explicit obligations to prioritize supply for Chinese clients during operational transitions, according to DiscoveryAlert. This move reflects Beijing's dual strategy of ensuring supply chain continuity while complying with anti-monopoly regulations. However, success hinges on overcoming Chilean regulatory hurdles, including environmental assessments and nuclear safety protocols, as DiscoveryAlert notes. Investors must monitor how geopolitical tensions-such as U.S.-China trade dynamics-might influence such cross-border ventures.

Argentina's Production Surge and Environmental Dilemmas

Argentina has emerged as a key player, with Lithium Argentina reporting 25,400 tonnes of lithium carbonate production in 2024, targeting 30,000–35,000 tonnes in 2025, as per Lithium Argentina's investor release. The country's decentralized governance model, where provincial governments manage mineral rights, has spurred rapid growth but also fragmented oversight. Yet, environmental concerns loom large: 2024 production rates exceeded natural water recharge levels in the Argentine Puna region, sparking protests and roadblocks by local communities, as noted in a ReleasePeace analysis. While Argentina's decentralized approach attracts foreign investment, it also exposes companies to reputational and operational risks tied to water scarcity and Indigenous land rights.

Australia's Value-Chain Ambitions and Operational Hurdles

Australia, the world's largest lithium producer, is pivoting from raw material exports to downstream processing. The Tianqi-IGO joint venture, which controls the Greenbushes mine and Kwinana refinery, exemplifies this shift. Despite owning 51% of the venture, Tianqi has struggled with the Kwinana refinery's suboptimal capacity utilization, currently below its 24,000-ton annual design target, according to DiscoveryAlert. Meanwhile, ASX-listed firms like Pilbara Minerals (ASX: PIL) and Allkem (ASX: AEM) are expanding battery-grade processing capabilities, aiming to capture higher margins, as described in a Farmonaut report.

However, geopolitical risks persist. China's regulatory scrutiny of foreign projects-evident in the Codelco-SQM approval conditions-could ripple into Australian ventures, particularly those involving Chinese partners. Investors should also assess Australia's ability to scale Direct Lithium Extraction (DLE) technologies, which could mitigate water usage and environmental impacts, as suggested in a DiscoveryAlert article.

Bolivia's Untapped Potential and Political Uncertainty

Bolivia, despite holding the world's largest lithium reserves, remains a minor producer due to outdated evaporation methods and high magnesium content in brines, according to DiscoveryAlert. The new administration under President Rodrigo Paz is reviewing partnerships with Chinese and Russian firms, signaling a shift toward national sovereignty in resource management. While DLE technology offers a path to commercial viability, political instability and technical barriers remain significant headwinds. For now, Bolivia's role in the global supply chain is likely to remain peripheral unless it secures stable international collaboration.

Geopolitical Risks and the Path Forward

The lithium sector is increasingly shaped by "resource nationalism," as seen in Chile's "lithium exceptionalism" policies, which treat lithium as a strategic asset separate from other minerals, as observed in a Marketscreener report. Such frameworks can deter foreign investment but also ensure state control over revenues. Investors must weigh these dynamics against the environmental costs of expansion, particularly in ecologically fragile regions like the Atacama and Puna.

For those seeking exposure, diversified portfolios that include companies with advanced DLE capabilities or strong ESG frameworks may offer resilience. Conversely, overreliance on single jurisdictions-such as Chile or Bolivia-could amplify vulnerability to regulatory or environmental disruptions.

Conclusion

The lithium supply chain in 2025 is a mosaic of opportunity and risk. While joint ventures like Codelco-SQM and Tianqi-IGO signal optimism, they also highlight the fragility of cross-border cooperation in a resource-constrained world. Investors must stay attuned to geopolitical shifts, technological advancements, and community pressures. Those who navigate these complexities with agility-and prioritize sustainability-will be best positioned to capitalize on the energy transition's next chapter.