US billionaire pressures Argentina to get loan for electric vehicles

Bloomberg – The world’s fastest-growing lithium producer is fighting to support access to new tax credits for electric vehicles promoted by President Joe Biden, despite Argentina failing to meet the requirement to be a free trade partner of the United States, known as FTAs ​​(free trade agreements). So far that effort has been rejected.

Designed to end China’s dominance of the critical metals sector and passed in August, Biden’s Inflation Reduction Act (IRA) was hailed as a key climate piece of legislation that would boost the production and adoption of electric vehicles in the world’s largest economy.

But to qualify for the credits, 80% of the battery metals in each vehicle must be U.S. or U.S.-sourced by 2027. “Mining or processing” must be done in a free trade agreement country.

That excludes Argentina, which on paper seems a logical partner in pushing for Biden and would help ease supply constraints for automakers including Ford Motor Company and General Motors in new plans. Relations with the US have improved since Biden took office.

The law has caused concern among Argentine officials, who have discussed it at various levels with their American counterparts, said an Argentine official familiar with the mining secretary’s thinking. Bloomberg News🇧🇷

The official added that the two countries’ embassies and Argentina’s foreign ministry were advancing negotiations for an exemption because the law had not yet been implemented.

A spokesman for the U.S. Commerce Secretary did not immediately respond to an emailed request for comment Bloomberg News🇧🇷

After meeting with US Commerce Secretary Gina Raimondo last month, Argentina’s Production Secretary Jose de Mendigueren said of the US: “We want them to include us in the new law on inflation so that we can be in the supply chain of lithium products”.

“If we can reach this deal, we can integrate into strategic U.S. manufacturing,” he added.

The US Treasury said it would provide more clarity later in the year. But the wording of the law clearly excludes non-FTA countries from refining metals to land-based battery status, said Tim Busch, battery market analyst at UBS.

It could also affect Indonesia, as its plan to process much of its nickel – another key EV raw material – on land also lacks a free trade agreement with the US.

“They might say you can mine it in Argentina or Indonesia as long as it’s processed in an FTA country,” Bush said. “But if it’s mined and processed in Indonesia, I don’t see how you can say it’s okay.”

Australian producer Alchem, which has several lithium projects in Argentina, expects to comply with the law until the company’s production is carried out in the US or FTA countries. But the text of the law is unclear, Martin Perez de Sole, the company’s Argentina CEO, said last month.

“Unclear” character

The key to whether producers in Argentina and some other countries will qualify for tax credits lies in the definition of “separated or processed”, says Conrad Mulherin, director of energy transition at PwC Australia.

He said the law’s “vague” wording could see countries like Argentina and Indonesia excluded from tax credits, making it “very difficult” to meet Biden’s climate goals.

However, he said the market outside the U.S. is large — especially in China — and there will still be a market for IRA-non-compliant battery metals in expensive U.S. vehicles that don’t qualify for tax breaks.

But as it stands, the law raises questions about supply agreements between U.S. automakers and Argentine manufacturers. Shortly before the IRA’s announcement, Rio Tinto, the world’s second-largest mining company, signed a non-binding agreement with Ford to sell lithium from its Rincon project in Argentina. Rio Tinto declined to comment on the future of that deal.

South Korean steel giant Bosco Holdings is also building a lithium hydroxide refinery in Argentina.

– In collaboration with Jonathan Gilbert, Eric Martin and Ana Monteiro.

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