(Adds details from Corfo statement, context, byline)
By Dave Sherwood
SANTIAGO, July 25 (Reuters) - China’s Sichuan Fulin Transportation Group Co has ditched a project to build parts for electric vehicles in Chile, the government said on Thursday, leaving in tatters a nascent EV battery industry in the South American nation.
Fulin and two other corporate investors won a 2018 government auction for a coveted, 27-year supply of ultralight battery metal lithium. In exchange, the companies said they would build battery parts factories in the north Chilean desert.
Chile development agency Corfo, which ran the tender, said in a statement it had received “letters from all three companies saying they will not go forward with their investments.”
Fulin was the last of the batterymakers to drop out. In June, South Korean steelmaker Posco said it was dropping out of a joint venture with electronics giant Samsung SDI to build a factory in Chile. Chilean chemical company Molymet has ditched its project as well.
The 2018 auction, proposed by the administration of former center-left President Michele Bachelet, was meant to lure batterymakers to Chile and rocket the world’s No. 2 producer of lithium up the supply chain. The country exports less than $100 million monthly of primarily lithium carbonate.
Bachelet said the three new factories could add as much as $7 billion in value to its lithium exports and create more than 650 new jobs.
But a Reuters investigation earlier this month found the government had failed to deliver the bountiful, bargain-priced lithium it had promised in a fast-changing market.
The deals hinged on the globe’s top producer of lithium, Albemarle Corp, boosting output from its Chilean operations to supply the planned factories.
But Albemarle’s expansion has been hampered by technological and regulatory hurdles. The U.S.-based miner has feuded with Chile’s government over the price battery makers would pay for its lithium. And it does not produce the type of processed lithium required by the POSCO-Samsung project.
Corfo said in the statement it had complied with its contractual obligations, but noted that the three batterymakers had failed to reach an agreement with Albemarle.
Chile’s government plans to try again. In March, officials announced another tender slated for early 2020. The new auction will offer discounted lithium from Albemarle competitor SQM for companies willing to build battery plants in Chile.
“Corfo will continue its efforts to add value to the lithium supply chain quickly and transparently,” the agency said in the statement.
Reporting by Dave Sherwood Editing by Chizu Nomiyama and Richard Chang