Chancellor Olaf Scholz is hoping his trip to Latin America this weekend will help Germany secure additional supplies of the lithium that car giants like Mercedes-Benz Group AG and Volkswagen AG need for their electric-vehicle batteries.

Chile is the world’s second-largest supplier of lithium after Australia and much of its output is currently gobbled up by China. Scholz, who will meet Chilean President Gabriel Boric on Sunday in Santiago, wants a larger share for Europe’s biggest economy, according to people familiar with the plans.

Part of Germany’s strategy to get Chile on board is to have more of the production process based locally and to help make extraction and processing less damaging to the environment, said the people, who asked not to be identified because the discussions are private.

The German government will aim to make an offer to Chile that is more appealing than the arrangement they have with the Chinese, said one of the people.

Major developed nations like Germany are competing fiercely for increasingly scarce resources and access to metals and rare earths is crucial for the transition to cleaner and more technologically advanced economies.

In the global race for many of the commodities, China has become the dominant supplier or processor, leading to warnings about the government in Beijing wielding excessive influence.

Those warnings especially resonate in Germany, which built up a heavy reliance on imports of Russian fossil fuels in recent decades. Since Vladimir Putin’s invasion of Ukraine, Scholz’s government has been racing to diversify suppliers of the materials it needs to keep its economy running.

In Buenos Aires, Germany and Argentina signed a memorandum of understanding on Saturday that is intended to secure Berlin’s access to the country’s rich Lithium resources. After a meeting with Argentinian president Alberto Fernandez, Scholz spoke out against a policy “which only serves the interests of that country that wants to process the commodities for themselves.“

On Sunday, he directly referred to China as Germany’s competitor in the global commodity market. “There are states that think that all raw materials come from China, but this is not true. Many raw materials in fact come for example from Argentina or Chile, get shipped to China, are processed there and then sold again,” Scholz said in a discussion with young Argentinians in Buenos Aires. “The question is: Can one not move the processing of these materials, which creates thousands of jobs, to those countries where these materials come from?”

During the visit to the Chilean capital Santiago later on Sunday, Scholz will send a similar message. Germany is ready to get into the lithium business with Latin America in an attempt to establish independence from China.

...continued

©2023 Bloomberg L.P. Visit bloomberg.com. Distributed by Tribune Content Agency, LLC.