25/03/26
LatAm lithium feels scant impact from Iran war
LatAm lithium feels scant impact from Iran war
Sao Paulo, 25 March (Argus) — Latin America's geographic position, market
structure and trade flows have left the region's lithium producers largely
insulated from the side-effects of the war in the Middle East. The global
lithium market has not felt an immediate impact from the US-Israeli war with
Iran, although second and third-order consequences could affect the industry if
the conflict persists. Examples include rising diesel and seaborne freight
costs, which underpin mining operations worldwide, and supply disruptions
affecting sulphur , a key feedstock in some spodumene projects globally. Those
effects, however, are not expected to be pronounced in Latin America, as a
combination of factors shield the region from the side-effects of the war.
Minimal effects from rising diesel prices Rising diesel prices are the main
worry, but operational impacts on local lithium producers remain minimal. In
contrast to regular mining operations — in which tens of thousands of litres of
diesel are consumed each month — brine-based lithium projects draw most of their
energy from the sun. Lithium Argentina (LAR), one of Argentina's leading lithium
miners, said less than 2pc of its operating costs are tied to diesel and natural
gas. In Argentina, truck freight rates are a major component of operational
costs for lithium producers because their projects are located up to 1,800km
from Rosario and Buenos Aires, the country's main export hubs. Still, LAR's
exposure to higher diesel prices since the Middle East war broke out remains
under 5pc of its total operating costs, even including road freight from mine to
port, according to chief executive Sam Pigott. In Chile, diesel has risen
sharply this week , but projects are also brine-based and located much closer to
ports and local refineries. Brazilian spodumene producers are more sensitive to
fuel costs, given their heavy reliance on diesel. On 13 March, state-controlled
Petrobras' wholesale diesel price rose by 11.5pc to 3.65 reals/l ($0.69/l or
$2.62/USG) — a smaller increase, and lower absolute price than in other major
lithium producing regions, such as China, Africa and Australia , curbing the
impact on miners. Brazil's own diesel production, albeit insufficient to supply
the entire domestic market, helps contain price surges. Brazil imports about
40pc of its diesel, mainly from Russia and the US, whose supply has not been
affected by the war and de facto closure of the strait of Hormuz. But buyers in
other countries have started to seek out more Russian and US product after
Washington waived sanctions on Russian oil , intensifying the competition that
Brazilian importers face. Still, flows are much less threatened than in Africa
and Australia given Brazil's domestic output — even though further price rises
may still materialise. Diesel also underpins soda ash and other feedstocks for
lithium production, which could eventually lift input prices. But that has not
occurred so far. "Our exposure is around what the diesel price is going to do,
and if it forces higher input costs for us," Pigott said on 23 March. "So far,
it seems minimal, if at all." Small impact on freight Shipping has felt indirect
ripple effects from the closure of the strait of Hormuz worldwide, but Latin
America's geographic position shields it from more intense shocks. None of Latin
America's lithium-related trade routes pass near Hormuz, meaning that neither
US-sourced soda ash nor lithium chemicals and spodumene exported to Asia face
insurance risk or war surcharges. Still, container rates from Latin America to
Asia have risen as the disruptions in and around Hormuz have tightened global
container supply. But the increase has been modest on a per-ton basis, limiting
its effect on large shipments such as lithium exports. Chile alone used around
1,222 containers for lithium shipments in February, according to Argus
calculations. Argus -assessed seaborne freight rates between Argentina and
Shanghai have risen by $18.50/t to $26.80/t since the war began, but the impact
on fob Argentina lithium carbonate prices — less than 1pc against the current
$19,090/t level — has been minimal. Bunker costs in the Americas also climbed
more slowly than in other regions. Bunker fuel premiums in Singapore relative to
the US Gulf coast have soared to their highest in five years since the war
started, as regions dependent on bunker imports began competing for fuel.
Meanwhile, in Latin America, prices for marine gasoil (MGO) and very-low sulphur
fuel oil (VLSFO) at key ports — including San Antonio in Chile, Santos in Brazil
and Zona Comun in Argentina — were as much as $100/t below international market
levels. Sulphur shocks are also not a factor for Latin American lithium, as
brine-based operations do not normally use it and Brazilian spodumene producers
use electricity-powered dense media separation to concentrate their produce, not
sulphuric acid or diesel-powered DMS as some of their counterparts do. Together,
these factors are keeping Argentinian, Brazilian and Chilean producers' exposure
limited. By Pedro Consoli, Gabriel Tassi Lara and Maria Albuquerque Send
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