The US risk rating agency highlighted that although the entry into lithium would not have credit implications for Codelco in the short term, the eventual need for capital for these initiatives could put pressure on its creditworthiness.

Entering the booming lithium industry will bring the Chile's state-owned Codelco, the world's largest copper producer, the benefits of business diversification, Moody's said on Wednesday.

The mining company was appointed last year by Gabriel Boric's government to lead greater state control in the business of the key component for electric car batteries, through associations with private firms.

"Lithium brings Codelco the benefits of diversification, from a commodity point of view, and it brings an additional source of cash flows and changes Codelco's position in terms of business profile," said Barbara Mattos, corporate analyst at Moody's.

She highlighted that although the entry into lithium would not mean credit implications for Codelco in the short term, the eventual need for capital for its lithium initiatives could put pressure on its creditworthiness.

In October, Moody's cut Codelco's rating and placed its outlook on "negative" amid high debt and delays in the construction of key projects to maintain its production.

However, Mattos stated that the firm must continue with its ambitious investment plan in copper to be able to supply the attractive future demand.

"Codelco is going to be a significant producer of two commodities that are crucial for the energy transition worldwide," she commented.

Regarding the lithium market, Moody's believes that mainly the electric car industry will maintain a strong interest in the light metal, despite the recent decrease in prices due in part to higher production.

"Due to this short term supply surplus, there could be a further decline in the price of lithium for the rest of the year and we expect that supply-demand will partially rebalance by 2025," commented Martina Gallardo, the firm's lithium analyst.

"Despite this short-term volatility, the long-term outlook remains positive," she added.

The expert pointed out that expectations indicate that lithium demand would skyrocket by 150% by the end of the decade and almost four times by 2050.

The agency considers that the reserves of Chile, which is the world's largest producer of copper and second largest of lithium, are a guarantee for the South American nation if it manages to advance efficiently in the implementation of its ambitious investment portfolio.

"Chile has the world's largest reserves of copper and lithium, so the country has a very large potential to become a fundamental player in the energy transition," Mattos stressed.