China’s purchase of Chile’s SQM shares sparked doubts about the outlook for lithium prices

After the largest battery material producer in China's lithium battery industry bought shares in Chile's SQM at below-market expectations, the future believers in the lithium industry questioned their confidence on Thursday.

SQM (NYSE: SQM) trades in New York in the form of ADR, with a value loss of 7%, making the company's market capitalization less than $15 billion.

Tianqi Lithium Corporation acquired a 24% stake in SQM of Canada's Nutrien (TSX:NTR) for US$4.07 billion, which is considered a touchstone test for the emerging battery market.

Investors hope that Apocalypse will acquire all 32% of the shares that Nutrien is disposing, and promote the Shenzhen-listed Tianzhu shares (SHE: 002466) to fall 2%.

The world's second-ranked mining company RioTinto is also said to be interested in running SQM, but Anglo-Australian diversified mining companies are likely to focus on their 100% stake in lithium and boric acid in the Jadar, Serbian minerals project, This is still in the early stages of development.

The deal contradicts the will of the South American development agency Corfo and believes that the two companies dominate a sector already dominated by a few large companies. SQM supplies one-fifth of the world's lithium carbonate and apocalypse 17%.

Today's trading may put pressure on FMCCorp's IPO plan for the fourth quarter of this year. The US Company is spinning off the Argentina-centric lithium business, which is less than one-tenth of the overall business and plans to offer up to 20% to the public.

China's Qifeng is also the leader in the production and recycling of lithium batteries. It has applied for listing in Hong Kong and hopes to raise no less than $1 billion.

Lithium carbonate prices have been falling from their highs in December, but have remained at around $20,000 per ton from around $6,450 per ton in early 2015.

The direction of lithium prices attracts a widely divergent view. Although analysts believe that the boom in the electric vehicle market will greatly boost demand, the large supply response of bear certificates may overwhelm the market.

Unlike cobalt, cobalt is another important battery component, rich in lithium, and the existing brine producers in South America have the ability to rapidly increase production. Together with many hard rock projects being implemented in Australia, the production of about 220,000 tons last year may have tripled in less than 10 years.

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