Chile and China strengthen control of global battery metals

China has strengthened its control over the global battery raw material supply chain, as Tianqi Lithium has signed a US$4.1 billion stake with Chilean rival SQM, the world's second-largest lithium producer.

Headquartered in Chengdu, Tianqi is looking to double its capacity by 2020, which is part of a positive expansion of Chinese companies to consolidate metals and chemicals, which are key to meeting the growing demand for rechargeable and electric vehicles. .

Tianqi will acquire all of Nutrien's voting shares in SQM and hold a 24% stake in its San Diego-based company. After months of speculation, the confirmation of the deal prompted the Chilean government agency Corfo to request an antitrust review on the grounds that it would give the two companies a swing in the global lithium market. The former head of Corfo said that the deal opened the door for Tianqi to control SQM.

Chris Berry, a New York energy metal analyst and founder of HouseMountainPartners, said in an e-mail that the deal "makes the lithium oligopoly even stronger than it is now." “This gives Tian Qi a unique opportunity to shape the direction of the lithium industry.”

Competitor HSBC Lithium plans to raise about $1 billion from its planned Hong Kong listing to expand its global acquisition boom, while Hyundai Ampere Technology in Southeast China is increasing its capacity to become the world's top battery manufacturer.

In March of this year, Glencore, the world's top cobalt producer, agreed to sell about one-third of its metal production to China's battery chemical supplier GEMCo.

Tianqi, which is planning to list in Hong Kong, rose 2.4% on Friday in Shenzhen. Due to the official name of SQM, SocQuimica & MineradeChile shares fell 5.5% in New York on Thursday, as Nutrien shares fell 0.4%.

Nutrien sold its 32% stake to meet the conditions created by the merger of PotashCorp and Agrium. Nutrien still has about 20 million non-voting shares and plans to sell them in the coming months.

The entire Nutrien share gives the holder the right to three of the eight SQM conference room seats. According to Eduardo Bitterang, former executive vice president of Corfo, if shareholders split into two pieces and the two buyers form an alliance, then this could increase to four.

JulioPonce, another major shareholder of SQM, wants to stop this. At a meeting in San Diego on Thursday, shareholders approved the Ponce proposal to revoke the by-laws that restricted A-share voting rights, especially to avoid losing power when other shareholders sought control. Representatives of Nutrien voted in favor of the proposal, while minority shareholders including pension funds and Moneda Asset Management voted against it.

In a request from Corfo to the Chilean antitrust authorities, it stated that controlling the SQM competitors would lead to further concentration of the global lithium market and is not in the public interest.

Tian Qi said in a statement on Thursday that it will gain non-control status in SQM.

HouseMountain's Berry said that the urgency of China's pursuit of lithium trading reflects the country's lack of "world-class lithium resources." “They think they have to try and alleviate this problem faster than the rest of the world,” he said.

In March of this year, Chilean Minister of Mines Baldo Prokurica said that the government would not intervene in any investigation into the potential purchase of SQM shares and support the ruling of the anti-monopoly agency. On Thursday, Finance Minister Felipe Larrain was quoted as saying that the government supports Chinese investors to enter.

In an interview on Thursday, Bitran countered that the threat from Chinese officials suppressed the antitrust process and that it is impossible to do anything now. Cove said that the national economic prosecutor has not indicated whether it will investigate the transaction.

The agreement was made after several years of contract dispute resolution between Corfo and SQM, and Ponce agreed to waive control of the company. Ponce, the former son-in-law of the dictator Augusto Pinochet, controlled SQM through a series of holding companies and an agreement with Japan's Kowa. As a major crop nutrient producer, SQM has become the world's largest exporter of lithium carbonate.

Tianqi Investment's acquisition of SQM's equity may increase its share of global lithium chemical production capacity from 12% to around 15% in 2018, AliceYu, senior consultant of CRU Group in Hong Kong, said in an email.

The manufacturer's assets include 51% of Perth's Talison Lithium, the world's largest lithium mine operator. And is building the largest lithium hydroxide processing plant in Western Australia, the goal of the planned expansion is to become a No. 1 lithium battery supplier, PhilThick, general manager of Tianqi Australia, said in a speech in March.

Another owner of Talison, AlbemarleCorp, located in Charlotte, North Carolina, is the industry's largest producer, operating alongside SQM in the Atacama Salt Mine in Chile. The Corfo-SQM agreement contains a clause prohibiting SQM from conducting commercial activities with other Atacama operators.

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