China's Tianqi Lithium faces challenges in Chile as the government seeks more control over lithium reserves, potentially jeopardizing Tianqi's position as the second-largest shareholder in Chile's SQM. The Chilean government's preliminary agreement with state-owned copper producer Codelco to form a joint venture risks diluting Tianqi's interests in SQM's lithium business. This comes as countries worldwide are reclaiming control over critical commodities for the green transition, including lithium, copper, cobalt, and nickel. Despite demanding a vote on the deal, Tianqi faces resistance and uncertainties regarding its influence in the new joint venture, raising concerns about its future prospects.
Key Takeaways
- China's Tianqi Lithium faces jeopardy in its investment in Chile's SQM, risking its control over the lithium business due to restructuring and increased government control.
- The global trend of countries taking back control of crucial commodities for green transition, such as lithium, copper, cobalt, and nickel, is impacting companies and prices.
- Tianqi's Hong Kong-listed shares have fallen 17% over the past year, and its net profit plummeted 70% to Rmb7.23bn ($1bn) in 2023.
- The preliminary agreement between SQM and Codelco in Chile aims to form a joint venture and may lead to a diluted stake for Tianqi in the lithium business.
- Tianqi is in a dispute to retain influence in the new joint venture, with concerns about being left with shares mainly in a fertilizer company, raising doubts about its future operations and expansion.
News Content
China's Tianqi Lithium's $4bn investment in Chile's SQM is in jeopardy as the Chilean government aims to exert more control over the world's second-largest lithium reserve. A preliminary agreement between SQM and state-owned producer Codelco risks diluting Tianqi's stake in SQM's lithium business. This comes as countries worldwide reclaim control over critical commodities for the green transition, such as lithium and cobalt. Tianqi's Hong Kong-listed shares have fallen 17% due to plummeting metal prices, resulting in a 70% net profit decline in 2023. The company's demand for a vote on the deal with Codelco was denied by the Chilean regulator.
The joint venture would commence next year, with Codelco holding a 50% stake plus one share in SQM's lithium business, potentially limiting Tianqi's influence and control over the company. The lack of transparency surrounding the agreement raises concerns, with Tianqi demanding insight into the details. Additionally, the dispute has led to the resignation of one of Tianqi's nominated board members, potentially slowing down the deal. With Tianqi's struggles also extending to its Australian plant, the company faces a challenging outlook.
Analysis
Tianqi Lithium's $4bn investment in Chile's SQM faces uncertainty as the Chilean government asserts more control over the lithium reserve. The preliminary agreement with state-owned Codelco risks diluting Tianqi's stake, impacting its influence and financial returns. Expect short-term share price volatility and long-term operational challenges for Tianqi. Countries worldwide are prioritizing control over critical commodities, impacting foreign investors like Tianqi. The deal's lack of transparency has led to regulatory disputes and internal tensions, potentially affecting Tianqi's strategic plans. This development's repercussions may extend to the energy storage industry and global lithium market dynamics, as well as the Chilean economy and government stability.
Do You Know?
-
SQM: SQM, short for Sociedad Quimica y Minera de Chile, is a Chilean chemical company and a major global producer of lithium. Lithium is a critical component for the production of batteries used in electric vehicles and other technology, making SQM's lithium business a key player in the green energy transition.
-
Codelco: Codelco, or Corporación Nacional del Cobre de Chile, is the world's largest copper producer and one of the largest state-owned companies in Chile. In this context, Codelco's involvement in a joint venture with SQM has significant implications for the control and influence over SQM's lithium business, particularly with regards to Tianqi's stake in the company.
-
Lithium and Cobalt: Lithium and cobalt are critical commodities for the green transition, particularly in the production of batteries for electric vehicles and renewable energy storage. The increasing global demand for these materials has led to countries exerting more control over their production and supply chains, impacting major investments and joint ventures in the industry.