SANTIAGO: President Gabriel Boric announced on Thursday that he would nationalize the lithium business, the second-largest producer of the metal required for electric vehicle batteries, to strengthen Chile’s economy and safeguard the environment.
A separate state-owned corporation would eventually take over the management of Chile’s massive lithium operations from industry titans SQM (SQMA.SN) and Albemarle (ALB.N) due to the shocking move in the nation with the most significant lithium deposits in the world.
With more nations looking to conserve their natural resources, it poses a new issue for makers of electric vehicles (EVs), who are rushing to get battery materials. Last year, Mexico nationalized its lithium reserves, and in 2020, Indonesia forbade the export of nickel ore, a crucial component of batteries.
In a speech broadcast across the country, Boric remarked, “In the short term, it will be difficult to beat this opportunity for economic growth.”
He said future lithium contracts would only be issued as public-private partnerships with state control.
“This is the best chance to transition to a sustainable and developed economy. We can’t afford to waste it.”
He said the government would not terminate current contracts. Still, he hoped companies would be open to state participation before they expire without naming Albemarle and SQM, the world’s 1st and 2nd lithium producers, respectively. Albermarle’s contract expires in 2043, and SQM’s in 2030.
SQM and Albemarle provide Tesla Inc (TSLA.O), LG Energy Solution Ltd (373220. KS), and other EV and battery makers. SQM was formerly known as Sociedad Quimica Y Minera de Chile. Albemarle stated that the announcement would not “materially impact our business” and that it would continue to discuss ways to invest in Chile’s future growth and adoption of cutting-edge technology.
SQM could not be reached right away for comment. The long-term supply partner of SQM, the South Korean battery manufacturer SK On, said it would keep an eye on the situation and have a long-term response approach.
Because EV demand in China, the world’s largest vehicle market, has been declining since November, the statement by Chile did not cause a turnaround in lithium prices, which have fallen more than 70% since that time. As of 03:13 GMT on Friday, the most actively traded lithium carbonate futures on China’s Wuxi Stainless Steel Exchange were down 6.2%. “Contract conditions would likely become more onerous than what they saw when there was no state involvement,” predicted Cho Hyunryul, an analyst at Samsung Securities, “when or if battery makers renew their contracts with lithium firms in Chile.”
To establish a lithium corporation wholly owned by the state, Boric said he would start a conversation with communities, businesses, and parliamentarians. He would ask Congress to approve the idea in the second half of the year.
