Tianqi Lithium buys stake in rival lithium miner SQM for £3bn
China-based miner Tianqi Lithium has acquired a minority stake in a rival Chilean lithium miner for $4.1bn (£3bn), expanding China's influence in the lithium market.
Tianqi is buying a 24 per cent stake in Sociedad Quimica y Minera de Chile (SQM), and has so far paid a 12 per cent premium for the shares currently held by Canadian company Nutrien.
However, the deal has faced some criticism from a Chilean regulator who claim that it would lead to less competition and move China one step closer to having lithium monopoly as SQM is currently the second-largest producer of the metal in the world.
Read more: Aim-listed firm charges higher on upgrade to its European lithium mine
The outgoing head of Corfo, a Chilean governmental organisation, Eduardo Bitran said: “If [SQM] is controlled by the development interests of the Chinese automobile industry, then the electric vehicle and anti-climate change movements at the global level will have a problem.”
Together, Tianqi and SQM controls around 70 per cent of the global lithium market which give China the majority of the production if it acquires a majority stake.
Lithium, which is essential in developing lithium-ion batteries used in electric vehicles (EVs), is a finite natural resource which has grown in demand ever since the advent of EVs.
China will therefore have increased control of the EV battery industry which will become increasingly profitable in the years to come as EVs will become more and more commonplace.
The market is still expanding and demand is expected to grow 20-fold by 2025, according to analysts at Goldman Sachs.
Analysts at Shore Capital said: “We see this development as being a minor negative for lithium consumers, but positive for lithium developers.”
“We do not believe that Tianqi would want supply growth overly restricted such that prices to rise too high, as this carries risks such as inhibiting EV uptake and further galvanising efforts at substitution and secondary production.”
SQM shares a join venture lithium processing plant in Kwinana with Australian mining company Kidman Resources which yesterday announced that it had entered into a deal with EV manufacturer Tesla to supply it with lithium for the next three years.
Read more: Tesla enters deal with miner Kidman Resources for supply of lithium
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CityAM
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