Top stocks plummet after Chile brings lithium industry under state control
Shares in the world’s top two lithium producers are tanking after Chile said their contracts will not be renewed under a new public-private partnership model announced on Friday.
Chile’s President Gabriel Boric announced on Thursday night his government would nationalise the country’s lithium supply, applying a model where private companies will be forced to partner with the state to develop the local industry.
The long-awaited policy in the world’s second-largest producer of the battery metal includes the creation of a national lithium company, Boric said on national television. Copper giant Codelco, nationalized in the early seventies, and state miner Enami will be given exploration and extraction contracts in areas where there are now private projects before the national lithium company is formed.
The contract for Chile’s current lithium producers, world no.1 producer, Albemarle (NYSE: ALB), runs out in 2043, while the one for SQM (NYSE: SQM), the second largest globally, ends in 2030. Charlotte, North Carolina-based Albemarle and Santiago’s SQM are responsible for about a quarter of global production.
Investors dumped the marquee names in brisk trading on Friday with SQM losing more than 17% in value in early afternoon trade to a 52-week low while Albemarle gave up 9%, also hitting a year low. Albemarle, now worth just under $21 billion in New York, is down 47% from its peak valuation while SQM, trading 42% below its year-high, has a market cap of $17.5 billion.
Without naming the two giants, Boric said he hoped that lithium miners already present in Chile would be open to negotiate state participation before the end of their contracts, although no details about state shareholding or other ownership arrangements were disclosed.
Friday’s news comes on top of a slide in lithium prices with Benchmark Mineral Intelligence assessment for the week ending April 19 showing a 7% sequential decline for battery-grade lithium carbonate inside China. At $28,625 a tonne, the battery metal is down 65% from its peak hit late November last year.
