China warns Chile against blocking $5bn SQM lithium deal

Move to halt sale of stake in miner to Tianqi could ‘leave negative influences’

Henry Sanderson in Santiago

SQM lithium mine on the Atacama salt flat: if Tianqi were able to buy the 32 per cent stake, it would have a dominant influence on global supplies of lithium © Reuters

The Chinese government has criticised a move by regulators in Chile to try to block the sale of a $5bn stake in the country’s largest lithium producer to a Chinese company, saying it could harm bilateral relations.

The comments could ease the way for China’s Tianqi Lithium to buy 32 per cent of Chile’s SQM, the world’s second-largest producer of the metal, a key material in batteries, which has been put up for a sale by a Canadian company called Nutrien.

Xu Bu, China’s ambassador to Chile, told local newspaper La Tercera that the opposition to the stake sale could “leave negative influences on the development of economic and commercial relations between both countries”.

The comments add pressure to the new administration of President Sebastián Piñera, who has vowed to attract more foreign investment to Chile. China is the largest buyer of copper from the country, but has invested less in Chile compared with other South American countries such as Brazil.

In January, China said it wanted to extend President Xi Jinping’s Belt and Road infrastructure and investment plan to Latin America.

If Tianqi were able to buy the 32 per cent stake in SQM, it would have a dominant influence on global supplies of lithium, just as carmakers are pouring billions of dollars into ramping up production of electric cars.

Shenzhen-listed Tianqi is already one of the largest suppliers of the battery raw material, through its ownership of the Talison Lithium mine in Western Australia.

SQM is the lowest cost producer of lithium in the world, due to its use of the fierce sunlight in the Atacama Desert to extract the metal from brine. SQM could supply over half of the world’s demand for lithium by 2025, according to analysts at Scotiabank.

On March 9, the last day of former President Michelle Bachelet’s administration, Eduardo Bitran, executive vice-president of Chile’s national development agency, filed a petition with Chile’s antitrust regulator, urging it to block Tianqi’s bid.

Mr Bitran argued that a sale of the 32 per cent stake to Tianqi would give China too much power over the global lithium market.

“Interlocking of . . . companies that represent a significant participation of a given market is a considered a risk to competition according with the law, [and] therefore has to be investigated,” Mr Bitran said in an email to the Financial Times.

Chile’s National Economic Prosecutor’s Office has until August to decide whether to pursue the case. Tianqi officials met with the office on March 29 to discuss the issue, according to Chilean records.

In the interview, China’s ambassador said Mr Bitran’s remarks had turned “this totally commercial action into a political issue”.

The Chinese embassy in Santiago did not respond to a request for comment. Canada’s Nutrien has until April 2019 to sell the 32 per cent stake as a condition of the merger last year between PotashCorp and Agrium, which created the company.

The stake sale has raised fears that a new shareholder could seek control of SQM. This month SQM’s other largest shareholder, Julio Ponce Lerou, requisitioned a shareholders meeting to change the company’s bylaws to prevent any new buyer from using the stake to take control.

Mr Ponce, the former son-in-law of Chile’s dictator Augusto Pinochet, has held a controlling stake in SQM through an agreement with Japan’s Kowa, which owns 2 per cent of SQM. But in January, Mr Ponce was forced to give that up as part of a deal to allow SQM to expand its production of lithium.

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