The world's second-largest lithium producer, Chile, plans to nationalize the lithium extraction industry, Chilean President Gabriel Boric said this week, adding that future contracts would be given only to public-private partnerships with state control.
The announcement sent shares in the world's biggest lithium producers, Albemarle Corporation and SQM, tumbling on Thursday and early Friday.
Chile produces lithium from brine, similar to the production in Argentina and China. The world's top lithium supplier, Australia, produces lithium from hard rock mines.
The Chilean move to nationalize its huge lithium extraction industry, the crucial first step in the battery production supply chain, is aimed at protecting the environment and boosting economic growth, President Boric said in a televised address on Thursday.
"This is the best chance we have at transitioning to a sustainable and developed economy. We can't afford to waste it," Boric said, as carried by Reuters.
Boric will look to receive support from Chile's Congress for the nationalization in the second half of this year. It is not certain whether Congress will approve all proposals in the president's plans for the nationalization of the lithium industry.
Under the plan, Chile will not rescind existing contracts with private companies but will not issue new ones unless the license holder includes a state-controlled public-private entity.
The current contracts in Chile of lithium-producing giants SQM and Albemarle expire in 2030 and in 2043, respectively.
While there will not be contract terminations, Boric said the Chilean government hopes that the companies could be open to including the state as a participant before the contract expiration.
The world's top copper producer, Chile's state-owned Codelco, will be tasked to find the best way to create a state-owned lithium company, the Chilean president said.
In the first comments on the plans, analysts say that investment could shift to Australia as miners prefer political and regulatory stability.
By Michael Kern for Oilprice.com
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