CRU reports that “the Chilean lithium industry has suffered from comparatively restrained growth predictions, with many suggesting the once largest producer could lag behind its global competitors. But with the new year comes a new hope: as the change in presidency signals reconciliation between SQM and CORFO, there are signs that both may be perfectly placed to take advantage of China’s rising appetite for NEVs.

“It has been an eventful few months for Sociedad Química y Minera de Chile (SQM). Since September 2017, when Potash Corp of Saskatchewan announced it was selling its 32% stake in SQM as a condition upon the China and India’s approval of their merger with Agrium, there has been a significant amount of commotion among investors keen to gain a substantial foothold in the lithium market.

“Such interest comes as little surprise; the sale offers a large stake and three board positions in a company that is a major producer in a historically highly concentrated market, controlling 21% and 9% respectively of lithium carbonate and hydroxide capacity globally. SQM is one of only two companies – Albemarle being the other – licensed to extract lithium in Chile, the country with the largest lithium reserve deposits in the world, and its Salar de Atacama brine asset offers a high lithium output at a low operating cost. With Chinese EV policy precipitating a rising appetite for lithium-ion batteries since its first NEV program was introduced in 2010 – an appetite that was compounded this year by the implementation of a credit quota system which requires carmakers to sell a minimum of 10% NEVs by 2019 to qualify – growth in lithium demand displays no signs of slowing despite the market already being in deficit, and many firms are exploiting this with new projects that sit much higher on the cost curve than Atacama.

“SQM has been unable to make full use of the current positive outlook, hindered by its ongoing spat with the Chilean regulatory agency CORFO. But with a new deal struck between CORFO and SQM, circumstances have changed; hopes of burgeoning all too modest future growth predictions for both company and country have become all the more promising.”