Tianqi Lithium will buy Nutrien’s 24% stake in SQM, held in series A shares, for $4 billion, taking its share in the Chilean lithium, potash, iodine and speciality chemicals producer to 26% following the purchase of 2% from a US-based asset manager in 2016. Tianqi had an option on another 7% of shares, secured at the time of the 2% share purchase, which would take its ownership to 33% if exercised, but if these are Nutrien’s series B shares then they will reportedly now be sold to a third party. The deal still needs approval by Chile’s anti-trust regulator, following the filing of a complaint by CORFO—the Chilean agency responsible for licensing the Atacama leases to SQM—which is expected later in 2018.

To break the deadlock over SQM’s operating license and expanded permits, SQM’s past controllers Pampa Group, a collection of holding companies of Julio Ponce Lerou, and Japanese trader Kowa, were forced to break a Joint Operation Agreement that together gave them a majority 32% voting share. Ponce Lerou secured further B shares in SQM in April, although whether this was part of an effort to regain control or for purely financial reasons remains uncertain. Pampa Group and Tianqi will each be entitled to three members on SQM’s board, with an additional two members appointed: one by other series A shareholders and one by series B shareholders. Under the new structure with Tianqi, no one party will effectively control the company.

Roskill’s view: “While Tianqi’s acquisition of SQM can be viewed as potentially further consolidating the control of refined lithium production amongst five major producers and into Chinese hands, with Tianqi having around an 18% share of refined supply based on 2017 output, without control or a distribution agreement Tianqi’s investment in SQM is mainly a financial one. While Tianqi can potentially direct SQM’s strategy at a board level, the attraction for Tianqi is SQM’s expanding, low-cost and currently high margin lithium business. However, while SQM has become best known for lithium, it only accounted for 30% of the company’s revenue in 2017; Tianqi is therefore also investing in SQM’s weaker-performing potash and iodine businesses.”

The picture shows Tianqi’s plant located in the Bonded Zone, Zhangjiagang, JiangsuProvince, which is the world’s largest battery-grade lithium carbonate manufacturing plant. The plant has a design capacity of 17,000 t/y lithium carbonate.