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Tianqi in SQM: Let it be proof



For the National Economic Prosecutor’s Office, the agreement signed between Tianqi and Albemarle will only be extractive, as previously stated in the Senate Commission on Mining, which turned out to be incorrect. For the Court of free competition, the proven data was not considered because it did not come from directly interested parties, that is, from Tianqi and FNE. For Corfo, who manages Salar de Atacama and must ensure its economic value, the agreement between Tianqi and FNE did not compete with it. For the government and its concerns regarding 25% of Chile’s total foreign trade with China, Tianqi’s support was tangible, as can be seen from the explanations given to its authorities to “verify” this operation. And as a forgotten background, our own DL 211 has been identified as one of the most serious behaviors defining zones or market shares.

The following Monday, December 3, the sale of 62,556,568 shares of SQM (23.77% of its total capital, with three directors of eight) from Tianqi to Nutrien – a company that was born from the merger of Canadian fertilizer companies PCS and Agrium – in the amount of $ 65 per share or $ 4,066 million. At the stock exchange, the cost of this participation is currently about $ 2,600 million, which is 35% lower. Tianqi, a bidder, lowered its market value by 50% to US $ 4,700 million, as he made an offer to SQM last May. Why does Tianqi then persist with opening on the Hong Kong Stock Exchange and $ 3.5 billion to finance this operation, with the maximum fines in favor of Nutrien for non-compliance of $ 325 million, according to its preliminary prospectus?

Failure to present

A possible deal between Tianqi and Nutrien on SQM was not submitted for approval US Federal Trade Commission (US FTC) for its competitive effects. This was only announced last February with respect to the aforementioned merger, requiring the sale of two fertilizer plants located in this country. It should be noted that nothing is related to this resolution with the lithium problem, which will become apparent several months later, in May this year, with Tianqi's proposal for SQM. Therefore, we can say that the authorities of free competition, the United States approved this purchase.

Global Market Distribution

Tianqi is a joint partner of American Albemarle at the largest lithium deposit in the world through Talison, joint venture which includes a lithium extraction agreement in Greenbushes, Australia, and one of the territorial distribution of the global lithium market associated with this extraction. This global agreement has been officially announced. US Securities and Exchange Commission (US SEC) when it was agreed, in 2014, and subsequently, to the same regulatory body in agreement with the Shareholders Agreement, which made it explicit, both documents were available on the official site US SEC,

According to the antitrust laws of the United States, an agreement on the territorial distribution of the market, even outside the country, cannot be implemented. For this law, it does not matter what type of goods agrees to distribute geographically or the degree of purity of minerals, but the fund in question: coordination to avoid competition. Fact of informing US SEC agreements of this kind obviously do not imply or can be understood as endorsing them in terms of free competition.

AND US Department of Justice (US DOJ) as US FTC Now they are officially informed about this territorial pact for the distribution of the world lithium market, and the course of action that they will follow is unknown. Both departments are responsible for complying with US antitrust laws, which Sherman Act of 1890 and Federal Trade Commission Act of 1914, which, among other things, prohibits the distribution of markets, and Clayton Act of 1914, which limits mutual participation, both because of their anti-competitive effects.

For the National Economic Prosecutor’s Office (FNE), the agreement signed between Tianqi and Albemarle will only be extractive, as indicated in the Senate Commission on Mines in October last year, which was proved wrong. For the Tribunal for the Protection of Free Competition (TDLC), the evidence presented was not considered because it did not come from the parties directly concerned, that is, Tianqi and FNE. For Corfo, who manages Salar de Atacama and must ensure its economic value, the agreement between Tianqi and FNE did not compete with it. For the government and its concerns regarding 25% of Chile’s total foreign trade with China, Tianqi’s support was tangible, as can be seen from the explanations given to its authorities to “verify” this operation. And as a forgotten background, our own DL 211 has been identified as one of the most serious behaviors defining zones or market shares.

Chinese intervention

Between the Greenbush, Australia (operated under Talison Tianqi and Albemarle) and Salar de Atacama, Chile (operated by SQM and Albemarle) deposits, 68% of the world's lithium originated as a raw material for use in various lithium compounds and in various concentrations. A possible merger of the three main players through cross-investment and joint venturesBy controlling two of the world's largest lithium deposits, he will not only strengthen the oligopoly with negative consequences for end users of lithium, but will also become the only buyer of lithium in Chile, which can only harm its economic interests.

The Chinese influence is obvious: 50% of global lithium consumption occurs in this country, where 49% of sales of electric vehicles occurred in 2017, and it is there that there is a strong growth in demand for lithium. Although the latter amounted to 1.2 million units over 97 million dollars in the global automotive market, by 2027 it is expected that they will reach almost 20 million. Chinese automobile consumption was 28 million units in 2017, followed by the United States of 18 million, and Japan, 5 million.

Tianqi is part of the strategy of the Chinese state, which seeks to consolidate its control over raw materials, which can play a central role in the development of electromobility. The lack of transparency in the lithium market only increases the problem.

If we add the above role joint ventures the conditions to which China seeks to gain access to its markets, to which, incidentally, the automotive sector belongs, then it should be clear that this Tianqi operation in SQM is not at all a passive financial investment, since FNE, Corfo and TDLC seem to consider agreement with ineffective behavioral restrictions, which also lose their power after six years. Rather, it is part of the global strategy of Chinese state capitalism.

The American dream

Corfo was forced to initiate arbitration with Albemarle for his lease agreement at Salar de Atacama, which would stop his predicted expansion; Albemarle, in parallel with Thianzi, conducted a tripling of Talison production and agreed this month using Mineral Resources, a new joint venture lithium (Wodjina) in Australia, keeping for itself the commercialization of it; Tianqi will enter SQM as a de facto co-controller, stating that it does not control; all of the above in the context of China, which does not give up its policy joint ventures despite requests from the United States and Europe, and this is certainly the main consumer of lithium. Is this not a general strategy for better coordination of lithium market projects?

It is this answer that is expected to come from the antitrust authorities of the United States, with the particular importance of the role of Albemarle, Tianqi and SQM companies also open in the United States – in this scenario, accepting statements from all involved and contrasting evidence, as well as the information provided US SEC, Chile declined to practice, to really explore what is happening in the lithium market, and, even worse, it gives antitrust immunity and lending to the production vehicle Salar de Atacama, in order to eventually consolidate a true lithium cartel worldwide,

It is hoped that the US authorities will soon intervene and not only pledge to cancel the possible purchase of 23.77% SQM from Tianqi, but face the nascent lithium cartel, since this seems to have all the consequences, on the contrary, unfortunately happened in chile.

Finally, returning to the original question, why is Tianqi preserved? Because he probably expects the lithium cartel to be consolidated, although the market does not share his expectations.

  • The content expressed in this opinion column is the sole responsibility of its author and does not necessarily reflect the editorial line or position. Counter,

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