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Tianqi in SQM: let there be evidence



For the National Economic Prosecutor's Office, the agreement signed between Tianqi and Albemarle will only be extractive – as stated earlier at the Senate Mining Commission – which was proven wrong. For the Free Competition Defense Court, the evidence provided is not considered because it does not originate from direct parties, namely Tianqi and FNE. For Corfo, who manages Salar de Atacama and must ensure its economic value, the agreement between Tianqi and FNE does not compete with him. For the Government and its attention to 25% of the total Chilean foreign trade with China, support for Tianqi has been palpable, as can be seen from the explanation given to the authorities for "supervision" of this operation. And as a forgotten background, our own DL 211 has been defined as one of the most serious behaviors that assigns zones or market share.

Next Monday, December 3, sales of 62,556,568 series A SQM shares (23.77% of total capital, with three directors eight) by Tianqi for Nutrients – companies born from the merger of the Canadian PCS and Agrium fertilizer Company – with a value of US $ 65 per share, or US $ 4.066 million. On the stock exchange, this participation value is currently around US $ 2,600 million, or 35% lower. Tianqi, the bidder, has reduced its market value by 50% to US $ 4,700 million since it made an offer for SQM last May. Why did Tianqi continue with the opening of the Hong Kong stock exchange and US $ 3.5 billion in debt to finance this operation, with a maximum fine supporting Nutrien for not implementing it, amounting to US $ 325 million, according to its initial prospectus?

Not a presentation

The last transaction between Tianqi and Nutrien on SQM was not submitted for approval to US Federal Trade Commission (US FTC) for its competitive implications. This was only said last February regarding the merger mentioned above to demand the sale of two fertilizer plants located in the country, it must be noted that there is nothing to do with this resolution with the lithium problem which will be proof a few months later, in May. this year, with Tianqi's proposal about SQM. Therefore, it can be said that free competition authorities from the United States have agreed to this purchase.

Global market distribution

Tianqi is a joint partner of American Albemarle in the largest lithium deposit in the world through Talison, a joint ventures which involves lithium extraction agreements in Greenbushes, Australia, and one of the world's lithium market territorial distributions related to this extraction. This global agreement was officially reported to US Securities and Exchange Commission (US SEC) when agreed upon, in 2014, and subsequently, to the same governing body when approving the Shareholder Agreement that made it explicit, the two documents became available on the official website US SEC.

Under the United States antitrust laws, market territorial distribution agreements, even overseas, cannot be implemented. For this law, it does not matter the type of goods agreed to be distributed territorially or the level of mineral purity, but the intended fund: coordination to avoid competition. Facts inform US SEC This natural agreement clearly does not require or can be understood as their agreement from the point of view of free competition.

Both US Department of Justice (US DOJ) as US FTC they are now officially notified of this territorial pact for the distribution of the world's lithium market, and the actions they will follow are unknown. Both departments are responsible for overseeing compliance with US antitrust regulations born with Sherman Act of 1890 and Act of the 1914 Federal Trade Commission, which, among other provisions, prohibits market distribution, and Clayton Act of 1914, which limits cross participation, both because of its anti-competitive effects.

For the National Economic Prosecutor's Office (FNE), the agreement signed between Tianqi and Albemarle will only be extractive – as stated in the Senate Mining Commission last October – which was proven wrong. For a Free Defense Competition (TDLC) Tribunal, the evidence provided is not considered because it does not originate from direct parties, namely Tianqi and FNE. For Corfo, who manages Salar de Atacama and must ensure its economic value, the agreement between Tianqi and FNE does not compete with him. For the Government and its attention to 25% of the total Chilean foreign trade with China, support for Tianqi has been palpable, as can be seen from the explanation given to the authorities for "supervision" of this operation. And as a forgotten background, our own DL 211 has been defined as one of the most serious behaviors that assigns zones or market share.

Chinese intervention

Among the Greenbushes deposits, Australia (exploited under Talison by Tianqi and Albemarle), and Salar de Atacama, Chile (exploited by SQM and Albemarle), 68% of the world's lithium originates as raw material to be used under different lithium compounds. and in various concentrations. The last union of the three main players through cross-investment and joint venturesBy controlling the two largest global lithium deposits, it will not only consolidate oligopolies with negative consequences for lithium end consumers, but will also be the only lithium buyer in Chile, which can only damage its economic interests.

Chinese influence is proven: 50% of world lithium consumption occurs in the country, where 49% of electric vehicle sales also occur in 2017, where strong future growth in demand for lithium is located. Although the latter is 1.2 million units of more than 97 million in the global automotive market, in 2027 they are expected to reach nearly 20 million. China's car consumption is 28 million units in 2017, followed by the United States at 18 million and Japan at 5 million.

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

If we add the role above joint ventures the condition that China is pushing to access its markets, which happens to include the automotive sector, it must be clear that Tianqi's operations at SQM are not passive financial investments at all, such as FNE, Corfo and TDLC seem to believe accept agreements with ineffective restrictions that also lose validity six years. This is more a part of the global strategy of Chinese state capitalism.

American dream

Corfo was forced to start arbitration with Albemarle for a lease contract at Salar de Atacama, which would stop the projected expansion; Albemarle has tripled Talison's production along with Tianqi in parallel and agreed this month, with Mineral Resources, new joint ventures lithium (Wodjina) in Australia, maintaining for itself this commercialization; Tianqi will include SQM as the de facto co-controller, stating that it does not control; all of the above is under the Chinese context which does not give up its policies joint ventures conditioned despite demand from the United States and Europe and so far, the main consumer of lithium. Isn't this a general strategy for better coordinating the lithium market design?

It is precisely this response that is expected to come from antitrust authorities from the United States, with the important role of Albemarle, Tianqi and SQM-companies in the United States – in this scenario, taking statements from all the hard evidence involved and contrasting, such as information provided to US SEC. Chile surrendered in practice to thoroughly investigating what's happening in the lithium market and, worse, gave anti-trust immunity and lent productive vehicles from the Salar de Atacama to finally consolidate a true lithium cartel worldwide. .

It is hoped that US authorities will immediately intervene and not only require to cancel the final purchase of 23.77% of SQM by Tianqi, but face the new lithium cartel because it seems, with all its consequences, on the contrary what unfortunately happened in Chile.

Finally, back to the original question, why, then, does Tianqi survive? Because he might expect a lithium cartel to be consolidated, even though the market does not share his hopes.

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

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