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Tianqi in SQM: Let it be proof



For the Prosecutor's Office, the agreement signed between Tianqi and Albemarle would only be mining – as has already been said in the Senate for mining – which proved to be wrong. For the CFI, the evidence submitted was not taken into account because it was not from direct interested parties, ie Tianqi and FNE. For Corfo, which manages Salar de Atacama and must ensure its economic value, the contract between Tianqi and FNE does not compete with it. For the government and its interest in 25% of total Chile's foreign trade with China, Tianqi's support was tangible, as can be seen from the explanations given to the authorities for "controlling" this operation. And as a forgotten background, the DL 211 itself defines one of the most serious behavior of assigning zones or market shares.

On Monday, 3 December, Tianqi sold SQM shares (23.77% of its total capital, with three directors of eight) of A & S, 62,556,568 A, of Nutrien, a company born of a Canadian fertilizer company PCS and Agrium – worth $ 65 per share or $ 4,066 million. On the stock exchange, the value of this share is currently about $ 2,600 million or about 35% less. Tianqi, the auctioneer, has cut its market value by 50% to $ 4,700 million, since it has offered the SQM offer since May. Why is Tianqi persisting with opening on the Hong Kong Stock Exchange and a debt of $ 3.5 billion to fund this operation with maximum fines in favor of Nutrien for not doing it at $ 325 million according to its prospectus preliminary?

Not presenting

Possible transaction between Tianqi and Nutrien on SQM has not been submitted for approval by the company US Federal Trade Commission (US FTC) for its competitive consequences. This was announced in February only in connection with the aforementioned merger that required the sale of two fertilizers found in this country. It should be noted that this solution has nothing to do with the lithium problem that will take place months later, this year with the Tianqi to SQM. It can therefore be said that the US authorities for free competition have approved this purchase.

Distribution of the global market

Tianqi is a joint partner of the American company Albemarle, the world's largest lithium deposit, through Talison, joint venture which includes a lithium mining agreement in Greenbushes, Australia, and one of the world's lithium distribution market associated with this mining. This global agreement was officially announced American Securities Commission (US SEC) when agreed in 2014 and subsequently to the same regulatory entity when the Shareholder Agreement was approved, which explicitly stated that both documents are available on the official site US SEC,

Under antitrust law of the United States, it is not possible to conclude an agreement on the territorial distribution of the market even outside the country. For this law, it does not matter on the kind of goods agreed for territorial distribution or the degree of mineral purity, but on the fund: coordination to eliminate competition. Actual information US SEC agreements of that nature clearly do not or can not be understood as their approval in terms of free competition.

Both US Department of Justice (US DOJ) as US FTC are now formally informed about this Territorial Pact for the distribution of the lithium world market and the course of action that will follow is not known. Both departments are responsible for overseeing compliance with US antitrust rules, which were born with The Sherman Act of 1890 and The Federal Trade Commission Act of 1914, which inter alia prohibits the distribution of markets, and Clayton's Law of 1914, which restricts mutual participation, both because of their anti-competitive effects.

For the FNE, the agreement signed between Tianqi and Albemarle was only mining – as reported in the October Ombudsman of the Oil Commission – which proved to be wrong. For the TDLC, the evidence submitted was not taken into account because it did not come from direct stakeholders, ie Tianqi and FNE. For Corfo, which manages Salar de Atacama and must ensure its economic value, the contract between Tianqi and FNE does not compete with it. For the government and its interest in 25% of total Chile's foreign trade with China, Tianqi's support was tangible, as can be seen from the explanations given to the authorities for "controlling" this operation. And as a forgotten background, the DL 211 itself defines one of the most serious behavior of assigning zones or market shares.

Chinese intervention

Among the deposits of Greenbushes, Australia (used by Talison by Tianqi and Albemarle) and Salar de Atacama in Chile (used by SQM and Albemarle) comes 68% of the world's lithium as a raw material for various lithium compounds and at different concentrations. Possible combination of three major players through cross – investments and joint venturesManaging two of the world's largest lithium deposits would not only consolidate an oligopoly with negative consequences for end-users of lithium but also become the sole lithium buyer in Chile that could only harm its economic interests.

China's influence is obvious: 50% of the world's lithium consumption is in the country where 49% of electric vehicles are sold in 2017, which is a strong future growth in lithium demand. Although it was 1.2 million units above 97 million in the global automotive market, it is expected to reach nearly 20 million in 2027. China's car consumption in 2017 was 28 million units, followed by 18 million US cars and 5 million Japan.

Tianqi is part of the strategy of the Chinese state, which is trying to consolidate its control over the raw materials that can be decisive for the development of the electric car. Lack of transparency in the lithium market only raises the problem.

If we add the role to the role above joint ventures the conditions that China enforces in its markets, which by the way include the automotive sector, then it should be clear that this Tianqi operation in the SQM is not a passive financial investment at all, as FNE, Corfo and TDLC believe they have to accept an agreement with ineffective restrictions in the behavior that will also lose its validity after six years. It is rather part of the global strategy of Chinese state capitalism.

American Dream

Corfo was forced to initiate arbitration with Albemarle for his lease agreement in Salar de Atacama to stop his planned expansion; Together with Tianqi, Albemarle is simultaneously expanding Talison's production and this month has agreed with Mineral Resources, joint venture lithium (Wodjina) in Australia, leaving itself commercialized; Tianqi would have joined the SQM as a de facto co-author, and said he had no control; all above mentioned in the context of China, which does not give up its policies joint ventures conditional despite the demands of the United States and Europe, and it is by far the main consumer of lithium. Is this joint strategy better coordinating the lithium market proposals?

This response is expected to come from the United States antitrust authorities, with particular emphasis on the role of Albemarle, Tianqi and SQM – a company also open in the United States – in this scenario, taking into account all the hard and contrasting evidence involved, as well as the information given companies US SEC, Chile has given up in practice to actually investigate what is happening on the lithium market, and even worse it gives antitrust immunity and lends to the Salar de Atacama production vehicle to eventually consolidate a real lithium cartel around the world,

It is to be hoped that the US authorities will soon intervene and will not only have to withdraw the potential purchase of 23.77% of SQM by Tianqi, but face an initial Lithium cartel because it is obviously all its consequences in contrast to what happened sadly in Chile.

Finally, when we return to the original question, why does Tianqi persist? Because it is likely to expect the consolidation of the Lithium cartel, even though the market does not share its expectations.

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