Chile Plans to Nationalize Lithium Production, Sending Miners' Shares Lower
Shares of lithium producers plunged Friday after Chile, the second-largest lithium producer in the world, proposed nationalizing its production of the rare earth metal, a key component of electric vehicle batteries.
Chilean mining company Sociedad Química y Minera de Chile (SQM) lost almost a fifth of its value, and shares of Charlotte, N.C.-based Albemarle Corp. (ALB) fell 10%.
Chilean President Gabriel Boric proposed Thursday that the country's state-owned copper producer, Codelco, work with the two lithium producers to negotiate contracts moving forward, though no existing contracts would get canceled.
Chile boasts about 40% of the world's known lithium reserves, more than any other country. However, its mines rank a distant second in lithium production to Australia, which produce twice as much but have just a quarter of the world's reserves. No other country has more than 10% of the world's reserves.
How the nationalization plan would affect global prices for lithium—for which three-quarters of global production goes to car batteries—remains less clear. But fewer players and state-owned operators negotiating contracts could imply a departure from current sliding prices.
Increasing supplies, slowing electric vehicle demand from China and contract reviews by electric vehicle producers have pushed spot prices for lithium down dramatically this year.
Global production, which rose just 1% last year, could increase by as much as 20% this year as production from new mines hits the market. Cash prices in the spot market have plunged 60-70%—but they're still about four times higher than they were in the late 2010s.
However, electric automakers such as Tesla (TSLA) are still feeling the pain on their margins because they
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