Wednesday , May 12 2021

Tianqi in the SQM: let him have proof



For the Office of the National Economic Prosecutor's Office, an agreement signed between Tianqi and Albemarle would only be extractive – as previously stated in the Senate Mining Commission – which proved inaccurate. For the Court of Defense of Free Competition, the evidence provided was not taken into account because they did not come from directly interested parties, that is, from Tians and the FNB. For Corfu, who runs Salar de Atacama and must secure his economic value, the deal between Tianchi and FNE did not compete with him. For the government and its concern for 25% of Chile's total foreign trade with China, support for Tianqi is obvious, as can be seen from the explanations given to its authorities for "overseeing" this operation. And as a forgotten background, our own DL 211 is defined as one of the most serious behaviors assigned by zones or market shares.

The next Monday, December 3, sales of SQM's 62,556,568 A series of shares (23.77% of the total capital, with three directors of eight) from Tianqi of Nutrien – the company that was born from the merger of Canadian fertilizer companies PCS and Agrium – worth $ 65 per share, or $ 4,066 million. At the stock exchange, the value of this share currently stands at around $ 2.600 million or 35% lower. Tianqi, the bidder, reduced the market value from 50% to $ 4.700 million after offering the SQM offer last May. Why Tianqi then continues to open the Hong Kong Stock Exchange and $ 3.5 billion in debt to finance this operation, with maximum fines in favor of Nutrien because it does not implement it, in the amount of $ 325 million, according to the prospectus preliminary ?

Non-presentation

Any transaction between Tianqi and Nutrien on SQM was not submitted for approval until The Federal Trade Commission of the United States (US FTC) for its competitive implications. This was announced in February last year in connection with the above merger to request the sale of two fertilizers for fertilizers located in that country, it should be noted that nothing was related to this resolution with the lithium problem that will become evident months later, in May this year, with the Tianqi proposal on the SQM. Therefore, it can be said that the free-competition authorities of the United States have approved this purchase.

Distribution in the global market

Tianqi is a joint venture of US Albemarle in the largest lithium deposit in the world through Talisman, joint venture which includes a contract for the extraction of lithium in Greenbushes, Australia, and one of the territorial distribution of the world lithium market associated with this extraction. This global agreement was officially reported to The Securities and Exchange Commission of the United States (SEC SEC) when agreed, in 2014, as well as subsequently, to the same regulatory entity when it aligns the shareholder agreement with which it will be explicitly, the two documents are available on the official website of US SEC.

Under the US antitrust law, an agreement on territorial distribution on the market, even outside the country, can not be implemented. For this law it does not matter the type of goods arranged to distribute the territorial or degree of mineral cleanliness, but the fund questioned: coordination to avoid competition. The fact of informing US SEC of contracts of this kind obviously does not entail or can be understood as their approval from the point of view of free competition.

Both US Department of Justice (US DOJ) as US FTC they are now formally informed of this territorial pact for the distribution of the world market for lithium, and the course of the action they will follow is unknown. Both departments are responsible for overseeing compliance with US antitrust regulations that were born with Sherman Act of 1890 and Federal Trade Commission Act of 1914, which, among other provisions, prohibit the distribution of markets, and Clayton Act of 1914, which limits cross-ownership, and because of their anti-competitive effects.

For the Office of the National Economic Prosecutor (FNB), an agreement signed between Tianchi and Albemar will only be extractive – as stated in the Senate Mining Commission last October – which proved to be wrong. For the Tribunal for Defense of Free Competition (TDLC), the provided evidence was not taken into account because it did not come from directly interested parties, that is, from Tians and the FNB. For Corfu, who runs Salar de Atacama and must secure his economic value, the deal between Tianchi and FNE did not compete with him. For the government and its concern for 25% of Chile's total foreign trade with China, support for Tianqi is obvious, as can be seen from the explanations given to its authorities for "overseeing" this operation. And as a forgotten background, our own DL 211 is defined as one of the most serious behaviors assigned by zones or market shares.

Chinese intervention

Among the deposits of Greenbushes, Australia (exploited by Talison by Tianqi and Albemarle) and Salar de Atacama, Chile (exploited by SQM and Albemarle), 68% of the world's lithium originates as a raw material used under different lithium compounds and in various concentrations . The possible unification of the three main players through a cross-investment and joint venturesControlling the two largest global lithium deposits will not only consolidate the oligopoly with adverse consequences for ultimate lithium customers, but will also become the sole lithium buyer in Chile, which can only damage its economic interests.

Chinese influence is obvious: 50% of the world's lithium consumption occurs in that country, where 49% of sales of electric vehicles occurred in 2017, where there is a strong increase in lithium demand. Although the latter were 1.2 million units over 97 million in the world automotive market, by 2027 they are expected to reach nearly 20 million. Chinese car consumption was 28 million units in 2017, followed by the United States of 18 million and Japan by 5 million.

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

If we add the above role to joint ventures conditions that China is pushing for access to its markets that accidentally involve the automotive sector, then it should be clear that this Tianqi operation in SQM is not a passive financial investment at all, since FNE, Corfo and TDLC seem to believe to accept a deal with ineffective behavioral constraints, which also lose their importance after six years. It is, instead, part of the global strategy of Chinese state capitalism.

American Dream

Corfu was forced to begin arbitration with Albemala for a lease agreement in Salar de Atacama, which would stop the planned expansion; Albemarle led Thalyson's triple production together with Tianki in parallel and agreed this month with Mineral Resources, a new joint venture of lithium (Wodjina) in Australia, retaining for itself the commercialization of this; Tianqi will enter the SQM as a de facto co-controller, declaring that he does not control it; all above in the context of China that does not give up its policy on joint ventures conditioned despite the requirements of the United States and Europe, and this is far from the main consumer of lithium. Is not this a common strategy for better co-ordination of designs in the lithium market?

It is this answer that is expected to come from the antitrust authorities of the United States of America, with the particular importance of the role of Albemarle, Tianki and the SCM Society, also open in the United States – in this scenario, taking statements from all involved and opposing hard evidence, such as the information given on US SEC. Chile has abandoned the practice of realizing what is happening in the lithium market and, worse, giving antitrust and lending to the productive vehicle of Salar de Atacama to consolidate the real lithium cartel in the world.

We should hope that the US authorities will soon intervene and will not only commit themselves to cancel the possible purchase of 23.77% of SQM by Tianqi, but face the initial lithium cartridge because it is obvious, with all its consequences , on the contrary to what sadly happened in Chile.

Finally, to return to the initial question, why, then, Tianki lasts? Because he probably expects to consolidate the lithium cartel, although the market does not share its expectations.

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

Source link