SQM probably most vulnerable, followed by Albemarle. Livent is mostly in Argentina. But they could participate in the OPEC arrangement and or be nationalized.
Albemarle seems most diversified with operations in Australia, China, and the US in addition to Chile.
Stats on Lithium production.
All of this kind of political risk keeps me out of the emerging markets index like EEM or VWO. Worked great in 2000s. Since then, not so much.
Electric vehicles and lithium batteries do seem to be major growth opportunities. I suppose they are emerging markets technically, but I don’t think many see them that way. Tesla became much more interesting to me when it turned a profit and the PE fell to reasonable numbers.
Of course competition and a few bumps in the road along the way are all part of it. Still likely to be a winner if EVs do hit 9MM vehicles in the US in 2030. That requires lots of growth both in vehicles and in lithium.
Details of the Chile plan
Chile plans to encourage use of direct extraction technology (DLE), but so far technology is unproven and may require more fresh water than available in the area.
China is going to lose her footing in this. Across the globe there will be a nationalization movement.
China can not easily afford higher priced premium resources en masse.
I am comparing the US that net imported oil for decades to China with a much larger population that can not produce more because of a lack of water. China can not import non stop like that into the distant future.
I am expecting China’s trade surplus to the globe to shrink dramatically.
Adding actually there were numbers less than five years ago discussing China has trade deficits with most countries. The US was the major exception.
It will be interesting to see how this comes out. China has an equity position in much lithium production. They might be difficult to displace.
As with rare earths, they are long term players and willing to cut prices to rock bottom if necessary. They know very well that western investors will drop out if a business does not start making money soon. Low price competition usually does them in. And indeed that is the risk US lithium processors face all the time.
If China is willing to supply for less than their cost of production, will users continue to pay premiums to keep them in business? Or will they buy from China?
The MBA philosophy is always take the money. To hell with tomorrow. Extremely short term focus. Tomorrow we may all be dead.
Paul,
I have not particularly read much on this but the headlines and small blurbs I read China has been investing abroad in all sorts of resources to control their supply. Chinese companies own mines etc…The nationalization movement strips them of their rights in other countries. There is nothing China can do about it except pay higher prices in the long run. China can not afford this.
The US also ran into this well before 1973 with oil. We were told to simply get out of countries as wells were taken over by the respective governments.
As far as I know the investment is a total loss.
The argument is the outside western or in this case Chinese companies are taking advantage. Forget about making them whole. Nothing at all is owed.
This comes at a time when the US federal government is investing in infrastructure and resource development including refinement processes here at home. The freeing up of resources abroad in the nationalization movement means China wont get the resource first or solely. This is an advantage to the US for EVs, batteries, PC chips etc…
There is talk in DC of helping countries kick the Chinese out of their nations. The Congo for instance might be getting assistance in the process of retaking their properties from China. That I have heard more about on NPR.
Nationalization of lithium seems popular in South America. Mexico plans to nationalize their (undeveloped) lithium.
Governments can do anything they like. But if they expect future loans from international sources they better mind their credit ratings.
I think that means they will pay for the assets they nationalize. Values will be negotiated and may be in court for years.
Must of lithium production is in Australia. I’d be surprised to see that nationalized. But China does own a chunk there. SQM also has a major Chinese block. As I recall someone owned a chunk of shares and wanted to cash out. China bought.
PBS news tonight had segment on Sri Lanka. They borrowed extensively from China to build many projects that failed to produce profits. China is extending terms. But has a big stake in the country. And with that they usually get negotiating power and influence. Meanwhile, the people can’t afford living expenses.
Mexico has been through this all before but years ago. Pemex was nationalized from Humble Oil and Standard Oil facility. Would like to know what compensation was paid.
Here is the Wikipedia article on Pemex–
https://en.wikipedia.org/wiki/Mexican_oil_expropriation
Looks there are several books to add to my reading list.
All mineral resources are ‘nationalized’ in Venezuela by the Constitution which is very much like Federal lands in the US, When Venezuela nationalized oil, it was the operating companies that changed ownership, not the oil itself. Just because there happens to be oil below your land, it does not belong to the landowner in Venezuela.
The Captain