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For the National Economic Prosecutor's Office, the agreement signed between Tianqi and Albemarle would be only extractive – as indicated by the Senate Mining Commission last October – which is proven to be inaccurate. For the Court of Defense of free competition, the evidence provided was not taken into account because it did not come from the directly interested parties, namely Tianqi and the FNE. For Corfo, who manages the Atacama Salar and must ensure its economic value, the agreement between Tianqi and the FNE does not compete with him. For the government and its interest in 25 percent of Chile's total foreign trade with China, support for Tianqi has been palpable, as shown by the explanations provided to its authorities for "control" of this operation. And as a forgotten background, our own DL 211 has been defined as one of the most serious behaviors allocating areas or market shares.
On Monday, December 3, the sale of 62,556,568 SQM Series A shares (23.77%) would be perfected. Tianqi sold Nutrien – the merger of Canadian fertilizer companies PCS and Agrium – for $ 65 per share, or $ 4.066 million. On the stock market, the value of this stake is currently about $ 2,600 million, a decrease of 35%. Tianqi, the bidder, has lowered its market value by $ 4,700 million since the launch of the bid for SQM last May. Why Tianqi persists then with an opening on the Hong Kong Stock Exchange and a debt of 3.5 billion US dollars to finance this operation, with a maximum fine of 325 million US dollars for not having implemented , According to Its Preliminary Prospectus
Non-Submission
Such a possible transaction between Tianqi and Nutrien on SQM was not submitted for approval to US Federal Trade Commission (US FTC) because of its impact on competition. It was only last February that the above-mentioned case was made to require the sale of two fertilizer factories in that country. It should be noted that nothing has to do with this resolution of the lithium problem that will become apparent a few months later, in May. this year, with Tianqi's proposal on SQM. So we could say that the US free competition authorities have approved this purchase.
Distribution of the World Market
Tianqi is a partner partner of the American Albemarle in the world's largest lithium deposit through Talison, a joint venture comprising an agreement on lithium extraction in Greenbushes, Australia, and a territorial distribution of the global lithium market badociated with said extraction. This global agreement was formally reported to the US Securities and Exchange Commission (US SEC) when it was agreed in 2014 and subsequently by the same regulator when it agreed to the shareholders' agreement which made it explicit, the two documents available on the official website of US SEC .
Under antitrust law of the United States, a territorial market allocation agreement, even out of the country, can not be implemented. Because this law does not matter the type of property agreed to distribute territorially or the degree of mineral purity, but the fund in question: a coordination to avoid competition. The fact of informing US SEC of such agreements obviously does not and can not be understood as an approval of these from the point of view of free competition.
The two US Department of Justice (US DOJ), as the US FTC are now officially informed of this territorial pact of distribution of the global lithium market, the course followed is not known. The two departments are responsible for monitoring compliance with US anti-trust regulations arising from the [18909008] Sherman Act of 1890 and of the Federal Trade Commission Act of 1914, which, among other provisions, prohibit market sharing and the Clayton Act of 1914, which restricts cross-shareholdings, both because of their anti-competitive effects.
For the National Economic Prosecutor's Office (NEF), the agreement signed between Tianqi and Albemarle would only be the extraction – as it was exposed to the Senate Mining Commission in October – this which is proven wrong. For the Tribunal for the Defense of Free Competition (TDLC), the evidence provided was not taken into account because it did not come from the directly interested parties, namely Tianqi and the FNE. For Corfo, who manages the Atacama Salar and must ensure its economic value, the agreement between Tianqi and the FNE does not compete with him. For the government and its interest in 25 percent of Chile's total foreign trade with China, support for Tianqi has been palpable, as shown by the explanations provided to its authorities for "control" of this operation. And as a forgotten background, our own DL 211 has been defined as one of the most serious behaviors allocating areas or market shares.
The Chinese Intervention
Among the deposits of Greenbushes, Australia (operated by Tianqi and Albemarle under Talison) and Salar de Atacama, Chile (operated by SQM and Albemarle), are at l & # 39; 39% of the world's lithium originates as a raw material for use under different lithium compounds and at different concentrations. The eventual union of the three main actors through cross-investments and joint ventures controlling the world's two largest deposits of lithium, would not only consolidate an oligopoly with negative consequences for end consumers of lithium, but also it would become the only buyer of lithium in Chile, which could only adversely affect its economic interests.
The Chinese influence is obvious: 50% of the world's lithium consumption takes place in this country, where 49% electric vehicle sales in 2017, where is the strong future growth of lithium demand. Although these represent 1.2 million units out of 97 million in the global automotive market, they are expected to reach nearly 20 million by 2027. China's consumption of cars was 28 million. units in 2017, followed by the United States with 18 million and Japan with 5 million.
Tianqi is inscribed in a strategy of the Chinese state aimed at consolidating its control over things. premiums that can be central in the development of electromobility. The lack of transparency in the lithium market only adds to the problem.
If we add to the foregoing the role of conditional joint ventures that China encourages to access its markets, which include automotive sector, it should be clear that this Tianqi operation in SQM is not a pbadive financial investment at all, as the FNE, Corfo and TDLC seem to believe when they accept an agreement with ineffective behavioral restrictions that also lose their validity after six years. . This is instead part of a comprehensive strategy of Chinese state capitalism.
The American Dream
Corfo was forced to start arbitration with Albemarle for his lease on the Atacama Salar, which halted his planned expansion; Albemarle also piloted the tripling of Talison's production with Tianqi in parallel and agreed this month on the acquisition of Mineral Resources, a new joint venture in lithium (Wodjina) in Australia, while retaining the marketing of the latter. ; Tianqi would enter SQM as de facto co-controller, stating that he was not controlling; all this in the context of a China that does not give up its policy of joint ventures conditioned despite the demands of the United States and Europe and which is, by far, the main consumer of lithium. Is this not a common strategy for better coordinating the conceptions of the lithium market?
It is precisely this answer that should come from the antitrust authorities of the United States, with particular importance for the role of Albemarle, Tianqi and SQM – The company has also opened its doors in the United States – in this scenario, gathering statements from all parties involved and opposing hard evidence, such as those given to US SEC . In practice, Chile has given up on actually investigating what is happening on the lithium market and, worse, grants antitrust immunity and lends the productive vehicle of the Atacama Salar to finally consolidate a real lithium cartel in the world.
It is hoped that US authorities will intervene soon and would not only require canceling a possible 23.77% SQM purchase by Tianqi, but would also face the lithium cartel as it is apparently, with all its consequences. consequences, unlike what has unfortunately happened in Chile.
Finally, to return to the original question, why then does Tianqi persist? Because he's probably waiting to consolidate a deal on lithium, even if the market does not share his expectations.
- The content expressed in this column of opinion engages only the responsibility of its author and does not necessarily reflect the line or the editorial position. from The Counter .
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