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| Codelco SQM Atacama Salt Flat |
The long-awaited lithium joint venture between Chilean state copper giant Codelco and local producer SQM has officially overcome its final regulatory obstacle. China’s antitrust regulator, the State Administration for Market Regulation, has given the green light for the deal, marking a significant milestone for both companies. This approval allows the joint venture to proceed with plans to produce lithium from Chile’s Atacama salt flat, one of the world’s richest sources of the mineral.
Deal Significance and China’s Approval
This partnership, initially announced nearly two years ago, aims to strengthen Chile’s control over its lithium industry and increase production. Chile is currently the world’s second-largest producer of lithium, a critical raw material for the production of electric vehicle (EV) batteries. Given the global importance of lithium in the green energy transition, this deal is seen as a strategic move by the Chilean government to assert more control over the sector, especially amid increasing global demand for lithium.
China's approval was the last major regulatory condition that the two companies needed to fulfill. Prior to this, several regulatory bodies, including those in Chile, the European Union, Brazil, Japan, South Korea, and Saudi Arabia, had already given their approvals. However, China’s decision was especially crucial due to its status as the world’s largest market for lithium-ion batteries and electric vehicles. China’s regulators stipulated that Codelco and SQM must ensure fair supply to Chinese customers and comply with market price conditions, which are yet to be revealed in detail.
Conditions Imposed by China’s Regulators
As part of the approval, China has laid out several conditions. Codelco and SQM must provide lithium at fair prices, ensuring that their rates do not exceed a certain percentage above the benchmark market price. Additionally, the companies are required to avoid sharing sensitive data with competitors in the lithium sector, ensuring that their dealings adhere to high corporate governance standards.
The Chinese regulators also demanded that the companies commit to a continuous supply of lithium carbonate to Chinese clients. If there are any major disruptions in supply, the companies must make reasonable efforts to maintain the flow of lithium to their Chinese partners. These stipulations are aimed at preventing supply shocks and ensuring a stable market for Chinese manufacturers, especially in the electric vehicle and battery storage industries.
Next Steps for the Joint Venture
With China’s approval now secured, the final step for the partnership is to receive approval from Chile’s Comptroller’s Office, which is expected by the end of the year. Codelco has expressed confidence that this final approval will be a formality, clearing the way for the joint venture to begin operations. Alvaro Garcia, Chile’s economy minister, has stated that he anticipates the deal will close before the current administration leaves office in 2026.
This partnership, despite facing resistance from some legislators and Tianqi, a major investor in SQM, is a significant development in the global lithium market. By combining the expertise and resources of Codelco and SQM, the venture is poised to enhance Chile’s position in the competitive global market for lithium and battery metals.
ScrapInsight Commentary
The Codelco-SQM lithium deal marks a key development for Chile’s lithium industry, signaling a shift toward greater state control and production expansion. The green light from China ensures a steady supply chain for critical raw materials, but the impact of regulatory conditions on market dynamics and pricing remains to be fully seen.
