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Tianqi in SQM: let's be a test



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For the Office of the National Economic Prosecutor, the signed agreement between Tianqi and Albemarle would only be extracted – as previously stated in the Parliamentary Mining Commission – which has proved to be inaccurate. For the Competition of the Free Court of Competition, the evidence provided was not considered as it did not come from the interested parties, that is, Tianqi and the FNE. For Corfo, who controls Salar de Atacama and has to achieve its economic value, the agreement between Tianqi and the FNE did not compete with it. For the Government and worrying about 25% of the total foreign trade in Chile with China, support for Tianqi has been clear, as the explanations given to authorities for " scrutinize "this surgery. And as a forgotten background, our DL 211 has itself defined as one of the most serious behaviors that assign zones or market shares.

Monday Next, December 3, selling series 62,556,568 Proportion of SQM (23.77% of total capital, with three directors eight) by Tianqi to Nutrien – the company named of the merger of the Canadian PCS and Agrium Fertilizer Companies for US $ 65 per share, or $ 4,066 million. On the stock exchange, the value of this participation is approximately US $ 2,600 million, or 35% lower. Tianqi, the bidder, has reduced its market value from 50% to US $ 4,700 million since it made the offer for SQM last May. Why does Tianqi then continue with an opening in the Hong Kong stock exchange and $ 3.5 billion in debt to fund this operation, with the maximum fines in favor of Nutrien for not operating, Does it amount to US $ 325 million, according to its preliminary prospectus?

The non-presentation

The transaction between Tianqi and Nutrien on SQM was not submitted for approval Federal Trade Commission of the United States (USA FTC) for its competitive implications. It was only stated in February last about the above combination to call the sale of two fertilizer plants located in that country, it should be noted that nothing with this decision had to be done with & # 39 ; The problem of lithium that would emerge months later, in May of this year, with Tianqi's offer on SQM. So one could say that the US free competition authorities have approved this purchase.

Distribution of the global market

Tianqi is a joint partner of the American Albemarle in the largest lithium deposit in the world through Talison, and joint venture which includes a lithium extraction agreement in Greenbushes, Australia, and one of the world's lithium-based territorial classification associated with this abstraction. This global agreement was notified to the official US Securities to Exchange Commission (US SEC) when it was agreed, in 2014, as well as that, to the same regulatory entity when agreeing the Shareholders Agreement that made it clear, both documents were available on the official website SEC of the United States.

Under the United States antitrust law, the territorial distribution agreement of the market can not be implemented, even outside the country. For this law it is not important that the type of goods agreed to distribute territorial or the amount of mineral purity, but the fund in question: cohesion to avoid competition. The fact of notifying SEC of the United States of agreements of this type clearly indicate that they can not be understood as approval in terms of free competition.

Both US Justice Department (US DOJ) as the US FTC they are now formally notified of this territorial agreement for distributing the world's lithium market, and the action that they are going to know is not known. Both departments are responsible for overseeing compliance with US antitrust regulations born with Sherman Act 1890 a Federal Trade Commission Act of 1914, which, among other provisions, prohibits the distribution of markets, The a Clayton Act 1914, which restricts cross-participation, because of their anti-competitive effects.

For the Office of the National Economic Prosecutor (FNE), the signed agreement between Tianqi and Albemarle would only extract – as stated in the Senate Mining Commission last October – who has proved wrong. For the Free Defense Competition Tribunal (TDLC), the evidence provided was not considered as it did not come from the interested parties, that is, Tianqi and the FNE. For Corfo, who controls Salar de Atacama and has to achieve its economic value, the agreement between Tianqi and the FNE did not compete with it. For the Government and worrying about 25% of the total foreign trade in Chile with China, support for Tianqi has been clear, as the explanations given to authorities for " scrutinize "this surgery. And as a forgotten background, our DL 211 has itself defined as one of the most serious behaviors that assign zones or market shares.

Chinese intervention

Between Greenbushes deposits, Australia (which is exploited under Talq by Tianqi and Albemarle), and Salar de Atacama, Chile (after exploitation by SQM and Albemarle), 68% of lithium of the world is derived from raw material to & # 39; w use it under different lithium compounds and in various concentrations of it. The final union of the three main players through cross investments a joint venturesBy managing both the largest global lithium deposits, not only reinforces oligopoly with negative consequences for lithium end users, but would also be the only lithium buyer in Chile, which could only harm its economic benefits.

The Chinese influence is clear: 50% of the world's lithium use occurs in that country, where 49% of electric vehicle sales also take place in 2017, which is where there is a strong growth in the a future in demand for lithium. Although the latter is 1.2 million units over 97 million in the global automotive market, by 2027 they are expected to reach almost 20 million. The use of cars in Chinese was 28 million units in 2017, followed by US $ 18 million and Japan of 5 million.

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

If we add to the above the role of joint ventures China's conditions are pressing to access its markets, which conditionally include the automotive sector, then it should be clear that this Tianqi operation in SQM is not a passive financial investment whatsoever, since the FNE, Corfo and TDLC believe that they accept an agreement with ineffective behavioral restrictions which also lose their validity after six years. Rather, it's part of the Chinese state capitalism's global strategy.

The American dream

Corfo was forced to start arbitration with Albemarle for his lease contract at Salar de Atacama, which will stop his projected expansion; Albemarle has been a tripled production of Talison together with Tianqi jointly and this month, with Mineral Resources, agreed to be new joint venture of lithium (Wodjina) in Australia, keeping itself to commercialize this; Tianqi would go to SQM as a de facto co-manager, stating that it does not control; All of the above are under the Chinese context that does not give it up joint ventures has been solved despite applications from the United States and Europe and that is the long-term lithium user. Is this not a common strategy to better co-ordinate lithium market plans?

Only this response is expected to come from the US rebellion authorities, and especially important, the role of Albemarle, Tianqi and SQM -company also opens in the US- in this scenario, taking statements from all acts and hard evidence that are contrasting, as is the information given to me SEC of the United States. Chile practiced to actually investigate what is happening in the lithium market and, worse, it gives immunity to resist and lends the productive vehicle of Salar de Atacama to reinforce a lithium card around the world.

It is hoped that the US authorities will intervene soon, and not only be forced to undo a purchase of 23.77% of SQM by Tianqi, but face the huge lithium cartel as it is & # 39 ; n probably, with all the consequences, to the opposite of what has happened unfortunately in Chile.

Finally, going back to the initial question, why, so, does Tianqi continue? Because it is likely that a lithium cardel is expected to be combined, even though the market does not share its expectations.

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