Shares of lithium miners have been on quite a ride lately amid falling prices and unusual pricing strategies from industry players. Shares of lithium miners have been volatile amid falling prices and unusual pricing strategies from industry players. On Friday, lithium related-stocks are diving on the new policies in one country.
Shares of
Albemarle
(ticker: ALB),
Livent
(LTHM), and
SQM
(SQM) dropped 10%, 5.5%, and 18.6% on Friday, respectively. The
S&P 500
and
Dow Jones Industrial Average
both rose about 0.1%.
Those three have a few things in common. They are all significant suppliers of lithium products. It’s a key component in lithium ion batteries that power electric vehicles. The companies also all mine lithium in South America. Albemarle and SQM have operations in Chile, and Livent in Argentina, as well.
Chile is the reason the stocks are down. Chile wants to nationalize the lithium sector over time with the state holding a controlling interest while partnering with lithium miners.
Chile accounts for roughly 30% of the raw lithium materials around the globe. Only Australia is bigger, accounting for almost 50%.
It’s sounds alarming. But it also sounds as if existing contracts will be honored. That takes some of the sting out of the proposal.
“We will continue to collaborate with the government of Chile regarding the proposed national lithium strategy,” Albemarle said in an emailed statement. “We have many shared interests to include how best to grow the lithium market and deploy new sustainable technologies. Albemarle said in an emailed statement. Our current contract with the Chilean state is valid through 2043. We expect no material impact as the Chilean government made clear it will fully respect existing contracts.”
SQM declined to comment. Livent didn’t return a request for comment.
Lithium is in the crosshairs because EV demand is growing. Global lithium demand has grown at an incredible 12% a year on average for the past 27 years, according to U.S. government data. It’s expected to expand another fivefold over the next seven years.
The lithium industry has struggled to keep up, and volatility has been the result. Lithium prices nearly topped $90,000 a metric ton in November, up from about $10,000 before the pandemic. Prices have since fallen to about $25,000 a metric ton.
Price volatility also led the world’s largest battery maker,
Contemporary Amperex Technology Co Ltd
(300750.China), better known as CATL, to essentially guarantee customers an embedded lithium price of $20,000 per metric ton on half of the batteries they buy from CATL. That policy seemed designed to grow CATL’s market share, although it also sent Albemarle stock down almost 10% on Feb. 17.
Shares of lithium miners that don’t do business in Chile or Argentina are rising. Shares of
Piedmont Lithium
(PLL) and
Sigma Lithium
(SGML) rose 2.4% and 3.5% on Friday, respectively.
Lithium Americas
(LAC) stock, however, dropped 1.4% after being up earlier in the day.
Piedmont has projects in Canada, Africa, and the U.S. Sigma has a project in Brazil. Lithium Americas has a project in the U.S. It also has a project in Argentina. All three of those companies are small and working to bring capacity online.
Albemarle doesn’t do all its business in Chile, as it has assets in North America and Australia as well.
The growth of EVs has had some unexpected consequences. The potential nationalization of the Chilean industry is one.
Write to Al Root at allen.root@dowjones.com
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