A looming copper squeeze | Tianqi's $4 billion lithium bet in Chile at risk
Weekly mining & batteries updates (April 8 - 14)
What’s big last week?
1. Minerals/ Mining: copper prices flying high; uncertainties around Tianqi in Chile; lithium price struggles to rebound
2. Batteries/ EVs: Chinese EVs piling at European ports
Minerals/ Mining
Copper price is hitting the highest level in two years, surging 14% since January.
Why? Strong demand coupled with supply shortages due to the closure of First Quantumn’s $10 billion Panama mine and permitting delays in the U.S. (FQ’s Panama mine counts for roughly 1.3% of global annual copper production)
Anecdote: Streetlamp wires have suffered from the surge in copper prices with increasing cases of robberies. Minnesota lawmakers are even planning for a bill to require a state license for selling copper to deter wire thefts last week.
Another anecdote: Rio Tinto promoted its copper executive to chief commercial officer, showing the company’s emphasis on its copper business. The new CCO highlighted solving the copper crisis through collaboration, especially via joint ventures, essential for securing capital, accessing new resources, developing sustainable technologies, and extending asset lifetimes.
Another side effect of copper crunch?
The tightening copper ore supply has caused a decline in copper treatment charges in China, reaching a five-year low. Smelters in the country may collectively reduce their refined output by 5%-10% to manage the tightening ore supply.
Also in China, investors are having a buying spree of metals stocks, from copper to gold. The materials gauge was the top-performing CSI 300 sub-index in the past month, gaining 10%.
Not just China, an index monitoring six industrial metals, including copper, on the LME has surged 8% since the beginning of 2024, surpassing the 6.3% increase in MSCI's global stock index. This growth is fueled by an expectation of increased demand from Chinese manufacturers, heightening concerns about global supply constraints.
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Tianqi Lithium is under pressure as Chile moves forward with its plans to nationalize the country’s lithium resources.
Background: In 2018, Tianqi Lithium invested $4 billion to become the second-largest shareholder in Chile's SQM, securing a strategic position in one of the world's leading lithium reserves. Meanwhile, Chile's new lithium nationalization plan mandates strategic lithium projects to be conducted through public-private partnerships. Thus, SQM has entered a preliminary agreement with state-owned copper producer Codelco to form a joint venture.
What’s next? Under the deal, SQM's lithium business would merge with Codelco, with Codelco holding a 50% stake plus one share. Tianqi's influence on the joint venture would be limited if the deal proceeds, as it would hold a diluted stake.
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Lithium prices struggle to rebound significantly despite hitting bottom; miners, refiners, and carmakers are still grappling with the stock surplus.
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Blackstone is nearing the acquisition of a former Britishvolt industrial site in northern England, aiming to construct one of Europe's largest data centers. Northumberland County Council is in discussions with Blackstone regarding the 95-hectare coastal property near Blyth. The potential investment in the area could reach £10 billion.
Batteries/ EVs
European ports are transforming into "car parks" amid surging imports, sluggish sales, and logistical hurdles.
“Car distributors are increasingly using the port’s car parks as a depot. Instead of stocking the cars at the dealers, they are collected at the car terminal.”
Wondering where they come from? (graphic source) This FT report interviewed supply chain professionals who pointed out that many Chinese-branded EVs have been stranded in European ports for up to 18 months. This has led some ports to require proof of onward transportation from importers.
The extended stay of these Chinese cars at the port could be attributed to sluggish sales and the process for new brands to enter the market, as these Chinese companies are strengthening their presence in Europe.
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