Australia’s lithium stocks rise after Chile’s nationalisation plan

Australian lithium miners saw an increase in their stocks on Monday as investors bet on rising demand for Australian lithium following Chile’s announcement that it plans to take control of its lithium output. 

This metal is essential for electric vehicle (EV) batteries and the move by Chile has raised concerns that other governments may follow in its footsteps. 

Meanwhile, lithium prices in Asia stabilised on an improved demand outlook and Japan announced a series of industry subsidies to shore up its EV minerals supply. 

In Australia, Pilbara Minerals, the country’s biggest independent lithium producer, saw its shares jump 5.2% to a six-and-a-half week high, while other listed miners with lithium projects, including Mineral Resources, Liontown Resources, Core Lithium and IGO Ltd also rose. 

Australia is the world’s top lithium producer and supplies around half of global supply. Chile, the second-largest lithium producer globally, has announced plans to shift to a model in which the state holds a controlling interest in all projects, partnering with mining firms. 

Glyn Lawcock, Head of Resources at Sydney investment bank Barrenjoey, said that Chile’s decision could slow down investment into the country, which is slightly positive for the lithium world. 

He also noted that the move might force major mining companies to pour more investment dollars outside of Chile. 

Lawcock further commented that the nationalisation of mining assets in Chile may make Australian hardrock more valuable since Australia is in a much more stable regulatory environment. While there might be small increases in royalties payments from time to time, Australia does not generally nationalise assets. 

Australian-listed miners with projects in South America’s lithium triangle, which spans Chile, Argentina, and Bolivia, saw their shares fall on concerns that other governments may follow Chile’s lead. Shares in miners with Argentine projects fell, while shares in Lake Resources, Argosy Minerals, and Galan Lithium fell between 4.1% and 4.9%. 

The nationalisation trend poses a challenge to EV manufacturers, which are scrambling to secure battery materials, as more countries look to protect their natural resources and access to battery minerals supply. 

In the latest move, Japan announced that it will subsidise half the cost of smelting and mine development projects of important minerals, including lithium, by Japanese companies. 

Despite the impact of Chile’s announcement, the outlook for lithium appears to be improving after stronger-than-expected first-quarter sales of EVs in China. 

Prices for lithium carbonate have slumped by more than two-thirds since November, while those for Australian ore have dropped nearly 30% after a rush by EV makers over two years drove prices up sharply. Prices of lithium in Wuxi, China, which fell after news of Chile’s policy broke last week, rallied 14.8% on Monday, given expectations of an upcoming demand recovery.