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EV Anxiety? World’s Largest Lithium Producer Crashes On Chilean Political Storm

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EV Anxiety? World's Largest Lithium Producer Crashes On Chilean Political Storm As we detailed earlier, as Chileans overwhelmingly chose leftist and independent candidates for the country's constitutional convention, the new non-free-market-friendly political regime is generating a lot of uncertainly in Chilean markets. One of the biggest equity losers on the session is Sociedad Química y Minera ...

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EV Anxiety? World's Largest Lithium Producer Crashes On Chilean Political Storm

As we detailed earlier, as Chileans overwhelmingly chose leftist and independent candidates for the country's constitutional convention, the new non-free-market-friendly political regime is generating a lot of uncertainly in Chilean markets.

One of the biggest equity losers on the session is Sociedad Química y Minera de Chile SA (SQM), the world's largest producer of lithium, down more than 10% in the US cash session. 

EV Anxiety? World's Largest Lithium Producer Crashes On Chilean Political Storm

A new left-leaning constitution could include even tighter lithium mining operations in the country. 

"Even, possibly, to the point that those old, grandfathered, licenses are revoked. Or the lithium operations (intimately tied in with the potassium and iodine ones, they're not separable) might be taken back under direct state control. There are those, as above, who still would relitigate that initial privatization," former Forbes writer Tim Worstall wrote in a Seeking Alpha piece in late 2020. Back then, he was writing about SQM's path in light of a new constitution in 2021. 

Worstall added:

"The process here is a constitutional convention and it's really difficult to predict what the end result of one of those is going to be. After all, they are, by there mere declaration of what they're doing, insisting that they're going to change the basic rules of the country. And SQM does have that slightly anomalous position - as does more strongly lithium mining in Chile - which means we might want to worry here."

A new constitution could change SQM's position in the country and even affect their legal right to mine. No wonder the stock crashed. 

Tyler Durden Mon, 05/17/2021 - 20:30
Tyler Durden
Tyler Durden (a pseudonym) represents the idea that a return to truly efficient markets is a possibility and a necessity. After having experienced the inner workings of capitalism at various asset managers and advisors, Tyler believes that the current model is flawed and a deleveraging at every level of modern society is needed to reinspire the fundamental entrepreneurial spirit. Visit his blog: ZeroHedge (http://www.zerohedge.com/)

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