By Javier Rogel Arellano
The approval granted by China’s State Administration for Market Regulation (SAMR) to the agreement between SQM and Codelco has cleared the final outstanding international hurdle for formalizing the partnership in the Salar de Atacama. However, alongside its approval, the regulator imposed a package of commitments that will remain in force for a decade—a period that some market observers consider unusually long.
Among the conditions are requirements to prevent the exchange of sensitive information with competitors, corporate governance obligations, and the mandate to guarantee a minimum annual supply of lithium to Chinese customers under FRAND terms—fair, reasonable and non- discriminatory.
Although the figure was designated confidential, reporting by La Tercera indicates that the commitment would reach 125,000 tonnes per year, and at earlier stages even a volume of 150,000 tonnes had been suggested.
Andrés González, Head of Mining Industry Analysis at Plusmining, explains that if this figure is confirmed, it would represent a significant volume, considering that SQM projects a capacity of 240,000 tonnes per year by 2026. “We would be talking about more than 50% of SQM’s projected capacity,” he notes.
Although the memorandum of understanding between Codelco and SQM envisions reaching 300,000 tonnes annually by 2030, González believes it is “likely that this target will take longer than expected. Even so, a minimum supply of 125,000 tonnes would remain a substantial obligation.”
He adds: “Today, more than half of SQM’s sales go to customers in China, but this commitment establishes a restrictive framework and operating boundaries that the partnership will not be able to exceed. The 10-year term is unusually long and reinforces the conditioning nature of the agreement.”
According to González, the pact also establishes a system of variable pricing linked to international benchmarks. “These are variable prices. SAMR’s statement specifies that the average annual price must not exceed a certain percentage of the benchmark market price. We still do not know which benchmark will be used, but it is clear that the price will fluctuate over time.”
Meanwhile, Cristián Quinzio, Chairman of the Board of the Center for Copper and Mining Studies (Cesco), considers the agreement “very good news for Chile.” In his view, “the supply requirement is not extraordinary; it rather formalizes the sales that SQM already carries out to its main commercial destination, the Chinese market.”
Quinzio also dismisses comparisons to the controversial 2005 contract between Codelco and China’s state-owned Minmetals, which committed copper sales at prices far below market levels. “That was a completely different model. Codelco sold copper for years at fixed prices, under a formula that resulted in revenues of between US$1 and US$1.5 per pound when the metal was trading at US$4. In this case, there are no fixed prices or structural discounts—these are market prices that reflect the international cycle.”
From London, José Hofer, lithium battery market specialist at the British consultancy Supply Chain Insights, offers a more dissenting perspective. While he acknowledges that the agreement provides short-term stability, he warns that it also deepens China’s dependence in a market where the Asian country already holds dominant influence. “It is not positive in the long term—perhaps in the short term it gives more breathing room. But globally this is a real move of socialism put into practice: on the Chilean side there was nationalization, and on the Chinese side there will be price controls,” the analyst cautions.
Source: La Segunda