Chile bid to boost state control over lithium spooks investors

SANTIAGO, April 21 (Reuters) - Chile has moved to boost state control over its lithium industry as it seeks to diversify from mining into batteries and other areas, spooking investors in the country's dominant miners of the white metal, SQM SQMA.SN and Albemarle Corp ALB.N.

Chile's progressive President Gabriel Boric late on Thursday announced the move that would see the world's second largest lithium producer shift to a model with the state holding a controlling interest in all projects through a public company that would partner with private mining firms.

By late Friday trading, Chilean firm SQM's U.S.-listed shares tumbled some 18%, while Albemarle was down nearly 9%. SQM's lithium contract in Chile is set to expire in 2030 and Albemarle's in 2043, giving it more insulation from the potential move.

The bid for state control in Chile, which has the world's largest reserves of the battery metal, reflects a wider wave of resource nationalism around Latin America, home to the so-called "lithium triangle", which holds the world's largest trove of the metal essential for electric vehicle batteries.

It poses a fresh challenge to electric vehicle (EV) manufacturers scrambling to secure battery materials. Mexico nationalized its lithium deposits last year, and Indonesia banned exports of nickel ore, a key battery material, in 2020.

Boric said in his announcement that Chile would not cancel existing contracts, though it would try to negotiate with mining firms to voluntarily shift to a public-private model.

But he signaled the country's ambitions to participate in the higher margin industries surrounding battery production rather than being restricted to mining, a common lament of emerging markets with big deposits of the metal. Speaking from the northern city of Antofagasta on Friday afternoon, Boric, 37, said the government has ambitions to produce value added products and batteries.

"In Chile we can add value, we can produce batteries, here in our country, we just don't have to extract the raw material," Boric said, adding that the government was opening a technological institute of lithium and salt flats in the northern city.

Separately, Chilean economic development CORFO said Chinese automaker BYD Co Ltd 002594.SZplans to build a $290 million lithium cathode factory in Chile's northern Antofagasta region.