A Simple Lesson on Lithium Profits: Part 1

I got chills on April 20, 2023. 

You know the kind I’m talking about. That creepy sense of déjá vu that raises goosebumps along your arm, making you suddenly shiver from an unknown coldness despite the warm spring weather. 

Spooky, eerie, chilling, perturbed… take your pick of synonyms. 

While everyone else around me was celebrating the holiday, my attention was fixated on an announcement made by Chilean President Gabriel Boric regarding his plans for Chile’s lithium industry. 

The flashback that sparked my unease happened the moment my eyes read the first headline: “Chile Plans to Nationalize Its Vast Lithium Industry.”

Here we go again, I thought to myself. 

After reading it a few times to make sure it wasn’t a typo, my déjá vu was overwhelming. 

My veteran readers remember Hugo Chavez’s May Day Takeover well. In May 2007, Hugo Chavez took control of the last privately run oil fields in Venezuela, effectively booting out the major oil companies that were operating in the country.

Oh, and he didn’t just ask them to leave…

No, Chavez seized every barrel, truck, and rig in Venezuela, nationalizing its oil industry in the name of the people. 

Total state control. 

Of course, you know just as well as I do how this tale ended. 

More than a decade and a half since the May Day Takeover, Venezuela’s oil industry is a shell of its former self, with production in an irreversible decline and the state-run company fraught with corruption and incompetence. 

So you can understand my initial reaction, can’t you? 

After all, Chile is a far more dominant supplier of lithium than Venezuela was of crude oil. 

Chile controls the largest amount of lithium reserves on the planet, with around 9.2 million tons, and is the second-largest producer at around 39,000 metric tons per year. Only Australia can boast more. 

Keep in mind that the world’s lithium supply is quite different from other commodities like crude oil. You see, the supply side of the lithium market essentially functions as an oligopoly, where a handful of powerful companies control production. 

Fortunately for us all, there’s more to the recent bombshell dropped by President Boric than meets the eye.

The good news is that President Boric’s nationalization of Chile’s lithium industry isn’t nearly as despotic as the headlines suggest. 

We can’t really blame him for making such a move, can we?

In Venezuela’s case, Chavez was taking advantage of high oil prices, even though the ensuing years led to the ruin of its oil industry. 

This is different, with Chile willing to directly work with companies, specifically SQM and Albemarle, two of the world’s top lithium producers. 

The plan is to create a state-controlled national lithium company. 

Rather than expelling large international companies from the country, current contracts would not be terminated. And in order to sign future contracts, companies must partner with the state-controlled company. 

President Boric called it a “public-private collaboration,” with the state-controlled company controlling 50.01% of all shares in joint ventures. 

The market backlash has been somewhat muted thus far. I’ll note that this situation isn’t entirely new to everyone. Chile nationalized its copper industry back in the 1970s, and today Codelco is the largest copper producer on Earth. 

If it worked once, why not twice? 

The question now is whether Chile’s government will play fair when it comes to these new collaborations. 

But there’s a smaller, lesser-known part of this lithium story — one that has the potential to be a game-changer for global supply. 

And it all comes down to HOW Chile wants to produce its future lithium supply. 

We’ll talk more about that next week.

Until next time,

Keith Kohl

Check us out on YouTube!

A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.

For nearly two decades, Keith has been providing in-depth coverage of the hottest investment trends before they go mainstream — from the shale oil and gas boom in the United States to the red-hot EV revolution currently underway. Keith and his readers have banked hundreds of winning trades on the 5G rollout and on key advancements in robotics and AI technology.

Keith’s keen trading acumen and investment research also extend all the way into the complex biotech sector, where he and his readers take advantage of the newest and most groundbreaking medical therapies being developed by nearly 1,000 biotech companies. His network includes hundreds of experts, from M.D.s and Ph.D.s to lab scientists grinding out the latest medical technology and treatments. You can join his vast investment community and target the most profitable biotech stocks in Keith’s Topline Trader advisory newsletter.