Published: May 2025 | By Minener Staff
Chile’s highly anticipated lithium partnership between SQM and Codelco may be closer to finalization, but not without complications. Despite public statements by Codelco Chairman Máximo Pacheco expressing confidence, several legal and market uncertainties remain unresolved as the year-end deadline approaches.
The deal, expected to generate over $20 billion in revenue for the Chilean state by 2060, hinges on multiple conditions—most notably, final approval from China, ongoing indigenous consultations led by Corfo, and a potassium supply clause that has raised red flags among Chilean regulators and competitors.
Potassium Clause Sparks Antitrust Concerns
While Chile’s National Economic Prosecutor’s Office (FNE) conditionally approved the SQM-Codelco agreement, it explicitly excluded from its analysis a crucial component: SQM’s intention to acquire 100% of the potassium chloride output from the newly created joint venture company (Tarar).
Potassium chloride is the base ingredient for producing potassium nitrate, a key component in fertilizers and a significant business line for SQM. The company, in partnership with Chinese lithium giant Tianqi Lithium, already holds a dominant market share both locally and globally in this segment.
In a statement, FNE clarified:
“This Division concluded that the potassium offtake is not directly related to the lithium commercialization process and serves a different economic purpose.”
However, FNE’s Mergers Division recommended further scrutiny of Chile’s potassium market, suggesting it could warrant an independent antitrust investigation in the future.
A Critical Condition for the Deal
The potassium clause has become a pivotal issue. Industry insiders argue that SQM’s access to potassium revenues is essential for offsetting volatility in lithium markets. With lithium prices having dropped to around $10,000 per tonne—down from over $85,000 in 2022—the fertilizer segment remains a vital cash generator for the company.
In 2024, SQM’s plant nutrition revenue grew 3% year-over-year, reaching $942 million and contributing over 13% of gross profit. Analysts forecast further domestic growth of 4–5% for 2025, with strong demand expected in Chile’s agricultural sector.
Still, FNE’s analysis highlighted that potassium imports—though feasible—come with significantly higher costs. On average, import prices were 57% more expensive than domestic potassium chloride between 2018 and 2023.
Strategic Risks and Legal Paths Forward
Fertilizer companies and agricultural groups have voiced concerns over the exclusive potassium supply deal. While SQM has historically used imports to secure its needs, the loss of domestic access could raise costs, logistics risks, and price volatility.
Experts warn that if the clause is included in the final contract without regulatory blessing, it could open legal vulnerabilities. The Tribunal for the Defense of Free Competition (TDLC) may be asked to intervene if anti-competitive behavior is suspected.
The Federation of Fruit Producers (Fedefruta), a powerful agricultural trade group, confirmed it is studying the FNE report and may consider taking legal action:
“We are evaluating the findings of the FNE and will decide our next steps accordingly,” a spokesperson said.
Such action could result in precautionary measures that delay or suspend the agreement, especially if broader competition issues are raised by stakeholders.
Final Approval Timeline and Implications
The Codelco-SQM agreement must be sealed by the end of 2025, as the Chilean Nuclear Energy Commission (CCHEN) has only granted SQM a temporary license to increase lithium output by 300,000 tonnes until that date.
While the long-term state benefit projection remains significant—Codelco estimates $20 billion in contributions over 45 years—the regulatory and legal uncertainties suggest that the final chapter in this lithium megadeal is yet to be written.
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