Today, Chile is not alone in its efforts to indigenize and enhance control over valuable commodity exports. Regional support among South American lithium producers for an OPEC-like cartel continues to grow, with additional interest from the likes of Indonesia. Such conditions could trigger a wave of state intervention in the global metals and mining sectors, leading to a profound shift in the industry’s dynamics and strategic value in advanced manufacturing.

By bringing the industry under state control, Chile aims to implement stricter regulations and more sustainable extraction practices. Extracting lithium from salt flats in South America is comparably cheaper than extraction from the hard rock mines in Australia, but the process requires evaporating water in what are already arid regions of South America. Immediate control of lithium production also grants Chilean President Gabriel Boric a fast-track method of allaying concerns voiced by the local indigenous communities that supported him and his party, the left-wing Social Convergence, ahead of elections in 2025.

Immediate reactions to the news led to declines in share price for two of the largest private lithium miners in Chile, SQM and Albemarle. In 2022, SQM saw its profits nearly triple, but with just seven years remaining on its current contract, SQM’s future in the lithium industry remains questionable, a telling sign for other private miners as they struggle to allay shareholder fears and profitably adapt to new regulatory environments.

In theory, nationalization allows Chile to exercise greater control over their resources and enforce sustainable extraction practices, addressing environmental and social concerns swiftly and directly, and without concern over the reaction from foreign shareholders. The imposition comes with hopes that the state will retain a larger share of revenue generated from its lithium resources to fund governmental programs and initiatives. Yet concerns of restrictions on exports or indigenization would adversely impact an industry that is volume-oriented in nature, and already endures seismic price volatility given its dependence on demand from China, which ended a popular EV subsidy program at the beginning of the year.

In the short-term, nationalization efforts are likely to create anxiety among investors and private corporations within the space that rely on a steady supply of lithium and other battery metals. Staunch opposition from the industry, both internal and external, could become a leading factor in elections and serve as a referendum on the future of Chile’s economic structure, possibly culminating in a reversal of the decision during the 2025 Chilean elections in the event of a Conservative victory. In the long-term, the lithium industry may consolidate around state-owned enterprises, with private sector firms either taking smaller stakes in joint-ventures or departing the industry entirely in favor of more accessible markets or alternative commodities.

The nationalization of lithium resources will likely have broader implications for the future of the global energy market. The race for clean energy development and a diversified energy mix will have to contend with diverging interests between the source of raw materials, and the markets that demand them the most.

*This article was originally published on May 2, 2023