AN ANALYSIS OF THE IMPACT OF CHINA'S LITHIUM CARBONATE MARKET ON SQM'S TAKEOVER OF AZURE MINERALS 

**The Lithium Carbonate Market in China and its Global Influence**

Recently, China's lithium carbonate market has come under significant pressure, with prices falling below CNY 165,000 per tonne, the lowest since September 2021. Factors contributing to this decline originate from increasingly high inventories and shrinking demand. A vital indicator of the underperformance in the lithium market was an 11% annual decline in the purchase of new electric vehicles in China, driven significantly by macroeconomic variables. 

**Effects of China's Macroeconomic Climate on the Lithium Carbonate Market**

The world's leading EV consumer market has encountered macroeconomic headwinds, compelling households to curtail substantial purchases. Consequently, these figures have elicited a pessimistic industry outlook, leading to a downturn in the restocking period of manufacturers using lithium batteries in their EV production units, especially in Q3. They continued to utilize the excessive inventory aided by the Chinese government's hefty subsidies in 2021 and 2022. Further demand apprehensions have arisen from an ongoing investigation launched by the EU into predatory pricing for Chinese vehicles stemming from Beijing's subsidies, posing threats of trade tariffs and barriers.

**Impact on the Battery Manufacturing Sector and Refrained Purchases**

The subsequent events and concerns have made battery manufacturers tentative about procuring substantial amounts of lithium or related input materials. A broad sector of these manufacturers elected to continue with their existing inventories instead of initiating the usual restocking practices, especially considering the outstanding supply started by significant subsidies from the Chinese government in 2021 and 2022.

**SQM's Proposed Takeover of Azure Minerals Amid Economic Turbulence**

Despite the challenges mentioned above within the lithium industry, Chilean lithium giant SQM is making strides toward expanding its global footprint with an A$1.63 billion ($1bn) bid for Azure Minerals, an Australian company owning around 60% stake in the Andover lithium project in Western Australia's Pilbara region. However, Australian billionaire Gina Rinehart might interfere in the takeover attempts, considering her 19.9% ownership in Azure and previous thwarting Albemarle's attempt to acquire Liontown Resources. 

**Major Shareholders and Impending Decision Making**

The landscape for SQM's bid may be complicated by the actions of Rinehart and Australian millionaire Mark Creasy, who, with a 13.2% stake in Azure, is also reportedly considering blocking SQM's bid. The complex nature of this business climate is emphasized by the structure and conditions in SQM's proposed offer, which legally restricts any other shareholders from acquiring more than a 19% stake in Azure.

**SQM's Pursuit of Dominance in the Battery Metals Sector**

Undeterred by existing conditions, SQM is resolute in maintaining its growth trajectory in the rapidly expanding battery metals sector. It acknowledges that merging and acquiring businesses is a more viable strategy for expanding production capacity than establishing new projects. The company's inflating portfolios beyond its native, Chile, might trigger vigorous competition from industrial giants like China's Ganfeng Lithium and Albemarle, who have previously expressed interest in acquiring Azure. 

**Conclusion**

In conclusion, the ongoing tussle for the control of Azure Minerals exemplifies the numerous factors, quarrels and strategic decisions that significantly affect the lithium sector on a global scale. Through this analysis of SQM's takeover attempts of Azure Minerals amid China's lithium carbonate market scenario, one can appreciate the substantial influences that international trade, macroeconomic conditions, investor strategies, and government policies have on shaping the future of the lithium industry and, by extension, the entire EV supply chain.

Important Points:

• Australian billionaire Gina Rinehart is considering ways to block SQM's $1 billion bid for Azure Minerals.

• SQM, the world's second-largest lithium producer, announced that Azure had agreed to its takeover offer.

• The proposed deal has been in the works since SQM acquired a 19.99% stake in Azure for A$20 million in March.

• The deal has two layers:

  1. Consolidating 100% ownership of Azure for A$3.52 per share, a premium of 44.3% to its last close.
  2. An off-market takeover bid of A$3.50 per share if the scheme is not accepted.

• Azure owns around a 60% stake in the Andover lithium project in Western Australia and its board unanimously supports the agreement.

• Rinehart’s Hancock Prospecting owns a 19.9% stake in Azure, raising questions about its potential influence on SQM’s bid.

• Other major shareholders like Mark Creasy, who holds a 13.2% stake in Azure, are also considering blocking SQM.

• Conditions of SQM’s offer state that no shareholder other than SQM can acquire more than a 19% interest in Azure.

• SQM aims to expand its portfolio beyond Chile, seeing mergers and acquisitions as effective ways to expand capacity.

• Other companies like China’s Ganfeng Lithium and Albemarle have shown interest in Azure in the past.

• If successful, this would be SQM's second venture into Australia's lithium sector in just a few days.

• SQM also has other ongoing projects and partnerships in Australia, including a 50/50 interest with Wesfarmers in the Mt. Holland lithium project.