Tianqi Lithium's Legal Setback in Chile: Implications for ESG and Supply Chain Resilience in the EV Sector

The lithium industry is at a crossroads, with geopolitical tensions, environmental scrutiny, and market volatility converging to reshape the landscape for key players like Tianqi Lithium. The company's recent legal challenge against the Codelco-SQM joint venture in Chile-a cornerstone of Chilean President Gabriel Boric's resource nationalization strategy-has sparked debates about corporate governance, ESG compliance, and the long-term viability of lithium supply chains for the EV sector. This analysis unpacks the strategic risks and opportunities for investors navigating this complex terrain.

The Legal Setback: A Clash of Governance and Geopolitics

Tianqi Lithium, the second-largest shareholder in SQM with a 22.16% stake, has contested the Codelco-SQM joint venture in court, arguing that the deal should have required a shareholder vote, as reported by Bloomberg. The joint venture, which received conditional approval from China's State Administration for Market Regulation (SAMR) on November 10, 2025, as reported by Caixing Global, grants Codelco a 51% stake and operational control starting in 2030, as noted by Bloomberg. This legal challenge reflects broader concerns about the lack of transparency in the deal's negotiation and its circumvention of competitive bidding processes, as noted by Bloomberg.

The implications for Tianqi are twofold. First, the company faces potential reputational damage as a major lithium producer accused of undermining corporate governance norms. Second, the legal battle could delay the joint venture's implementation, which is critical for Chile's goal of increasing state control over lithium resources, as reported by Bloomberg. For investors, this highlights the growing risks of geopolitical entanglements in resource-rich nations, where nationalization agendas may prioritize state interests over shareholder rights.

ESG Implications: Sustainability vs. Resource Nationalism

The Codelco-SQM joint venture is framed as a step toward sustainable lithium production, with both companies pledging to reduce greenhouse gas emissions and improve water usage efficiency in the Atacama Desert, as reported by Supply Chain Digital. Codelco aims to cut emissions by 70% by 2030, while SQM has invested in technologies to minimize the environmental footprint of lithium extraction, as reported by Supply Chain Digital. However, these commitments are tested by the reality of resource nationalism.

Chile's decision to cede operational control to Codelco-a state-owned entity-raises questions about the independence of ESG initiatives. While the joint venture extends SQM's Atacama Salt Flat mining rights to 2060, as reported by Caixing Global, critics argue that state control could prioritize short-term production targets over long-term sustainability. For Tianqi, which has championed ESG compliance through initiatives like the "Supply Chain ESG Stewardship Initiative" (SCSI), this deal underscores the challenge of aligning corporate values with nationalistic policies, as reported by Tianqi's website.

Supply Chain Resilience: A Double-Edged Sword

The Codelco-SQM partnership is designed to enhance lithium supply chain resilience for the EV sector by securing long-term production in one of the world's most critical lithium regions, as reported by Supply Chain Digital. However, the joint venture's success hinges on Tianqi's ability to navigate its legal and financial risks.

Tianqi's financial struggles-exemplified by a 7.9 billion yuan ($1.1 billion) net loss in 2024, as reported by Bloomberg-highlight the fragility of its position. The company's stake in SQM, which itself reported a $404 million loss in early 2025, as reported by Bloomberg, is a double-edged sword: it provides a lifeline in a volatile market but also exposes Tianqi to the same geopolitical and environmental risks. The conditional approval from SAMR, which mandates fair pricing and governance standards, as reported by Caixing Global, adds another layer of complexity. While these conditions aim to protect Chinese buyers, they could limit SQM's profitability and, by extension, Tianqi's dividends after 2030, as noted by Caixing Global.

Strategic Risk Assessment for Investors

For long-term investors, the Codelco-SQM joint venture represents both a strategic risk and an opportunity. On one hand, the deal could stabilize lithium supply for the EV sector by consolidating production in a geopolitically stable region. On the other, it exposes Tianqi to regulatory overreach, reduced shareholder influence, and the financial strain of a prolonged legal battle.

The SCSI initiative, which Tianqi co-launched to align with UN 2030 Sustainable Development Goals, as reported by Tianqi's website, offers a counterbalance. By embedding ESG metrics into supply chain operations, the company aims to mitigate risks associated with resource nationalism and environmental scrutiny. However, the effectiveness of these efforts will depend on Tianqi's ability to maintain influence in the Codelco-SQM partnership-a prospect complicated by its legal challenges.

Conclusion: Navigating a Fractured Lithium Landscape

Tianqi Lithium's legal setback in Chile is a microcosm of the broader challenges facing the lithium industry. As governments increasingly assert control over critical minerals, companies must balance compliance with corporate governance, ESG commitments, and financial sustainability. For investors, the key takeaway is clear: the lithium value chain is no longer a straightforward play on EV demand. It is a high-stakes game of geopolitical chess, where strategic foresight and adaptability will determine long-term viability.