Chile will nationalize its massive lithium sector. On Thursday, Chilean President Gabriel Boric announced he would nationalize the world’s second-largest lithium business to strengthen the economy and safeguard the environment.

SQM (SQMA.SN) and Albemarle (ALB.N) would lose control of Chile’s massive lithium operations to a state-owned firm in the country with the world’s largest lithium reserves.

As more governments defend their natural resources, electric vehicle (EV) manufacturers scramble to get battery materials. In 2020, Indonesia stopped nickel ore exports, and Mexico nationalized its lithium reserves.

This is our best hope for a sustainable and developed economy. “We can’t waste it,” Boric stated on national television.

He claimed state-controlled public-private partnerships would issue future lithium contracts.

He said the government would not cancel current contracts but hoped firms would be open to state engagement before they expired without identifying Albemarle and SQM, the world’s top and second lithium producers.

SQM’s contract expires in 2030, and Albemarle’s in 2043.

SQM (Sociedad Quimica Y Minera de Chile) and Albemarle supply Tesla Inc (TSLA.O), LG Energy Solution Ltd (373220. KS), and other EV and battery makers.

Albemarle said the announcement would have “no material impact on our business” and would continue conversations on investing in expansion and innovative technologies in Chile.

SQM was unreachable.

SK On, a long-term SQM supplier, would watch and respond.

Chile’s declaration did not reverse lithium prices, which have fallen more than 70% since November due to decreasing EV demand in China, the world’s largest vehicle market.

Friday’s Wuxi Stainless Steel Exchange lithium carbonate futures decreased by 3.4%.

“When or if battery makers renew their contracts with lithium firms in Chile, contract conditions would likely become more difficult than what they saw in the past when there was no state involvement,” said Samsung Securities analyst Cho Hyunryul.

Analysts expect lithium investment to shift to Australia, the world’s largest producer.

“Policy stability is very important for any mining project… Mining-friendly jurisdictions like Australia would be places where incremental funds get invested,” said National Australia Bank’s private wealth arm JBWere analyst Harsh Bardia.

Boric said state-owned Codelco, the world’s largest copper producer, will be charged to discover the best way forward for a state-owned lithium company. He will seek congressional approval in the second part of the year.

Congress halted Boric’s tax reform bill in early March.

Before the national lithium business is founded, Codelco and Enami will receive exploration and extraction contracts in private project areas.

Direct lithium extraction will be preferred over evaporation ponds by a division focused on environmental technology.

Summit Nanotech Corp., a private company researching direct lithium extraction technology, hailed the announcement.

Boric pledged to maintain nature and share mining advantages with indigenous and nearby populations.

“Today we present a national lithium strategy that’s technically solid and ambitious,” the president added, promising “a Chile that distributes wealth we all generate in a more just way.”