China's Tianqi boosted its position as one of the world's largest suppliers of lithium, a key component in batteries for the booming electric car industry, after it agreed to acquire a stake in Chile's SQM.

Tianqi Lithium will take a 24-percent stake in SQM in a deal worth $4.07 billion by buying up the shares owned by Canada's Nutrien, the companies announced Thursday.

SQM exploits what is considered the world's largest lithium deposit in Chile's northern Atacama desert, an area with high concentrations of lithium with low levels of impurity, as well as byproducts like potassium.

Global demand for lithium, on the rise since 2014, is expected to grow at rates of six to eight percent over the next decade.

Lithium is a key component in making batteries for electric cars, which according to the Boston Consulting Group will make up half of all the world�s car sby 2030.

China is already the world's biggest market for electric cars.

A relatively rare light metal, lithium is also used in other industrial applications.

With 52 percent of the world's reserves, Chile competes neck and neck with Australia for the global markets, with each accounting for close to 40 percent of the world's production.

Argentina, which increased its lithium production by 58 percent in 2016, has about 15 percent of the market.

Chile expects to nearly double its lithium production by 2021, from 77,000 tons in 2017 to 147,000, as US chemical company Albemarle and SQM expand their operations in the Atacama salt flats.

- 'Attractive investment' -

Listed on the Shenzhen stock exchange, the Chengdu-based Tianqi Lithium is one the world's biggest suppliers of lithium products, with operations in China and Australia.

"This is an attractive investment for Tianqi Lithium which fits well within our existing business strategy," Tianqi's president Vivian Wu said in a statement.

"Tianqi Lithium's shareholders will greatly benefit from this transaction given SQM's long-term stable financial returns and steady dividends."

The deal is expected to be completed by the fourth quarter of this year.

Once the transaction is finalized, the Chinese giant will not exercise control within SQM, Tianqi Lithium said in reference to fears raised in Chile over one the most emblematic groups in the South American country's mining industry.

"Although much anticipated, this is important news," Plusmining analyst Juan Carlos Guajardo told AFP.

"Tianqi's interest in acquiring SQM's capital was the most consistent, despite several episodes that caused great uncertainty."

Nutrien CEO Chuck Magro said the "sale of the majority of our SQM holdings marks another key integration milestone for Nutrien.

"With growing free cash flow, combined with the significant proceeds from this sale, Nutrien further enhances our balance sheet and liquidity, and places us in a strong position to execute on our capital allocation priorities."

After the announcement, SQM's share price was stable, up just 0.2 percent, on the Santiago Stock Exchange.

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