Sociedad Química y Minera de Chile (SQM), the world’s second-largest lithium producer, achieved record-high shipment volumes last quarter, driven by a 20% increase in lithium output.
The company continues to expand its low-cost operations in Chile’s Atacama Desert, aiming to increase its market share as competitors reduce production due to the lowest lithium prices in three years.
While SQM remains optimistic, forecasting about 20% growth in lithium demand this year, it reported a sharper-than-expected decline in quarterly profits and cautioned that prices are likely to stay low in the second half of the year. As a result, SQM is reassessing some markets and initiatives that may not be as attractive in the short term.
Some of SQM’s competitors, like Albemarle Corp., are scaling back operations, including shutting down half of their processing capacity in Australia. Other smaller, higher-cost producers, such as Core Lithium Ltd. and Zhicun Lithium Group Co., have already suspended operations.
Despite the price challenges, SQM is continuing to ramp up production at its northern Chile plants, aiming to reach an annual capacity of 210,000 metric tons.
Further expansions could push capacity to 300,000 tons, contingent on a deal to transfer a majority stake in its brine assets to state-owned Codelco in exchange for extending operations.
SQM’s competitive advantage lies in its access to the world’s richest brine deposits and the use of an efficient evaporation technique that requires less fresh water, chemicals, and energy than hard-rock mining, which is common in Australia.
The Chilean government supports SQM’s growth strategy, as authorities are looking to open new mining areas and increase processing capabilities.
Finance Minister Mario Marcel emphasized that the risk of a future lithium shortage is more concerning than current oversupply, as it could drive prices up and make alternative battery technologies more viable.
As of midday trading in New York, SQM shares were up 1.8%, though they remain down 37% year-to-date. SQM executives are scheduled to hold a conference call to discuss the results and future plans.
