Chilean lithium producer SQM, the world’s second-largest supplier of the critical battery metal, has reported a sharp 63.2% drop in its quarterly profit, reflecting the ongoing challenges posed by falling lithium prices. The company, which also produces fertilizers and industrial chemicals, anticipates that the weak pricing environment will persist throughout the rest of the year, further straining its financial performance.
Declining Profit and Market Challenges
SQM’s net profit for the second quarter plummeted to $213.6 million, or 75 cents per share, significantly below analysts’ expectations of $296.7 million, or 95 cents per share, according to LSEG data. While the company generated $1.3 billion in revenue, in line with predictions, the substantial decline in lithium prices severely impacted profitability.
The company, which extracts the majority of its lithium from brines in the Atacama salt flat of northern Chile, experienced record-high sales volumes. However, these gains were insufficient to offset the steep drop in average realized lithium prices. CEO Ricardo Ramos emphasized that the trend of lower prices is expected to continue, with current lithium price indices in China nearly 20% below the second quarter’s average.
Strategic Shifts and International Expansion
In response to the challenging market conditions, SQM has been aggressively pursuing international expansion to diversify its lithium production capabilities. The company recently launched SQM International Lithium, a new division dedicated to expanding operations beyond Chile. This move is part of a broader strategy to tap into the long-term growth potential of the global lithium industry.
SQM’s international ventures include investments in hard rock lithium mining, such as its partnership with Australia’s Azure Minerals. The company has set an ambitious goal to increase its lithium carbonate equivalent (LCE) production by at least 100,000 tonnes annually by the end of the decade. This expansion is supported by a projected capital expenditure of nearly $1.6 billion in 2024, which includes key acquisitions like the $350 million Andover lithium project in Australia and the $140 million Dixin plant in China.
The company is also focusing on expanding its production capacities in Chile, with significant investments aimed at boosting both lithium carbonate and hydroxide output. Additionally, SQM plans to grow its nitrates and iodine operations, with maintenance expenses expected to account for around $150 million of the total capex.
Industry Outlook and Future Prospects
Chile remains the world’s second-largest lithium producer, with output driven by SQM and its rival, US-based Albemarle. The country has recently opened new lithium mining areas to private companies and is exploring direct lithium extraction technologies. These advancements aim to reduce environmental impact and accelerate production by allowing brine to be re-injected into salt flats.
According to Chile’s copper commission, Cochilco, the nation is expected to produce approximately 275,000 tonnes of LCE this year, with a slight increase to 285,000 tonnes in 2025. As SQM navigates the pressures of a volatile market, its strategic investments and international expansion efforts will be critical in securing its position in the evolving global lithium landscape.
Source: Mining.com
