Lithium miner SQM swings to $870m loss on oversupply

Chilean mining company SQM, the world’s second-largest lithium producer, on Thursday posted a net loss of $870m for the first three months of the year, as oversupply of the metal needed for electric vehicle batteries drags on prices.

This brought a loss of $3.04 per share, well below the $0.74 profit expected by analysts polled by LSEG, while revenues more than halved to $1.09bn over January to March, below analysts’ $1.13bn forecast.

A year earlier, the company had posted a close to $750m profit.

Ricardo Ramos, SQM CEO, said that despite growth in sales volumes, the quarter had been hit by average sales prices for lithium that dropped over 75% to $12,600 a tonne.

Data from Benchmark Mineral Intelligence suggests that global prices have fallen by more than 80%, dragged by weaker demand for electric vehicles — a key market for producers of the white metal, used to power rechargeable batteries.

“Since our sales contracts are tied to market price indices, our realised sales prices reflect the market price trends,” the company said in a statement, noting China remains the primary market concentrating over 75% of lithium demand.

Albemarle, the world’s largest lithium producer, also saw prices halve its revenues and push profits below estimates — though these stayed in positive territory. The company warned early this month it could cut spending if prices stay low.

SQM, however, remained upbeat on demand.

Raised guidance

“We believe that the strong demand growth in lithium market seen since the beginning of the year could continue for the remainder of the year, with total lithium demand surpassing 1.1-million metric tonnes during 2024,” Ramos said.

While SQM’s quarterly lithium revenues fell 67% from a year earlier, its lithium sales volumes grew 34%.

The company predicted volumes could climb some 18% to reach 200,000 metric tonnes this year, compared to 170,000 tonnes in 2023. This is up from the 5% to 10% increase it had previously forecast, when it warned of a supply glut.

The company plans to continue with its growth plans in Chile and abroad, Ramos said.

SQM has been expanding its lithium carbonate capacity in Chile; it expects to produce 210,000 tonnes this year and grow this to 240,000 tonnes by 2025, by when it said it should be totaling 305,000 tonnes of lithium carbonate equivalent.

This includes output from a China plant set to convert lithium sulfate from Chile’s Atacama salt flats into battery-grade lithium hydroxide, and the acquisition of a 50/50 joint venture with Hancock Prospecting in Australia.

SQM added it is finalising details of an agreement with copper miner Codelco that is expected to give the state-run company a majority share in a new partnership while extending SQM’s lease in the Atacama salt flats through 2060.

The two firms are expected to announce a finalised deal on May 31.

Reuters