SQM cuts spending amid drawn-out lithium price slump

Chile’s SQM (NYSE: SQM), the world’s second-largest lithium producer, is scaling back spending this year as a prolonged weakness in prices for the battery metal continues to erode margins.

The miner, which also produces fertilizers and industrial chemicals, plans to invest $1.1 billion across its businesses in 2025, with $550 million directed toward its lithium operations in Chile. An additional $350 million will go to its iodine and plant nutrition business, while the remaining $350 million will fund international lithium ventures.

Last year, SQM allocated around $1.6 billion capital expenditures, including $1.3 billion on expansion projects across its divisions. 

The Santiago-based miner delivered on Wednesday another sharp drop in earnings for the fourth quarter of 2024, with profits plunging nearly 41% to $120 million from $206 million a year earlier.

Full-year revenues from lithium and derivatives totalled $2.2 billion, marking a steep 56.7% decline from the $5.2 billion recorded in 2023. 

Fourth-quarter revenues for lithium alone fell almost 33% to $532 million from $792 million recorded for the fourth quarter of 2023.

Despite the downturn, chief executive Ricardo Ramos struck an optimistic tone, citing a 25% increase in market demand in 2024. He anticipates that global demand could grow around 17% this year, driven by electric vehicles (EV) sales and increased adoption of battery energy storage systems.

“We believe that prices will remain relatively stable throughout this year, and remain optimistic about a positive trend starting in 2026,” Ramos said.

Underproduction?

SQM also expects a 15% increase in lithium sales compared to 2024, including about 10,000 tonnes of lithium carbonate equivalent (LCE) from the Mt. Holland operation in Australia. Ramos highlighted progress at the Kwinana refinery, which remains on track to begin operations by mid-2025.

On the flip side, the company anticipates lower average realized lithium prices this year, with first-quarter prices slightly below those recorded in the final quarter of 2024.

BMO analyst Joel Jackson noted that SQM’s 2025 lithium guidance suggests the company will underproduce relative to its capacity, signalling potential efforts to exercise supply discipline. However, he does not expect prices to improve this year.

The lithium market has been battered by the prolonged slump, driven by weaker-than-expected demand for EVs. In response, many lithium producers have scaled back operations and slashed spending to protect margins.

The latest to take action was Sibanye-Stillwater (JSE: SSW)(NYSE: SBSW), which opted in February not to proceed with its Rhyolite Ridge lithium-boron project in the US state of Nevada.