World’s No. 2 lithium miner SQM hit by weak prices

SQM’s brine pool on the Atacama salt flat, northern Chile. (Image courtesy of Ferrando | Flickr)

Chile’s Chemical and Mining Society (SQM), the world’s second largest lithium producer, has been hit by sustained weak prices for the metal used in batteries that power electric vehicles (EVs) and high tech electronics, with profits falling by 47.5% to $70.2 million in the second quarter, from $133.9 million a year earlier.

Delivering results for the three months leading to June 30, the Santiago-based company echoed analysts and other market players’ concerns about the effect oversupply of the battery metal and cuts to EV subsidies is having on prices.

“The second quarter results were mainly impacted by lower lithium sale prices,” Chief Executive Ricardo Ramos said in a statement. “We have seen lithium supply growing more than demand over the past few quarters, putting pressure on prices.”

The miner attributed the sharp decline in its selling prices to higher sales to China, the world’s top consumer of the commodity, where prices have sunk.

Quarterly earnings fell by almost half, even as sales volumes grew

Prices for lithium carbonate, the most common type used in EV batteries, doubled over 2016 and 2017. Since then, they have fallen by more than 40% over the past year, to around $9.25 per kg at the end of July, commodity research group CRU said on Wednesday.

The consultancy says that lithium prices will continue to be governed by cost fundamentals, which will keep them in the single-figures.

CRU’s view seems to be backed by the main producers. Earlier this month, Albemarle Corp (NYSE: ALB), the world’s No. 1 lithium miner, postponed plans to add about 125,000 tonnes of processing capacity due to oversupply.

The company has also revised a deal to buy into Australia’s Mineral Resources’ (ASX: MIN) Wodgina lithium mine and said it would delay building 75,000 tonnes of processing capacity at Kemerton, also in Australia.

Despite market weakness, SQM said it expected sales volumes to increase in the near-term, noting that shipments to China had already jumped. “We sold higher sales volumes in the second quarter and expect to sell higher volumes in the second half of the year as we prepare for a 30% to 40% increase in sales volumes next year,” Ramos said.

SQM still expects sales volumes for the year to reach between 45,000 and 50,000 tonnes, and said the figure will grow further thanks to a key project in the Middle East, which will require 400,000 tonnes of lithium between 2020 and 2022.

The company did not provide details on the project.