Chile Miner SQM Reviews Markets as Lithium Prices Languish

Chilean lithium producer SQM posted a sharp slump in second-quarter earnings and said it’s re-assessing some “less attractive” markets as prices of the battery metal remain in the doldrums.

“While we continue to advance our previously announced expansions, we are currently re-evaluating specific markets and initiatives that may be less attractive in the near term,” Chief Executive Officer Ricardo Ramos said in a statement.

Net income dropped to $213.6 million in the second quarter, down 63% from a year earlier, while revenues slumped 37% to $1.3 billion. There will be more pressure on lithium in the second half after significantly lower prices last quarter, Ramos said.

Lithium prices have slumped to a three-year low as disappointing demand exacerbates a supply glut. The market won’t return to deficit until the end of the decade, according to Benchmark Mineral Intelligence. So while SQM racked up record sales volumes of lithium last quarter — with an increase of more than 20% — revenues fell by more than half. 

Some lithium producers may reduce their output, Ramos said, “as many projects, especially greenfield, are not economically viable at these prices.”

Some of SQM’s rivals are already going on the defensive. Albemarle Corp., the biggest producer, said three weeks ago that it plans to shut half of its current processing capacity in Australia and put an expansion there on hold. Some smaller, higher-cost miners have already shuttered mines, including Core Lithium Ltd. In China, Zhicun Lithium Group Co. has placed two carbonate units into care and maintenance.

While the global lithium supply chain is still working through a glut, SQM remains optimistic about consumption, estimating global demand growth of about 20% this year.

SQM has some of the industry’s lowest costs. It’s able to tap into the world’s richest brine deposit and employ an evaporation technique that uses far less fresh water, chemicals and energy than hard-rock mining as practiced in top producer Australia. 

Chile’s government shares SQM’s growth strategy as authorities look to open up new areas to mining and encourage more processing. More threatening than oversupply in the coming years is the risk of a renewed shortage, which would send prices soaring and make alternative battery technologies more viable, Finance Minister Mario Marcel said in March.

Executives from the firm formally known as Soc. Quimica & Minera de Chile SA will hold a conference call at 12 p.m. Santiago time on Wednesday.

The company’s shares have lost 38% so far this year.

This article was generated from an automated news agency feed without modifications to text.