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Thursday, December 7, 2023

Top Lithium Producer SQM's Profit Climbs, US$250 Million Expansion Planned

SQM’s (NYSE:SQM) net income in 2021 was three times higher than in 2020, with the company hitting US$585.5 million, up from US$164.5 million reported the previous year.

Lithium revenues increased by more than 144 percent for the top producer of the commodity, coming in at US$936.1 million in 2021 compared to US$383.4 million in 2020.

“We believe global lithium demand grew approximately 55 percent during 2021 when compared to 2020, mainly driven by new demand for electric vehicles,” CEO Ricardo Ramos said in a statement. “During 2021, market prices for lithium also grew as supply could not keep up with the strong demand growth.”

The miner is expecting its lithium carbonate production capacity to reach 180,000 metric tonnes (MT) in the coming months, with lithium hydroxide capacity hitting 30,000 MT. The company also announced on Wednesday (March 2) that it will begin working on a US$250 million capacity expansion plan in Chile that will allow it to reach output of 210,000 MT of lithium carbonate and 40,000 MT of lithium hydroxide next year.

“Demand keeps on growing strongly, and we believe that the total demand will reach 1 million MT sooner than previously anticipated. Our current estimates for 2022 demand growth are over 30 percent,” Ramos told market watchers. “We do not believe that supply will be sufficient to meet this growth, ultimately putting pressure on market prices, reaching levels never seen before.”

SQM has set its lithium sales target at 140,000 MT in 2022, with only 20 percent of sales expected to be in fixed contract prices. As a result, the company is expecting to see higher prices during the first half of 2022.

The major producer’s primary lithium business is in the Salar de Atacama in Chile, where its lithium brine operations are located. SQM is also developing the Australia-based Mount Holland lithium project, known as one of the world’s largest hard-rock mining deposits, in a joint venture with Wesfarmers (ASX:WES,OTC Pink:WFAFF).

Last week, SQM’s rival Albemarle published its profits outlook for 2022, missing some analysts’ expectations despite current favorable lithium market conditions.

US-based Livent (NYSE:LTHM) also posted earnings last week, saying it is on track to deliver a previously announced capacity expansion. The lithium producer outlined another expansion program to be completed by 2025, sending its shares up following the news.

Most lithium companies have seen their momentum increase in the past year, with lithium stocks in the US, Canada and Australia all seeing year-to-date gains.

On Wednesday, shares of SQM closed at US$65.86, up 2.75 percent from stock’s closing price the previous day.

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Securities Disclosure: I, Priscila Barrera, currently hold no direct investment interest in any company mentioned in this article.

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