SQM’s net profit slips on lower lithium prices
Chile’s SQM, the world’s second-largest lithium producer, reported a 73% drop in third-quarter profit on Wednesday, as higher sales volumes failed to offset a sharp decline in prices due to a supply glut.
Lithium miners around the world have been impacted by a sustained drop in lithium prices in the past few months due to weaker-than-expected demand for electric vehicles. Lithium is a major component of batteries for electric cars.
SQM reported net profit of $131 million for the quarter, below analyst estimates of $162 million, based on LSEG data.
Revenue fell 41% year-on-year to $1.07 billion, in line with analyst forecasts.
Lithium sales volumes rose almost a fifth compared with the same period last year, but average prices plunged 67%, the mining group said. Between the second and third quarters, prices dropped 24% for the metal.
Prices are expected to fall further in the current quarter, SQM said, tracking with the company’s prior forecasts of weak pricing throughout 2024.
“Although demand continues to grow at a strong pace, mainly driven by strong EV sales growth in China, we continue to see the prices pressured by an oversupply,” CEO Ricardo Ramos said in a statement.
In a call with analysts to discuss the results, executives said they did not plan to pull back on production in response to excess supply that has dragged down prices.
“For next year, we’re not planning any curtailment,” said Felipe Smith, commercial vice president of SQM’s lithium business. “We’re just planning to increase our sales in line with increasing production.”
The company said its third-quarter lithium sales included, for the first time, production from Mt. Holland in Australia, a project co-owned with Westfarmers, under the SQM International division that was announced last quarter.
Mt. Holland contributed about 900 metric tons in the quarter, and the site is expected to yield about 1,000 to 1,200 tons in the fourth quarter, executives told analysts.
SQM, which also produces fertilizers and industrial chemicals, extracts lithium from the Atacama salt flat in northern Chile, a region with some of the world’s highest lithium concentrations.
The company maintained its target for lithium sales volumes this year of 190,000 to 195,000 metric tons. Lithium made up 42% of its gross profit this year.
Ramos added that SQM was working hard to finalize a joint venture with Chile’s state-run copper producer Codelco in the Atacama salt flat as soon as possible. The partnership is set to begin in 2025.
“We expect it’s going to be closed as soon as we have every single condition met,” Ramos said.