Lithium Trends – Our Thoughts Following SQM’s Earnings Call

SQM announced 2nd quarter earnings and there were a lot of deep insights which we would like to share with our community of readers.  Here are some of our thoughts and analysis after reading all of their press releases and listening to the earnings call:  

  • Annual Demand growth is now expected to be between 12%-18%.  This is extremely important to note since previously the company had mentioned demand growth being anywhere up to around 14%.  Based on this latest announcement, SQM is comfortable stating that demand growth could increase up to another 4% per year. This of course is no surprise given all of the announcements in the Electric car industry as well as Energy storage marketplace over the last several weeks.  
  • The very first question out of the gate on the earnings call was actually the same question which we had posed to our readers before the earnings call- why their sales volume was slightly lower than last year (see below)?  The company did not elaborate much and this is certainly something to watch moving forward for the rest of the year.  The one thing they did continue to reiterate both in print and in their call was the “total volume this year should be similar to last year.”  We’ll have to watch out and see what happens in the 3Q.  

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  • The company stated that Lithium pricing should “be higher” than what was seen during the first half of 2017.  This is very good news for current Lithium investors.  
  • Why is Lithium pricing moving higher?  In their words, “Demand is really quite strong” and once again, it seems like worldwide, people have been too skeptical on how strong demand really is currently.  In particular, they noted that electric cars are in fact really moving quickly.  Furthermore, supply has not been able to keep up, which is what we had previously highlighted in our supply II post, stating that “we are confident that there is no overabundance of supply….prices & profit margins should remain strong for the remainder of 2017.”

Future Lithium Investment Trends:  

  • One of, if not the most important takeaways was how crucial battery grade lithium, especially that of lithium hydroxide has increasingly become to the marketplace. More and more, worldwide, battery grade lithium is wanted in order to help with the ever increasing demand from the electric car industry.  And with lithium hydroxide providing specific advantages to carbonate in the performance of electric vehicles, this has many ramifications for the mining and processing industry.  Most important of them is in considering where to put your money with junior lithium producers.  When sifting through the various companies, it’s best to look at those producers who will be supplying that particular market.  But more on that later, as we are going to be highlighting two of them in the very near future!  
  • Finally, once arbitration is over for the company with Chile, they hope to produce another 60,000t in the market.  Amazingly, the company has also stated that this extra production, while obviously requiring additional investment, would still be minimal for the company overall.  This is something which we’ll have to keep monitoring and looking at closely, especially once arbitration has concluded!  

More to follow, in particular, on the junior lithium producers that will be supplying the electric car industry craze.  Also our supply III post is almost out and will be featuring our thoughts on supply that will come online in 2019 (and beyond)!  

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