SQM 3rd Quarter Earnings Overview

SQM, one of the world’s largest Lithium producers, reported earnings on Wednesday and held their investor call yesterday (Thursday).  Below are some learnings from their earnings report and post earnings call.  Whether you’re invested in SQM or not, it’s important to watch closely what SQM reports on a quarterly basis since they are such a large part of the overall Lithium market.  

Demand:  

Lithium demand continues to be strong, increasing by at least 14% according to the company. The market will continue to be tight in the 4th quarter and for the first half of next year.  Depending on how much new supply comes into the market in 2018, there is a possibility that markets will start to balance towards the second half of the year according to the company.  This  makes sense since we know that new supply will increase rapidly with Pilbara Minerals, Altura Mining and Tawana Resources coming online to name a few starting next year.  

Pricing:

Prices for Lithium increased 8% compared to the 2nd quarter and reached US $13,000/ton.  Due to the market demand, prices should continue to be tight through 2017 and for at least the first half of 2018.  

New Projects:

SQM once again reiterated that their project in conjunction with Lithium America’s continues to run on time and is set to “to be online in 2019.”  The company is expanding their Hydroxide and Carbonate capabilities by the middle of 2018.  

Arbitration:

The company’s dispute with Corfo, Chile’s state-run development agency, over lease agreements could continue through all of 2018.  Management are optimistic that the dispute will have a happy ending. Certainly, the dispute has not had any affect on the stock, SQM is up nearly +100% year to date.

Final Thought: 

Interestingly, the company decided to host their earnings call on Thursday, which was the American thanksgiving holiday.  As a result, there were only two analysts that asked questions on the earnings call.  Next up for the company, they will be presenting at the UBS Global Emerging Markets conference on November 28th.  The company will publish their 4th quarter results on February 28th, 2018.

 

Disclaimer: We currently own shares in the company.

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