• Specialty Plant Nutrition Volume Growth: More than 20% year-on-year increase.

• Specialty Plant Nutrition Revenue Growth: Increased by more than 12% despite lower prices.

• Lithium Sales Volume: Over 51,000 metric tonnes, an 18% growth year-on-year.

• Lithium Average Realized Prices: 24% lower than the second quarter of this year.

• Warning! GuruFocus has detected 7 Warning Sign with SQM.

Release Date: November 20, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Sociedad Quimica Y Minera De Chile SA (NYSE:SQM) reported positive volume growth in almost all business lines compared to last year.

• Specialty plant nutrition volumes increased by more than 20% year-on-year, boosting revenues by over 12%.

• Iodine prices have shown a subtle but continued increase, with strong demand growth and limited supply potentially leading to further price rises.

• The company posted its first revenue from Mount Holland and initiated its first spodumene concentrate bidding event, enhancing lithium market efficiency.

• Lithium sales volumes grew by 18% year-on-year, demonstrating strong market demand despite price pressures.

Negative Points

• Lithium prices continued a downward trend, with average realized prices 24% lower than the previous quarter.

• The lithium market is experiencing temporary oversupply, pressuring prices despite strong demand growth.

• There is a risk of negative profitability and start-up issues at the Kwinana refinery, similar to competitors’ experiences.

• The company is under investigation by the SEC for potential violations of the Foreign Corruption Practices Act (FCPA).

• SQM’s iodine demand growth is expected to moderate to 2.5% next year, with new supply potentially insufficient to meet demand.

Q & A Highlights

Q: Does SQM need to cut volume to support the lithium market given the current pricing trends? A: Felipe Smith, Commercial Vice President, SQM Salar, stated that SQM plans to maintain its sales volume target of 195,000 tonnes for the year and does not plan any curtailment. Instead, they aim to increase sales in line with production growth.

Q: What is the status of the Mount Holland project in Australia, and how does it impact SQM’s operations? A: Mark Fones, CEO of SQM International Lithium, explained that the Mount Holland project is ramping up, with expected production of 110,000 to 130,000 tonnes of spodumene concentrate this year. The Kwinana refinery is 91% complete, with commissioning underway, and first product expected by mid-2025. SQM remains flexible in selling either spodumene concentrate or lithium hydroxide.

Q: What is the outlook for the lithium market in 2025, and how does SQM view the market balance? A: Pablo Hernandez, Senior Director of Business Strategy and Development, noted that global lithium demand remains strong, driven by the EV market. They expect demand to grow by 16% to 18% annually over the next five years, with EV penetration increasing significantly. Supply is expected to grow in line with demand, though some projects may be disincentivized if prices remain low.

Q: Can you provide an update on the iodine market and expected new capacity? A: Juan Pablo Bellolio, Commercial Vice President of Iodine and Industrial Chemicals, stated that the iodine market is around 38,000 to 39,000 tonnes, with demand growing by 7% this year. New supply is expected in the second half of 2025 and 2026, but it may not meet demand growth, leading to strong prices.

Q: What is the status of the agreement with Codelco and the SEC investigation? A: Ricardo Ramos Rodriguez, CEO, mentioned that the agreement with Codelco is progressing as expected, with no specific issues to report. Gerardo Illanes, CFO, added that SQM is cooperating with an SEC inquiry related to potential FCPA violations, and the investigation is a nonpublic fact-finding inquiry with no conclusions reached yet.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.