This article first appeared on GuruFocus.

SQM (NYSE:SQM) reported a sharp rebound in first-quarter profit as lithium demand shows signs of tightening again, helped by battery storage systems and electric vehicles. The Chilean lithium producer posted adjusted Ebitda of $837 million for the three months ended March 31, more than double the year-earlier level and above the average analyst estimate. Revenue rose to $1.8 billion, also slightly ahead of expectations, giving investors one of SQM's strongest quarters since the 2022 lithium boom.

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The bigger story is volume. SQM sold about 69,000 metric tons of lithium carbonate equivalent in the quarter while operating at full capacity to meet demand. Management now expects lithium sales volumes to rise about 15% this year, up from its earlier forecast of 10%. That matters because the lithium market has spent two years under pressure, with falling prices forcing producers to cut costs, delay projects and idle capacity. SQM's updated outlook suggests demand from energy storage and EVs could be pulling the market back toward a tighter supply-demand balance.

CEO Ricardo Ramos said global lithium demand could exceed 1.9 million tons in 2026, supported in part by rapid growth in battery energy storage systems. Ramos said market conditions continue to point to a tight balance between supply and demand, and that the positive pricing trend seen in recent months could continue in the short term. SQM is choosing to maximize output and keep costs low rather than restrict supply to support prices, while investors are likely to focus next on pricing trends, Salar Futuro and the company's Codelco partnership, which extends Atacama operations through 2060.