Lithium giant SQM says demand up 40%, and prices could hit US$10,000/MT this year
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Reported earnings for Chile-based miner SQM in Q2 were a material 76% higher than last year, the company has announced.
SQM put the gains down to higher sales volumes and prices – and it expects sales volumes for lithium this year to surpass 95,000 metric tonnes higher than its original estimates.
“We are seeing positive market conditions in all our major markets in which we participate and expect to see demand growth of over 40% in the lithium market,” the company said.
“Our average lithium prices during the second quarter of 2021 were almost 20% higher compared to the first quarter of 2021, as sales contracts signed last year are expiring and a higher percentage of our sales are invoiced based on the current pricing scenario.”
The NYSE-listed company said its sales volume could grow in the year ahead with expected market growth of around 20%.
“Our average prices during the second half of the year are expected to increase further as the market continues to tighten and the 2020 contracts continue to expire; prices in the fourth quarter could reach approximately US$10,000 per metric tonne,” SQM said.
“The fundamentals in the lithium market are stronger than ever and we recently updated our 2025 LCE estimates to surpass 1 million metric tonnes and we are working to strengthen our position in this market.”
Fastmarkets analysts also agree lithium will be the most difficult to secure battery metal in the second half of this year, releasing a report last week detailing an expected deficit of 12,000 tonnes of lithium carbonate in 2022, compared with a surplus of 3,000 tonnes in 2021.
“We think lithium will be the tightest of the battery raw materials in the second half of 2021 and the first half of 2022,” Fastmarkets’ head of the battery raw materials research team Will Adams said.“Lithium supply will remain tight until expansions and restarts at SQM, Albermarle, Livent and Pilbara become commercially available as 2022 and 2023 unfold.”
It’s worth noting that this demand for battery-grade lithium hydroxide is driven by hurdles in the limited number of qualified lithium producers in the EV battery manufacturers’ supply chain causing bottlenecks – but even as new capacity is ramped up it could take 6-18 months for the material to be qualified.
SQM is prepared to play the long game – and its focused on lithium carbonate expansion plans in Chile as well as plans to develop a 50,000 metric tonnes lithium hydroxide plant in Australia.
“Currently we are producing lithium carbonate in the Salar de Atacama at a rate of approximately 110,000 metric tonnes per year and we remain on target to reach a nameplate capacity of 120,000 metric tonnes during the fourth quarter,” the company said.
“The completion of the next stage of our lithium carbonate expansion in Chile has been moved forward to 2022. We expect to produce approximately 140,000 metric tonnes in 2022.”
“In Australia, the development of our 50,000 metric tonnes lithium hydroxide plant is on track to be operating in 2024,” SQM said.