The incoming chief executive of lithium heavyweight SQM has hosed down fears of a looming glut in the market, telling investors that he could see no reason for a lithium oversupply to emerge in the years ahead.
Speaking at the company’s annual investor day at the New York Stock Exchange early today (AEST), SQM chief financial officer Ricardo Ramos Rodriguez — who will replace outgoing chief executive Patricio de Solminihac at the end of this year — said surging demand for lithium from the electric vehicle industry would absorb the new supply expected to come on the market in the years ahead.
The outlook from Mr Ramos comes amid a heavy selldown of lithium stocks this year and growing expectations that a wave of new lithium projects in Australia will swamp demand. SQM itself last month warned that it expected its received lithium prices to fall by as much as 10 per cent later this year.
But Mr Ramos said SQM expected the lithium market to grow at a compounding rate of 15 to 17 per cent between now and 2025. The company earlier this year was guiding for a compounding growth rate of 13 to 17 per cent.
The forecast is based around a growth in electric vehicles from 3 per cent of the total vehicle market to between 9 and 11 per cent in 2025. Reaching that 10 per cent mark, he said, will give electric vehicles the critical mass needed to spur an even more rapid period or market share growth.
Mr Ramos said the lithium industry would need to avoid delays in the development and commissioning of new projects if it was to keep up with demand, and that he could not see “any reason” why there would be an oversupply.
“Every single project, and we’ve reviewed every single project from the last 10 years, every single project failed to deliver on time and volumes,” Mr Ramos said.
“We think they’ve learned the lessons and they’re better, that’s why we’re optimists, but some of them will fail to deliver. That’s why we have to be prepared.”
SQM is currently in the first phase of a multistage expansion of its key Chilean lithium brine operations from 48,000 tonnes today to 180,000 tonnes in 2021. It is also planning to develop the Mt Holland lithium deposit in Western Australia, a 50-50 joint venture with ASX-listed Kidman Resources, into a 45,000 tonne per annum mine by 2021.
Mr Ramos said SQM would be ready to lift its output further if demand exceeded expectations or if rival projects failed to materialise.
“We will be prepared for higher demand growth in lithium demand,” he said.
“If for any reason they don’t deliver, or if we’re wrong like we’ve been in the past and demand growth is 20 per cent instead of 17 per cent, we want to be there to supply enough lithium to the market.”
Mr de Solminihac, meanwhile, said the company had examined numerous projects around the world before deciding to strike the joint venture deal on Mt Holland.
“After all the work we’ve done, we feel this is one of the best deposits in the world for hard rock production of lithium. We feel the production will be very competitive and will be at the lower end of the cost curve,” Mr de Solminihac said.
He said Western Australia had proved a “very friendly” destination to invest.
“We got a very warm welcome from the WA government from the very beginning, they were saying ‘we want you, you are a great company, the best company in lithium in the world, and we want to have you as an investor here in WA’,” he said.
“That was important, but the most important reason was that we believe we will be in the lower part of the cost curve.”
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