Some weekend reading for the Lepidicians:
SQM's press release from Friday regarding ramping up their carbonate production:
http://s1.q4cdn.com/793210788/files...lithiumexpansionupdate_18oct18_eng_FINAL_.pdfNow let us remember that a major plank of the oversupply thesis is that SQM and Albermarle were going to ramp up production and kill off their competitors. In particular, SQM were going to move from 48,000 MT of production to 70,000 MT of production this year. Let's just crunch some numbers to see how that is going so far for SQM.
Sales last year were 49,700 MT, with nameplate capacity being 48,000 MT, so they were humming along nicely. (
http://s1.q4cdn.com/793210788/files/doc_financials/2017/Memoria-Anual-2017_eng.pdf)
Production in the first half of this year: 21,100 MT, so a bit off the pace (
http://s1.q4cdn.com/793210788/files/doc_news/2018/8/PR_2Q18_ing_final.pdf)
Which brings us to the latest update.
"Sales volumes in the third quarter of approximately 15% less than the volumes in the second quarter."
Sales volume in the second quarter was 11,100 MT, so third quarter was 9,435 MT. That brings production so far this year to 30,535 MT.
"Fourth quarter sales volumes....letting us reach sales volumes in the second half of the year of over 20% more than sales volumes reported during the first half of 2018."
As above, sales in the first half were 21,100 MT, so 20% higher is 25,320 MT. That brings total annual production to......
46,620 MT. So over 3,000 MT LESS than they produced last year, even after expanding capacity to 70,000 MT.
Now, following the logic of above, they're saying they expect the fourth quarter production to be 15,867 MT, which is 63,468 MT at an annualised rate. That's operating at about 90% of the installed capacity of 70,000 MT.
So, to recap: They're 3,000 MT behind where they were last year, nowhere near the 70,000 MT that was supposed to be being dumped on the market, and next year they're supposed to be pushing towards 120,000 MT of capacity, which is almost double the rate they will be producing at in the current quarter.
Hmmmmmmmmmmmm. Chances of that happening without a hitch? Pretty slim, I think.
I'm not saying they won't bring on a lot of extra supply. I'm just saying it won't happen in the timeline that is being given.
Anyway, we had a bit of a discussion about indexing earlier in the week. I didn't realise that Benchmark Minerals and the LME were working on the index together. That gives me some hope that it will be reasonable, as the Benchmark guys aren't messing around. But even they admit there is a long way to go. Prices are currently reported monthly, and the market needs to grow a lot before it will get to daily.
There's some good general market info in there as well:
http://www.benchmarkminerals.com/be...esentation-to-london-metal-exchange-download/Cheers
(20min delay)