UPDATE 2-Chilean miner SQM profits plunge alongside lithium price
By Dave Sherwood ReutersAugust 23, 2019, 3:43 AM GMT+10
(Adds drop in shares of rival lithium companies)
By Dave Sherwood
SANTIAGO, Aug 22 (Reuters) - SQM, the world's No. 2 producer of lithium, saw its profits plunge along with lithium prices in the second quarter, even as the Chile-based miner said it had sold more of the ultralight battery metal.
Profits sank 47.5% to $70.2 million in the second quarter, from $133.9 million a year earlier, the company said in a statement, though the drop was largely in line with analysts' expectations.
"The second quarter results were mainly impacted by lower lithium sale prices," Chief Executive Ricardo Ramos said in a statement. "We have seen lithium supply growing more than demand over the past few quarters, putting pressure on prices."
News of the pessimistic outlook for prices sent B-shares in SQM down 6.6% at mid-afternoon on Santiago's Stock Exchange.
Shares of lithium industry leader Albemarle Corp fell 4.4% and Livent Corp dropped 5.6%, both on the New York Stock Exchange.
SQM said its lithium sale price in the third quarter was likely to drop to $10,000 per tonne, down one-third from its average first-quarter sale price of $14,600. The third-quarter figure may also weigh on a previous SQM estimate of $11,000-$12,000 per tonne for the second half of 2019.
Demand for lithium, a key component of batteries used in cell phones, electric vehicles and other consumer goods, is widely expected to triple by 2025.
But festering global trade tensions, the scaling back of electric vehicle subsidies in China and a wave of new output have stifled both demand and prices in recent months.
Ramos said the downturn in prices was likely attributable in part to flagging Chinese demand, which he expected to fall by 3,000-4,000 tonnes in 2019.
"The reduction in total demand of lithium carbonate in China...is affecting supply and demand worldwide," Ramos said.
Weak demand and looming oversupply have already prompted some miners to put off near-term investments.
The world's top lithium producer Albemarle said earlier this month it would delay construction plans for about 125,000 tons of additional lithium processing capacity.
Despite the headwinds, SQM said it expected sales volumes to increase later this year.
Sales volumes grew more than 14% in the second quarter to 22,800 tonnes, the company said.
SQM earlier this year delayed an expansion at its Atacama operations from the end of 2020 to late 2021, citing fast-changing technical specifications of buyers.
Ramos said in a Thursday earnings call that he expected sales volumes to hit 65,000 tonnes in 2020. (Reporting by Dave Sherwood; Additional reporting by Ernest Scheyder; Editing by Bernadette Baum and Richard Chang
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