Lithium miner SQM swings to $870 million loss on sinking prices, tax ruling

A SQM lithium mine plant at the Atacama salt flat is pictured through a bus window, in Antofagasta region, Chile, May 3, 2023. REUTERS/Ivan Alvarado/File Photo

By Sarah Morland

(Reuters) - Chilean mining group SQM, the world's second-largest lithium producer, swung into an $870 million net loss in the first quarter, it said on Thursday, hurt by a squeeze on prices due to oversupply and the $1.1 billion impact of a tax ruling.

A truck loads concentrated brine at SQM lithium mine at the Atacama salt flat, in Antofagasta region, Chile, May 3, 2023. REUTERS/Ivan Alvarado/File Photo

This brought a loss of $3.04 per share, well below the $0.74 profit expected by analysts polled by LSEG. Revenues more than halved to $1.09 billion over January to March, below analysts' $1.13 billion forecast.

A year earlier, the company had posted profit of close to $750 million.

SQM CEO Ricardo Ramos said that despite growth in sales volumes, the quarter had been hit by a more than 75% drop in average sales prices for lithium to $12,600 per ton.

Data from Benchmark Mineral Intelligence suggests global prices have fallen by more than 80% due to weaker demand for electric vehicles. The white metal is a key component in rechargeable batteries.

The results also reflect a $1.1 billion accounting hit that SQM said in April would result from a long-standing tax dispute. The company said the ruling is still subject to appeal.

Albemarle, the world's largest lithium producer, saw prices halve its revenues and push profits below estimates - though these stayed in positive territory. The company warned early this month it could cut spending if prices stay low.

SQM, however, remained upbeat on demand.

RAISED GUIDANCE

"We believe that the strong demand growth in the lithium market seen since the beginning of the year could continue for the remainder of the year, with total lithium demand surpassing 1.1 million metric tons during 2024," Ramos said.

While SQM's quarterly lithium revenues fell 67% from a year earlier, its lithium sales volumes grew 34%.

The company predicted volumes could climb some 18% to reach 200,000 metric tons this year, compared to 170,000 tons in 2023. This is up from the 5% to 10% increase it had previously forecast, when it warned of a supply glut.

SQM plans to continue with its growth plans in Chile and abroad, Ramos said.

The company has been expanding its lithium carbonate capacity in Chile. It expects to produce 210,000 tons this year and 240,000 tons by 2025, by when it said it should be totaling 305,000 tons of lithium carbonate equivalent.

This includes output from a Chinese plant set to convert lithium sulfate from Chile's Atacama salt flats into battery-grade lithium hydroxide, and the acquisition of a 50/50 joint venture with Hancock Prospecting in Australia.

SQM added it is finalizing details of an agreement with copper miner Codelco that is expected to give the state-run company a majority share in a new partnership while extending SQM's lease in the Atacama salt flats through 2060.

The two firms are expected to announce a finalized deal on May 31.

(Reporting by Sarah Morland, Daina Beth Solomon and Fabian Cambero; Editing by David Goodman, Michael Perry and Jan Harvey)