SQM: Lithium Prices Up 8 Percent

In its recently released H1 2015 earnings results, Sociedad Química y Minera de Chile (NYSE:SQM) states that during the period, lithium prices increased nearly 8 percent, to roughly US$5,700 per tonne, compared to the first half of 2014.
Higher prices allowed the company to record stable revenues from lithium despite a decrease in sales volumes. SQM’s sales volumes for lithium and derivatives fell 10.5 percent for the first six months of 2015 year-over-year.
Revenues decreased slightly, coming in at US$100.4 million — that’s down 3.6 percent from US$104.1 million for the first half of 2014. However, the company expects to see stronger sales volumes in the second half of the year, and is forecasting continued growth for the lithium market overall.
“The lithium market continues to show robust demand growth, and we expect to see market growth of over 5% in 2015 when compared to 2014,” the company said in a statement. “Growth is being led by energy storage, and while batteries related to the electric car market remain a small percentage of the overall lithium carbonate market, we do see significant growth in this area.”
Certainly, that falls in line with broader expectations for continued growth in lithium demand and rising lithium prices.

The company also states that new supply expected to come online has been delayed, suggesting that in 2015 new supply will be limited. “This could create tightness in the market and lead to upward pressure on prices in coming quarters,” the release states.
Lithium made up approximately 17 percent of SQM’s consolidated gross margin for H1 2015. SQM is also the world’s largest maker of iodine and a major potash producer.
The company has made plenty of headlines this year. In March, it was investigated as part of a broader probe into bribery and tax evasion in Chile. This summer, its share price dropped on news that Chile’s Corfo might try to revoke its mining leases in the Salar de Atacama. The parties continued to butt heads, and an arbitration process is still ongoing.
On top of that, Northern Chile has been hit by floods and heavy rainfall twice this year, and while SQM has said that its operations were unaffected, the events no doubt rattled investors.

Other major lithium producers have recently reported higher pricing as well. Albemarle (NYSE:ALB) reported increased lithium pricing and higher sales volumes for lithium in Q2, partially due to the addition of its Talison Lithium joint venture in Australia in May.
FMC (NYSE:FMC) CEO Pierre Brondeau commented in the company’s Q2 earnings release that the company “saw positive price and demand trends across the majority of its [lithium] business.” However, FMC also reported lower sales volumes of lithium carbonate and lithium chloride and unfavorable foreign currency exchange impacts for its Argentina operations, leading to a 39-percent decrease in earnings for its lithium segment compared to Q2 2014.
 
Securities Disclosure: I, Teresa Matich, hold no investment interest in any companies mentioned.