Lithium Miner SQM's Profits Surge on Higher Lithium Prices

Soaring lithium prices supported earnings from Chile’s SQM (NYSE:SQM) during the first quarter, with the miner seeing its net income reach US$796.1 million ― up from US$68 million a year earlier.

The top lithium producer's revenue from lithium sales increased almost 970 percent year-on-year to hit US$1.44 billion, with its sales volume increasing 59 percent and reaching its highest level at 38,100 tonnes.

“The lithium market continues to be very dynamic and at times difficult to gauge and estimate,” the company said in a Wednesday (May 18) statement. “Despite the higher pricing environment we have seen, we still believe that the lithium market will grow at least 30 percent this year.”

SQM is forecasting that its sales volume in 2022 will exceed 140,000 tonnes, with only 20 percent of sales expected to be in fixed contract prices or at variable prices with specific floors and ceilings.

“In light of market demand expectations, we are increasing our capacity and our growth plans remain on target with previous announcements,” the company said.

Last March, the major lithium miner said that in the coming months it was expecting its lithium carbonate production capacity to reach 180,000 tonnes, and its lithium hydroxide capacity to hit 30,000 tonnes. It also outlined plans for a US$250 million capacity expansion plan in Chile that would allow it to reach 210,000 tonnes of lithium carbonate and 40,000 tonnes of lithium hydroxide next year.

SQM’s primary lithium business is in the Salar de Atacama in Chile, where its lithium brine operations are located. SQM is also developing the Australia-based Mount Holland lithium project, which is known as one of the world's largest hard-rock mining deposits, in a joint venture with Wesfarmers (ASX:WES,OTC Pink:WFAFF).

Earlier this month, SQM’s rival Albemarle (NYSE:ALB) published its quarterly results, with shares climbing after the miner raised its 2022 outlook on the back of higher lithium prices.

The spike in prices also helped US-based Livent (NYSE:LTHM) during the first quarter, with the producer posting a 56 percent increase in year-on-year revenue, beating expectations and raising its full-year guidance.

Most lithium companies have seen momentum increase in the past year, with some lithium stocks in the US, Canada and Australia seeing year-to-date gains.

On Thursday (May 19), shares of SQM were trading at US$94.50, up more than 5 percent from the company's closing price the previous trading day.

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Securities Disclosure: I, Priscila Barrera, currently hold no direct investment interest in any company mentioned in this article.