SQM H1 results bolstered by higher lithium prices, sales volumes

Chilean lithium and iodine producer Sociedad Quimica y Minera's (SQM) earnings in the first half of 2018 rose by 21.2% year on year to $247.7 million from $204.4 million the year before.

Total revenue from SQM’s five businesses increased by 13% to $1.15 billion in the first six months of 2018, from $1.02 billion in the corresponding period last year.

SQM’s first-half results were led primarily by its lithium business, the company said.

While the higher sales volumes and new lithium supply could soften prices slightly in the second half of 2018, they will remain higher than the average reached in 2017, according to chief executive officer Patricio de Solminihac.

“We expect our sales volumes in the lithium business line to be almost 50% higher in the second half of the year, compared to the first half, bringing total sales volumes to over 50k tonnes during 2018. Average prices in this business line were slightly higher during the second quarter. We see demand growth in 2018 surpassing 20%; as expected, new supply has been entering the market, mostly from Australia,” de Solminihac said.

In the first quarter, SQM achieved average lithium compound prices of $16,400 per tonne. It did not specify its average sales prices for the six months to June.

Industrial Minerals assessed technical and industrial lithium carbonate contract prices (min 99%), cif China, Japan and South Korea at $15.50-18.50 per kg in July, down slightly from $16-19 per kg in January.

Battery-grade contract prices (min 99.5%) have remained stable between January and July at $17-20 per kg, according to Industrial Minerals’ monthly assessments.

However, a deceleration in demand due to Chinese battery-makers transitioning to long-range battery production to take advantage of government subsidies and the availability of additional units of lithium carbonate in the global market over the year have caused battery-grade lithium carbonate spot prices to fall by 47% in China. 

Chinese spot battery-grade lithium carbonate prices fell to 90,000-95,000 yuan ($13,008-13,730) yuan per tonne on Thursday August 16, 2018 from 180,000-170,000 yuan per tonne on November 3, 2017.

Falling spot prices in China could translate to lower contract prices in the second half of 2018. The Chinese domestic spot market remains the global price benchmark proxy because the vast majority of lithium compounds produced in the world are consumed and processed in China.

SQM expansions
SQM remains on track with its production expansion plans in Chile and has committed to the Mt. Holland project in Australia.

The company has completed the first stage of expansion to increase production capacity to 70,000 tonnes per year of lithium compounds in Chile from 48,000 tpy. It has now started the second stage expansion to ramp up capacity to 120,000 tpy by the end of 2019.

Iodine business
Meanwhile, SQM’s iodine business was boosted by record sales volumes and higher prices in the first half of the year.

Iodine prices in the second quarter increased by 25% year on year, SQM said without specifying its average sales prices.

Industrial Minerals assessed spot prices for iodine global min 99.5% at $25.50-26.50 per kg on August 16 up from $23-25 per kg on January 4.

Industrial Minerals’ contract price for iodine global min 99.5% were at $25.00-26.00 per kg on July 26 up from $23-24 per kg on January 4.

SQM’s revenues from iodine and derivatives sales during the first half of 2018 increased by 24.2% to $160.2 million, against $129.1 million in the first half of 2017.

“The strong results were also driven by positive performance in the specialty plant nutrition and iodine business lines, both reported record sales volumes during the second quarter, and both are on target to reach record sales volumes for the year. Iodine prices have risen, and were over 25% higher during the second quarter this year, when compared to the same period of 2017,” Solminihac said.

SQM increased its iodine production capacity to 14,000 tpy from 11,000 tpy in 2017.

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