SQM's net profits drop due to lower lithium prices
SQM, world's second largest lithium producer, reported on Wednesday a 73% decline in its third-quarter profit, as increased sales volumes did not offset a sharp drop in prices due to an oversupply.
The lithium mining industry has been affected by the sustained fall in prices of lithium in recent months, due to a weaker than expected demand for electric cars. The lithium is an important component in batteries for electric vehicles.
SQM's net profit for the third quarter was $131 million, which is below the analyst estimate of $162 millions, based on LSEG Data.
Analysts had predicted that revenue would fall by 41% to $1.07 Billion.
The mining group reported that lithium sales volume increased by almost a fifth when compared to the same period in the previous year. However, average prices fell 67%. Prices for the metal dropped by 24% between the second and third quarters.
SQM expects prices to continue falling in the last months of the year. This is consistent with its previous forecasts for weak pricing through 2024.
"Although the demand for electric vehicles continues to grow, mainly due to strong growth in EV sales in China, prices continue to be pressured by oversupply," CEO Ricardo Ramos stated in a press release.
The company announced that its third-quarter sales of lithium included for the first quarter, SQM International, a division it launched the previous quarter to develop the company's business outside Chile.
SQM, who also produce fertilizers and industrial chemical, extracts the lithium from the Atacama Salt Flat in northern Chile. This region has some of the highest lithium concentrations in the world.
The company has maintained its sales volume target of 190,000 - 195,000 metric tonnes for this year. Lithium accounted for 42% of the company's gross profit this year.
(source: Reuters)
