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Chile’s SQM can’t escape slide in lithium prices

Chile’s SQM, the world’s second-largest lithium producer, couldn’t escape the impact of the 80%-plus slide in world prices for the metal over 2023, with the company’s December quarter revenue and earnings plunging sharply.

SQM is the final lithium major to report its 2023 performance, and like its rivals, it wasn’t good.

But the company, which is growing its operations in Australia with 50% of the Mount Holland mine in WA and associated refinery at Kwinana (with Wesfarmers), expects stable lithium prices over the next three months and demand to strengthen (at low levels, mind you) later in the year.

Fourth-quarter net profit was down 82% from a year ago, thanks to the slide in battery metal prices, led by lithium.

Revenue fell 58% to $US1.31 billion, from $US3.13 billion in the December 2022 quarter, while net profit was $US203.2 million, a fraction of the $US1.15 billion a year earlier.

For the full 2023 financial year, SQM saw a 30% slide in revenue to US$7.7 billion (from $US10.7 billion), while net profit fell by half to $US2.01 billion from $US3.9 billion in 2022.

The huge slide in metal prices, and weaker demand, also took a dramatic toll on the company’s finances, slashing cash reserves and forcing the company to borrow more.

SQM ended the quarter (and year) with $US1.04 billion in cash and cash equivalents, down from $US2.66 billion in cash and equivalents a year earlier. That fall saw long-term debt jump to $3.21 billion from $US2.39 billion.

After global supplies for lithium outpaced demand over 2023, feeding a glut that dragged prices lower and triggered widespread cutbacks by producers and explorers around the world, led by rivals such as Albemarle, Pilbara Minerals, Mineral Resources, and Core Lithium.

Even with global demand forecast to rise by 20% this year, and SQM forecasting sales volumes to increase 5%-10%, the company warned that oversupply would hold prices steady.

SQM executives told analysts on Thursday they did not have indications of any major lithium pricing shifts to come in the next three months but were optimistic for the second half of the year.

They predicted higher sales volumes in the second part of the year, and SQM CEO Ricardo Ramos told analysts the company could potentially revise its sales volume forecast as the year progresses.

SQM’s Wall Street-traded shares were up 8% at the close on Thursday as lithium carbonate prices rose in China, which also helped Albemarle shares rise 4.4%.