Chilean miner SQM said on Thursday it foresees strong long-term demand for lithium but offered a short-term prognosis clouded by the entry of new projects into the market and slowing growth of demand for the product this year.
The company’s new chief executive, Ricardo Ramos Rodriguez, said in an earnings call he expected sales volume in 2019 to rise slightly from 2018, along with modestly higher average market prices.
Beyond 2019, demand growth continues to look extremely healthy
He said SQM would increase its production of 50,000 metric tonnes (MT) of lithium to a below-market expectation of 60,000 MT for 2019, moving any surplus production into its strategic inventory, for release when market demand merits.
“Demand rose in 2018, surprised us again by surpassing 27 percent and is expected to grow at rates above 20 percent in 2019,” he said.
“Beyond 2019, demand growth continues to look extremely healthy, making us believe that the 1 million tonnes per year lithium market may happen sooner than originally anticipated.”
SQM, the world’s No. 2 producer of lithium, saw its B share price fall by 5.38 percent to 17,250 pesos after the earnings call at midday.
In a statement overnight the company said its revenue dipped by 1.6 percent in the fourth quarter to $565.2 million from $574.8 million in the fourth quarter of 2017. Its income dropped to $108.6 million in the fourth quarter from $110.5 million in the year-earlier period.
“As was expected, new supplies coming into the market make it more difficult for us to capture the price premium that we had in 2018,” said Ramos.
“It is very difficult to predict our sales volume for 2019 and 2020, it depends on supply and demand equilibrium. The timing of the start and the ramp-up of new projects is difficult to assess. We are very optimistic about the demand for lithium in the long-term.”
Ramos confirmed heavy rain in northern Chile earlier in February that caused suspension of operations would not affect its ability to fulfill sales contracts.
The results come amid concern about softening Chinese demand for lithium, the key ingredient in electric car batteries.
Earlier this month, U.S.-based lithium miner Livent that it believed sales to key market China could weaken 2019 because of macroeconomic uncertainty and concerns around electric car subsidies.
(By Aislinn Laing and Marion Giraldo; Editing by Steve Orlofsky)
