Column: Trump 2.0 won’t reverse Biden’s critical minerals push
Donald Trump has described the Inflation Reduction Act (IRA) as a "green scam" and vowed to repeal it after he returns to the White House in January.
SQM, the world’s No. 2 lithium producer, is plowing ahead with expansions in an oversupplied market, building stockpiles of the battery metal to be ready when purchasing rebounds.
The strategy is a doubled-edged sword for the market — by continuing to increase output when buyers are still running down inventories, SQM may help prolong the glut. But it’s also a bet on buyers returning as underlying electric-vehicle demand continues to grow in the shift away from fossil fuels.
SQM’s US depository receipts surged as much as 12%, its biggest intraday jump since March 2022.
Reporting an 82% drop in quarterly profit, the Santiago-based firm said the excess inventory that drove down lithium prices is expected to continue this year, keeping prices under pressure and resulting in an increase in its own sales of just 5% to 10% even as global demand rises at least 20%.
But as some suppliers rein in spending and output, low-cost SQM continues to run at full tilt. An expansion in Chile has pushed up its lithium carbonate capacity to 210,000 metric tons, with annual company-wide production set to come in at 220,000 tons to 230,000 tons. That would result in stockpiling of less than 50,000 tons, executives said on a call with analysts Thursday.
SQM, which is closely watched because it’s more exposed to spot prices than peers, sees stable prices in the short term and as is more positive after that, they said. There’s upside risk to prices from delays in new projects, chief executive officer Ricardo Ramos said, without naming them.
Over the next decade, lithium demand probably will grow fourfold, with the supply response contingent on higher prices, Gonzalo Gil, SQM’s head of lithium market intelligence, said on the call. He was responding to questions from CEO Ramos in a bid to dispel concerns about the pace of EV growth.
SQM continues to work on a definitive deal with Codelco over a new operating arrangement under Chile’s new public-private participation model. The two firms reached a framework accord late last year, with SQM set to hand over a majority stake in its Chilean brine assets to state-owned Codelco in exchange for extending operations for three more decades.
“Together with the communities, we are working on the definitive documentation in the upcoming months and will inform the market once this process is concluded,” Ramos said.
(By James Attwood)
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