Top Lithium Miner Boosts Output on Optimism About Long-Term Demand

Commodities & Futures
© Bloomberg. Stockpiles of lithium carbonate and salt by-product are reflected in a brine lake at a Sociedad Química y Minera de Chile (SQM) lithium mine on the Atacama salt flat in the Atacama Desert, Chile, on Wednesday, May 29, 2019. Almost three-quarters of the world’s lithium raw materials come from mines in Australia or briny lakes in Chile, giving them leverage with customers scrambling to tie-up supplies. The mining nations hope to bring refining and manufacturing plants that could help kickstart domestic technology industries. © Bloomberg. Stockpiles of lithium carbonate and salt by-product are reflected in a brine lake at a Sociedad Química y Minera de Chile (SQM) lithium mine on the Atacama salt flat in the Atacama Desert, Chile, on Wednesday, May 29, 2019. Almost three-quarters of the world’s lithium raw materials come from mines in Australia or briny lakes in Chile, giving them leverage with customers scrambling to tie-up supplies. The mining nations hope to bring refining and manufacturing plants that could help kickstart domestic technology industries.

(Bloomberg) — One of the world’s largest lithium suppliers is producing at record levels because of optimism about long-term demand for the material used in electric vehicle batteries.

“Given the demand growth expectations in coming years, we feel comfortable with the higher level of inventories that are being built,” Soc. Quimica y Minera de Chile SA said after reporting second-quarter income beat the highest analyst estimates.

SQM said output levels have reached an all-time high and it’s currently producing at a rate of about 70,000 tons this year. While the company expected demand in 2020 to be similar to 2019, it remained optimistic about long-term demand growth because of increasing expectations for car sales, EV penetration rates and continued government incentives.

Between mid-2015 and mid-2018, prices for lithium almost tripled as the world’s EV fleet hit the 5 million mark and the auto industry began to fret over the supply of raw materials. Prices have since plunged by more than 50% and SQM expects them to be lower in the second half, though sees higher sales volumes.

The higher inventory levels posed the key concern for SQM’s stock, according to a Citigroup Inc (NYSE:). note, citing elevated inventory throughout the supply chain and depressed prices. Albemarle (NYSE:) Corp. and Livent (NYSE:) Corp. “seem to be taking a more conservative approach, only producing to meet customer demand,” it said.

©2020 Bloomberg L.P.

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