Santiago-based miner SQM, the world’s second-largest lithium producer, is scaling back its capital expenditures for 2025 in response to prolonged weakness in lithium prices. The company plans to invest $1.1 billion across its operations, a reduction from the $1.6 billion allocated last year.
Of the planned investments, $550 million will be directed toward lithium operations in Chile, while $350 million will be used for the company’s iodine and plant nutrition business. The remaining $350 million will go toward international lithium projects. In 2024, SQM spent approximately $1.3 billion on expansion projects across its business segments.
The decision comes during a sharp decline in earnings. SQM reported a 41% drop in fourth-quarter 2024 profits, falling to $120 million from $206 million in the same period a year earlier. Revenues from lithium and derivatives totaled $2.2 billion for the year, a significant decline of 56.7% compared to the $5.2 billion recorded in 2023. Fourth-quarter lithium revenues alone dropped nearly 33% to $532 million, down from $792 million in the fourth quarter of 2023.
Despite these financial setbacks, SQM sees reasons for optimism. The company reported a 25% increase in lithium market demand in 2024 and expects global demand to grow by approximately 17% in 2025, driven by the electric vehicle (EV) industry and increased adoption of battery energy storage systems. SQM projects a 15% rise in lithium sales this year, including an estimated 10,000 tonnes of lithium carbonate equivalent (LCE) from the Mt. Holland operation in Australia. The Kwinana refinery, also in Australia, remains on track to begin operations by mid-2025.
Although the company expects sales volume to increase, it anticipates lower average realized lithium prices in 2025. Prices in the first quarter are projected to be slightly below those recorded in the final quarter of 2024. The lithium industry has faced a prolonged downturn, largely due to weaker-than-expected EV demand. In response, several lithium producers have adjusted their strategies, reducing spending and scaling back operations to protect margins. Sibanye-Stillwater, a mining company with operations in the United States and South Africa, recently announced that it would not proceed with its Rhyolite Ridge lithium-boron project in Nevada, reflecting broader industry caution.
While SQM maintains a measured approach in response to market conditions, the company has said it remains confident in long-term lithium demand growth. Industry observers will continue to monitor pricing trends and production strategies as the lithium sector navigates challenges.
The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a licensed professional for investment advice. The author is not an insider or shareholder of any of the companies mentioned above.
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