“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. note, citing elevated inventory throughout the supply chain and depressed prices. Albemarle Corp. and Livent “seem to be taking a more conservative approach, only producing to meet customer demand,” it said.