Early in 2018, Chilean miner SQM settled a long-lasting dispute over its rental contracts in the lithium-rich Salar de Atacama with state development agency Corfo, a roadblock that had threatened to limit the company's expansion just as lithium prices were multiplying.
The agreement, which permits a new lithium production quota of 349,553t lithium metallic equivalent through 2030, has opened the doors for SQM to increase its lithium capacity in Chile and maintain its leading position in the world lithium carbonate market, where it has a 23% share.
The arrangement also made Canadian Nutrien's (former Potash) 32% SQM stake more attractive.
Now, SQM plans to nearly triple lithium capacity by 2021. CEO Patricio de Solminihac said in May that the market had been underestimating demand, expected to grow 20% this year and 20% in 2019. "We are very optimistic about demand ... Our strategy right now is to push capacity as far as we can because the market needs that capacity now."
SQM sent a powerful message to the market about its plans to satisfy lithium demand, especially for electric vehicles batteries. Capex for lithium carbonate expansion from 2017 to 2021 (up to 180,000t) will require US$525mn besides the US$30mn earmarked for the 2018 lithium hydroxide expansion (up to 13,500t).
"We are at the point in the lithium cycle where major producers are going to need to start increasing capital expenditures to maintain or increase market share and so this is the next challenge for SQM," said Chris Berry, a New York-based analyst on energy metals and founder of House Mountain Partners LLC.
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