SQM: Lithium Deal with Codelco on Track Despite Chilean Election Concerns

SQM, the world's top lithium producer, expects to finalize a deal with state-owned Codelco by March 2024, before Chile's next government takes power. The deal, which would see SQM relinquish a majority stake in its Atacama assets, has faced criticism from leading presidential candidates who vowed to review it. However, SQM's CEO, Ricardo Ramos, is optimistic about the review process and believes it will conclude positively in the coming weeks.

Chile's SQM, the world's second-largest lithium producer, reported a 59% decline in quarterly profit for the second quarter of 2025, driven by a significant drop in lithium prices. The company's net profit fell to $88.4 million, missing analysts' expectations of $143.01 million [1]. Despite the profit decline, revenue remained broadly in line with estimates at $1.04 billion [1].

The decrease in profit is primarily attributed to a 34% year-on-year drop in lithium prices [1]. This decline, coupled with a protracted slump in global lithium prices, has led SQM to reduce its workforce and reevaluate production plans. In June, SQM began laying off 5% of its Chilean workforce [1].

SQM's CEO, Ricardo Ramos, acknowledged the challenging market conditions, stating, "As anticipated, during the second quarter, we navigated a period of lower lithium market prices than those observed in previous quarters. In this context, some of the contracts we had in place, hit the lower limits set in those contracts, affecting the volumes agreed" [1].

In addition to the financial challenges, SQM is set to finalize a partnership with state-run copper producer Codelco to produce lithium in the Atacama salt flat. The deal, which would see SQM relinquish a majority stake in its Atacama assets, has faced criticism from leading presidential candidates who vowed to review it. However, SQM's CEO, Ricardo Ramos, remains optimistic about the review process and expects it to conclude positively in the coming weeks [2].

Despite the recent challenges, SQM's strong market position is reflected in its financial metrics. The company's P/E ratio of 21.37 indicates investor confidence in its earnings potential, while its current ratio of 2.88 demonstrates its ability to meet short-term liabilities [2].

References:
[1] https://ca.finance.yahoo.com/news/chiles-sqm-quarterly-net-profit-064532760.html
[2] https://site.financialmodelingprep.com/market-news/sqm-lithium-industry-leader-positive-market-dynamics