SQM Rises on Record Lithium Sales, Fuels EV and Storage Demand Surge

Chilean Lithium Producer Sociedad Química y Minera de Chile (SQM) Reported Its Highest Quarterly Earnings Since 2023, Driven by a Record Surge in Lithium Sales.

The company announced adjusted core earnings of $404.2 million for the third quarter, exceeding expectations and reflecting strong demand from electric vehicles and energy storage systems. SQM's revenue also climbed to $1.17 billion, primarily fueled by its lithium operations.

The company sold 72,900 metric tons of lithium during the quarter, marking a 43% year-on-year increase. This record output came as global demand for battery materials continued to rise, with analysts forecasting further growth in the coming months. SQM's leadership remains optimistic, noting the expanding role of lithium in energy storage beyond traditional EV applications.

SQM's performance aligns with broader industry trends, including strong global demand and strategic expansions. The company recently received regulatory approval from China's antitrust authority to collaborate with state-owned Codelco on a lithium project in the Atacama salt flat, signaling renewed momentum in its operations. With lithium prices recovering from earlier-year lows, SQM is positioned to benefit from both demand and pricing dynamics.

Drivers of Strong Earnings

SQM's lithium sales surged due to a combination of higher volumes and improved pricing. The company's lithium revenue for the quarter reached $603.7 million, reflecting a significant contribution to overall earnings. Analysts attribute this growth to sustained demand from the EV industry and rising investments in battery storage systems, particularly in AI-driven energy infrastructure.

The company also highlighted increased sales of iodine, a product with a 57% gross margin in the second quarter of 2025. This diversification of revenue streams has helped SQM maintain profitability even as potassium volumes are expected to decline. The company's strong cash flow and low production costs in Chile's Salar de Atacama further bolster its competitive edge in the lithium market.

Market and Analyst Outlook

SQM's performance has sparked optimism among investors and analysts. Recent analyst revisions indicate a positive outlook, with three upward adjustments for both earnings per share (EPS) and revenue estimates over the past month. The company's market capitalization stands at $16.99 billion, with a P/E ratio of 35.55 and a P/S ratio of 3.95, reflecting a premium valuation compared to historical averages.

However, the company is not without risks. The lithium market remains volatile, with prices still below their 2022 peak despite a 50% increase from a June low. SQM's beta of 1.59 indicates higher volatility than the broader market, and its net margin of 11.28% suggests room for improvement in profitability.

Risks and Future Challenges

Despite its strong earnings, SQM faces several headwinds. The lithium market could be disrupted by supply-side issues, such as the temporary suspension of a major mine operated by Contemporary Amperex Technology Co., the world's largest EV battery maker. While demand remains robust, oversupply risks persist, and SQM must navigate these challenges to sustain its growth trajectory.

Regulatory and geopolitical factors also play a role. For instance, China's proposed export restrictions on key battery technologies could limit technology transfer and affect global supply chains. SQM's joint venture with Codelco, while promising, must contend with potential regulatory scrutiny and environmental concerns. Additionally, the company's Altman Z-Score of 2.98 places it in a grey area, indicating some level of financial stress despite its current liquidity position.

Implications for Investors

SQM's strong performance has drawn attention from both institutional and retail investors. Institutional ownership stands at 14.73%, and analyst ratings are largely bullish, with a 12-month price target of $51.85. The company's recent earnings beat and revenue guidance for the year have been well-received, with technical indicators like the RSI approaching overbought territory.

However, potential investors should carefully consider the valuation and market dynamics. SQM's current P/E and P/S ratios are near historical highs, and while the company's financial health appears strong, its leverage and capital allocation efficiency remain areas of concern. Investors are advised to monitor upcoming catalysts, including the finalization of expansion projects and evolving regulatory environments in key markets.

Global Lithium Market Trends

The global lithium market is undergoing a transformation, with demand expected to grow by 20% in 2025. SQM is part of a broader industry shift toward battery energy storage and EV applications, with lithium demand outpacing supply in many regions. The company's position as one of the world's largest lithium producers, particularly from brine deposits, gives it a strategic advantage over rivals relying on hard rock mining.

Meanwhile, lithium prices have shown signs of recovery after hitting a multi-year low in June. While prices remain below their 2022 peak, the industry is optimistic about a long-term recovery driven by infrastructure investments and technological advancements. SQM's ability to scale production efficiently in the Atacama region will be crucial in maintaining its market leadership.

Strategic Expansions and Partnerships

SQM is actively expanding its lithium refining assets in China and has announced a joint venture with Codelco to develop the Atacama salt flat. These initiatives are expected to enhance production capacity and secure long-term supply for key markets like China, where SQM and Tianqi are major suppliers. The company's Salar Futuro project, which aims to increase lithium output, is also on track for a 2026 environmental review, with potential production ramping up in the latter half of the decade.

The company's partnership with Codelco is particularly significant, as it allows SQM to tap into Chile's state-run lithium infrastructure and access new sources of supply. However, the collaboration is not without risks, including regulatory challenges and potential supply chain disruptions. SQM's management remains confident in its ability to navigate these complexities and maintain its dominant position in the lithium market.

Conclusion

SQM's record third-quarter earnings underscore its leadership in the global lithium industry and reflect the growing importance of battery materials in the transition to clean energy. With strong demand from EVs and energy storage, the company is well-positioned to benefit from a long-term recovery in lithium prices and volumes. However, investors and market participants should remain cautious about volatility, regulatory risks, and supply chain uncertainties.

As SQM continues to expand its operations and forge strategic partnerships, it will be critical to monitor how the company balances growth with financial discipline. The next earnings report, scheduled for November 19, 2025, will offer further insight into SQM's momentum and its ability to sustain its recent performance in a rapidly evolving market.