SQM’s production capacity for lithium compounds is expected to increase to 180,000 tpy in the next few years to meet growing demand. Current capacity is 70,000 tpy; an interim capacity for 120,000 tpy is expected in 2020.
Meanwhile, demand for lithium compounds is likely to increase to at least 1 million tpy by 2025 from an expected 350,000 tpy in 2019, according to SQM.
This year, SQM believes that it will sell just under 50,000 tonnes of lithium compounds but will produce more than 60,000 tonnes.
The company will hold back more than 10,000 tonnes of lithium compounds throughout 2019
for strategic purposes, the equivalent of two to three months-worth of inventory.
“Over the past few years, we have been selling more than our installed capacity, pressuring our lithium production process along with our entire supply chain, taking away the flexibility needed to respond to our customers,” SQM chief executive officer Ricardo Ramos said in a press release.
“Producing volumes slightly higher than we expect to sell this year will allow us to recover part of our inventories, which will give us greater flexibility to face the market and the expansion challenges facing our plants,” he added.
Despite falling lithium prices, SQM said it was optimistic because demand is set to outstrip supply in the foreseeable future.
Fastmarkets assessed the Chinese domestic spot price for battery-grade lithium carbonate, min 99.5% Li2CO3
, down by 49.50% to 73,000-81,000 yuan ($10,843-12,031) per tonne on Thursday March 7. This compared with 150,000-155,000 yuan per tonne on March 15, 2018.
The capex associated with the production expansion, according to SQM, will be in the range of $4,000 per tonne or $400 million.