Lithium price recovery, delayed plants, iodine support
- Lithium is the largest business, making up 50.0% of 2025 revenue.
- Management targets close to 260,000 tons of lithium carbonate equivalent production in 2026.
- SQM expects higher lithium prices in 2026 following a trend reversal driven by stronger late-2025 demand.
- Iodine is the profit buffer, contributing about 42% of 2025 gross margin.
- The Codelco joint venture is finalized, requiring SQM to give up operational control and secure a new environmental permit after 2030.
- The main operational drag is execution: Kwinana ramp-up moved into 2027 and Antofagasta expansion moved to 2028.
Volumes up, patience required
SQM is trying to win the lithium cycle by staying low cost and shipping more tons while weaker rivals feel pain. That plan is working on volume. Management now targets close to 260,000 tons of lithium carbonate equivalent production in 2026.
The price story is improving. Lithium prices fell hard through 2024 and 2025, but management noted a shift late in the year. Stronger demand and supply disruptions reversed the downward trend, and the company now expects higher realized lithium prices in 2026.
The bear case is about delays and long-term control. Kwinana, the Australian refinery, is now expected to ramp in 2027. The Antofagasta chemical plant expansion has moved to 2028. Those delays mean more sales stay in lower-value spodumene concentrate for longer. Additionally, the finalized Codelco agreement means SQM gives up management control in 2030.
Finn's view is balanced. SQM has good assets, a strong balance sheet profile, and a valuable iodine business. But sentiment, execution delays, and the impending 2030 permit cliff require investors to proceed with caution.
Low-cost brine, high-cycle prices
SQM makes money by extracting minerals, processing them, and selling them into global supply chains. Its main asset is the Salar de Atacama in Chile, one of the best lithium brine resources in the world. The company will operate there through 2060 under the finalized Nova Andino Litio SpA joint venture with Codelco.
The key advantage is cost. When lithium prices are weak, SQM can keep producing and protect share better than higher-cost producers. Long-term supply deals with large car makers, including Hyundai and Kia, also help support demand.
The model relies on control and execution. SQM will lose control of the Nova Andino Litio joint venture after December 31, 2030, and will require a new environmental permit to continue operations. Additionally, the company recently entered a copper exploration agreement with Ivanhoe Electric in northern Chile, planting a seed for future diversification outside of lithium and iodine.
Battery growth, iodine cash
Lithium and derivatives
Lithium is used in EV batteries and energy storage. It is SQM's largest revenue line and the main source of upside if lithium prices recover.
Spodumene concentrate
This comes mainly from the Mount Holland asset in Australia. Because Kwinana is delayed, 2026 international lithium sales should lean heavily toward concentrate.
Iodine and derivatives
Iodine is used in medical imaging and other specialty uses. It contributed about 42% of 2025 gross margin, giving SQM a cushion when lithium is weak.
Specialty plant nutrition
These are fertilizer products for higher-value crops. The business is not the main growth story, but it adds diversity outside battery materials.
Potassium
Potassium is tied to brine extraction and fertilizer markets. SQM has been shifting focus away from potash as it pushes lithium efficiency.
Industrial chemicals
This is a smaller line serving industrial uses. It helps round out the portfolio but does not drive the stock thesis.
Copper exploration
An early-stage joint venture with Ivanhoe Electric in northern Chile. It is a new effort to find future resources outside of the core battery minerals.
2025 sales mix
The mix uses fiscal 2025 revenue from SQM's 2025 Annual Report. Lithium is half of revenue, but iodine has a much higher profit weight than its sales share suggests.
What could go wrong
Lithium price whiplash
High impact · Medium oddsSQM's largest business is still tied to lithium prices. Management expects higher prices in 2026 based on recent demand growth, but if that trend reverses, volume growth may not protect earnings.
Kwinana and Antofagasta delays
High impact · Medium oddsThe Kwinana refinery ramp-up moved into 2027, and the Antofagasta chemical plant expansion moved to 2028. These delays slow the move from raw or semi-processed material into higher-value lithium chemicals. They also raise the chance of cost creep.
2030 control and permit cliff
High impact · High oddsSQM finalized the Nova Andino Litio joint venture with Codelco, extending Salar de Atacama operations through 2060. However, the agreement requires SQM to give up operational control after December 31, 2030. The current environmental permit also expires then, meaning operations will require a newly granted permit.
Compliance overhang
Medium impact · Medium oddsSQM faces a separate SEC subpoena tied to possible FCPA and anti-corruption law violations. A negative outcome could bring fines, strict controls, or investor distrust.
EV policy and demand risk
Medium impact · Medium oddsLithium demand depends on electric vehicle and battery growth. Management has flagged policy uncertainty in the U.S. and Europe as a possible headwind. Slower EV demand would make it harder for the market to absorb SQM's higher output.
Tianqi share sales
Medium impact · Medium oddsA large shareholder selling stock can weigh on the share price even if the business improves. The internal view flags Tianqi sales as a possible technical overhang. This risk is about market supply of shares, not SQM's mines or plants.
In one breath
What does SQM actually sell?
SQM sells lithium, iodine, specialty fertilizers, potassium, and industrial chemicals. Lithium is the largest business, while iodine is a key profit cushion.
Why does lithium pricing matter so much for SQM?
Lithium is used in EV batteries and energy storage, and it made up 50.0% of 2025 revenue. When lithium prices move, SQM's earnings power can move fast too.
Why is iodine important to the SQM thesis?
Iodine demand is helped by medical imaging and tight supply. In 2025, iodine contributed about 42% of gross margin, which helped offset lithium weakness.
What is the biggest near-term issue to watch?
Watch plant execution. Kwinana is pushed into 2027 and Antofagasta into 2028, so investors need proof that SQM can turn volume growth into higher-value chemical sales.
