SQM Earnings: Falling Unit Production Costs Will Keep Firm Profitable Amid Near-Term Price Decline

SQM's first-quarter results reflected cyclically low lithium prices. During the quarter, SQM's average realized lithium price was just under $12,600 per metric ton, down over 75% from the prior-year quarter. The price decline was partially offset by higher volumes and lower unit production costs. As SQM ramps up volumes from its new lithium production capacity, we expect it will see falling unit production costs, excluding royalties, which are dependent on lithium prices. As a result, SQM should generate solid profits even with lower lithium prices. Having updated our model to incorporate the first-quarter results, we maintain our $95 fair value estimate and narrow moat rating.