SQM Earnings: Supply Discipline Will Support Lithium Price Recovery
Our key takeaway from SQM's fourth-quarter earnings results and subsequent conference call was management's discipline to act as a rational player in lithium by reducing volume growth in response to lower prices. SQM plans to slow its sales volume growth in 2024 to a midpoint of 7.5%, which is below our outlook for the pace of lithium demand growth. The company also does not plan to sell spodumene into the market at its Mt. Holland project, which just began production last year. As a result, we think SQM's supply discipline will help the lithium market move back into a supply deficit by the end of the year. Having updated our model to incorporate fourth-quarter results, we maintain our $95 per share fair value estimate. Our narrow moat rating is also unchanged.