August 24, 2018 / 5:43 PM / in 9 months

Chile's SQM expects lithium prices to dip in second half

SANTIAGO, Aug 24 (Reuters) - Chilean lithium miner SQM said it forecast lithium prices dropping as much as 10 percent in the second half of the year compared to the first but stressed it saw no problems with potential water restrictions in the Atacama salt flat where it operates.

Chief executive Patricio de Solminihac said on a second-quarter earnings call that Australian lithium concentrate being converted in China for use in car and cell phone batteries was responsible for downward “price pressure.”

“There’s consensus the market will continue to grow, but on supply there’s more uncertainty,” he said. “We see that the price will be slightly lower in the second half of the year, although still significantly higher than in the second half of last year.”

SQM , which is also an important producer of plant fertilizer and iodine, said in its earnings report for the second quarter, released on Thursday, that its overall revenue had increased 26 percent compared to the same period last year. It projected that lithium sales would increase 50 per cent in the second half of the year compared to the first.

On Thursday, Reuters reported that Chile’s water regulator said the government had significantly over-promised on water rights and it was preparing major new restrictions on water extraction from the Salar de Atacama basin, where both SQM and its rival Albemarle operate, along with major copper mines.

Solminihac said SQM held less than 4 percent of all the water rights in the salar, and he saw no risk of lithium production being impacted by the regulator’s plans.

“On fresh water rights, we don’t see any effect on our small quantity of water and according to our production line, we expect to increase our production without a need for more fresh water than what we have,” he said.

However, he said potential restrictions on brine extraction would mean that the company would produce less potassium chloride, used for making potash.

SQM said earlier this month that it would overtake Albemarle as the world’s top producer of lithium by 2022, boosting its production capacity that year to 28 percent of the world’s total versus the U.S.-based Albemarle’s 16 percent.

Reporting by Felipe Iturrieta and Aislinn Laing, Editing by Rosalba O'Brien

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