May 24, 2018 / 3:42 PM / a year ago

UPDATE 1-Chile's SQM says will boost lithium capacity by 2021

(Adds details on expansion plan, quotes from CEO de Solminihac, context)

By Dave Sherwood and Antonio De la Jara

SANTIAGO, May 24 (Reuters) - Chilean miner SQM said on Thursday that it would invest $525 million to boost its lithium production capacity in Chile through 2021 as demand for the key ingredient in electric vehicle batteries continues to surge.

SQM , one of the world’s largest producers of lithium and fertilizers, said it would be ready to produce as many as 180,000 metric tonnes of lithium in Chile’s Salar de Atacama salt flat by early 2021, up from 48,000 tonnes currently.

“We believe that with demand growing close to 20 percent this year and next year, the market will be able to absorb this additional supply,” said CEO Patricio de Solminihac in a statement accompanying the company’s first quarter results. “Our strategy is to have the installed capacity to react to market demand.”

The company said it would invest $75 million this year to increase production to 70,000 tonnes at Atacama, its flagship lithium deposit in northern Chile.

“2018 sales volumes in the business line should reach approximately 55,000 MT (metric tonnes) as we ramp up the current production. These additional sales volumes should be seen during the second half of 2018,” the company said in a statement.

Lithium and its byproducts accounted for approximately 61 percent of SQM’s gross profit in the first quarter, the company said. Demand exceeded supply, it added, sharply boosting prices in early 2018 to $16,400 per tonne from $13,500 in the fourth quarter of 2017.

“We believe that this price pressure will continue throughout the first half of the year,” de Solminihac said.

The second stage of SQM’s expansion plans in Chile would increase capacity to 120,000 tonnes, 20,000 tonnes more than previously anticipated, the statement said.

“The second stage of the expansion in the Salar de Atacama will be completed in the next 18 months with a total investment of US$200 million,” de Solminihac said in the statement.

The final stage would boost production capacity to 180,000 tonnes with a price tag of $250 million. It was not immediately clear if that was in addition to the $200 million.

SQM earlier today reported earnings of $113.8 million in the first quarter of 2018, up 10 percent, on growth in its lithium business.

The results and revised production schedule come one week after China’s Tianqi Lithium Corp said it would buy nearly a quarter of SQM for $4.1 billion from Canada-based fertilizer company Nutrien Ltd. (Reporting by Dave Sherwood and Antonio de la Jara Editing by Phil Berlowitz)

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