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Chile's SQM expects steady lithium prices in coming months amid supply glut

FILE PHOTO: Atacama Desert salt flats, lithium deposit spots, in Chile

By Daina Beth Solomon

(Reuters) - Chile's SQM, the world's second-largest lithium producer, expects stable lithium prices over the next three months and strong demand through the year, executives said in a call with analysts on Thursday.

A day earlier, the company reported fourth-quarter net profit down more than 80% from a year ago as prices for the metal key to electric vehicle batteries continued to slide.

Global supplies for lithium outpaced demand over 2023, fuelling a glut that has dragged prices and caused producers such as Albemarle, the world's largest supplier, to cut jobs and pause expansions.

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Even with global demand forecast to rise by a fifth in 2024, and SQM sales volumes expected to increase 5%-10%, the company warned that oversupply would hold prices steady.

SQM executives told analysts they did not have indications of any major lithium pricing shifts to come in the next three months, and were optimistic for the second half of the year.

They also predicted higher sales volumes in the second part of the year, along with first-quarter volumes expected to outdo the same period from a year before.

SQM's U.S.-listed shares were up 9.2% at $50.25 on Thursday afternoon as lithium carbonate prices rose in China, which also helped Albemarle shares rise 4.7% to $138.20.

SQM Chief Executive Ricardo Ramos said the company could potentially revise its sales volume forecast as the year progresses.

Executives also discussed the electric vehicle (EV) market, with SQM's lithium market analyst Gonzalo Gil noting that EVs are expected to make up more than half of new vehicle sales a decade from now, with continued dependence on lithium batteries.

EV demand has slowed in recent months, forcing automakers and suppliers to pull back on plans and re-evaluate targets. Analysts have also noted that a potential win by former President Donald Trump in the U.S. presidential election in November could lead to reduced EV incentives.

Asked by an analyst whether that possibility could lead to further oversupply of lithium, Gil said he did not anticipate a long-term impact.

(Reporting by Daina Beth Solomon and Aida Pelaez-Fernandez in Mexico City; Editing by Valentine Hilaire, David Gregorio and Matthew Lewis)