SQM (SQM) Q3 2025: Lithium Sales Volumes Hit All-Time High, CAPEX Cut by $800M
SQM delivered record lithium sales volumes in Q3 2025, capitalizing on a recovering price environment and operational efficiency in both Chile and Australia. Management cut its three-year CAPEX plan by $800 million without impacting near-term production targets, signaling strategic discipline amid market volatility. With the Codelco joint venture on track for year-end close, SQM is positioning for scale and flexibility while navigating demand and supply uncertainties into 2026.
Summary
- Lithium Output Record: Atacama and Australia operations set new sales volume highs, with expansion continuing.
- CAPEX Discipline: Three-year capital plan reduced, maintaining focus on production and cost efficiency.
- JV Milestone: Codelco partnership advances, enhancing long-term supply security and market access.
Performance Analysis
SQM’s third quarter was defined by operational outperformance and disciplined capital management. The company reported its highest ever lithium sales volumes, driven by robust production from the Atacama operation and a step-change in spodumene concentrate output from Australia. The lithium segment benefited from a modest recovery in realized prices versus prior periods, as demand fundamentals held strong in both EV and energy storage segments. Management highlighted that energy storage systems now comprise over 20% of global lithium demand, underscoring a structural shift in end markets.
Outside lithium, iodine and specialty plant nutrition businesses delivered steady growth, with iodine revenues up 5% year-on-year and prices holding firm near $73 per kilogram. The company’s product mix in fertilizers continued to shift toward higher-value, tailor-made blends, supporting margins. On costs, efficiency gains and cost reduction initiatives in Chile and Australia helped protect profitability despite ongoing market volatility. The revised CAPEX plan of $2.7 billion for 2025-2027, down from $3.5 billion, reflects both project reprioritization and improved capital allocation discipline.
- Operational Efficiency Gains: Atacama delivered low-cost, high-volume output, while Australian spodumene sales increased significantly.
- Segment Diversification: Iodine and plant nutrition contributed stable revenues, buffering lithium price swings.
- Cash Flow Management: CAPEX cut by 22%, with no impact on divisional production objectives, preserving balance sheet strength.
Management’s commentary and Q&A responses reflected cautious optimism, with a focus on preserving flexibility and maintaining strong investment grade metrics as the lithium market remains volatile.
Executive Commentary
"During the third quarter, we experienced a more favorable pricing environment for lithium compared with the previous period. Although the market remains highly volatile, we are cautiously optimistic. Our realized average prices increased, and while we expect this positive trend to continue in the fourth quarter, we remain focused on high-quality production, being a reliable supplier, increasing volumes, and continuing to advance our cost reduction initiatives."
Ricardo Ramos, Chief Executive Officer
"Our CAPEX program for the years 2025-2027 will be somewhere around $2.7 billion. The breakdown is going to be somewhere around $1.3 billion for the Lithium Chilean Division... For the International Lithium Division, the total capex... is approximately $700 million... in the iodine and plant nutrition business line, the total capex is approximately $800 million."
Gerardo Allanes, Chief Financial Officer
Strategic Positioning
1. Lithium Platform Expansion and Global Diversification
SQM’s lithium business is scaling across both Chile and Australia, with Atacama production expected to reach 230,000 tons this year and Australian spodumene sales upgraded to 23,000-24,000 tons. The company is advancing lithium hydroxide production in Australia and expanding lithium sulfate output in China, providing geographic diversification and exposure to multiple end markets. The ramp-up of the Quinana hydroxide plant is expected to improve realized pricing and margin capture in 2026 as more value-added product is sold directly.
2. Capital Allocation Discipline and Flexibility
The $800 million CAPEX cut underscores a pivot toward disciplined growth, as management prioritizes projects with near-term returns and defers longer-dated investments. The revised plan maintains all divisional production targets while enhancing free cash flow and balance sheet resilience. The company’s strong investment grade commitment was reiterated, with several levers available before considering any capital raise even in a lower price environment.
3. Strategic Partnerships and Market Access
The pending joint venture with Codelco, Chile’s state copper company, is a major milestone that will secure long-term access to Chilean brine resources and ensure regulatory alignment. The JV, now cleared by Chinese antitrust authorities, is expected to close by year-end, with dividend payments to Codelco structured on attributable tonnage. This partnership positions SQM as a preferred supplier to global EV and energy storage OEMs, while providing flexibility to scale output with market demand.
4. Product Mix Shift and Segment Resilience
The specialty plant nutrition and iodine segments continue to deliver stable cash flow, with ongoing investments in seawater infrastructure and new production capacity at Maria Elena. The focus on high-margin, tailor-made fertilizer blends and expansion in iodine supports resilience against lithium price swings, while maintaining SQM’s position as a reliable supplier across chemical and agricultural markets.
Key Considerations
This quarter’s results highlight SQM’s operational strength and strategic recalibration in the face of market volatility and evolving end-market demand. Investors should weigh the following:
Key Considerations:
- Lithium Market Volatility: While pricing improved sequentially, management remains cautious given ongoing supply and demand uncertainty, especially in China and the energy storage segment.
- CAPEX Cut Preserves Optionality: The $2.7 billion plan ensures all key expansions proceed, but defers longer-dated projects like Salar Futuro, maintaining flexibility for future cycles.
- JV Execution Risk: The Codelco joint venture is critical for long-term Chilean access, but introduces new profit-sharing and governance dynamics that must be managed carefully.
- Segment Diversification as Buffer: Iodine and plant nutrition provide a countercyclical hedge, but remain exposed to their own supply-demand cycles and regulatory risks.
Risks
Key risks include persistent lithium price volatility, execution challenges in ramping new capacity in Australia and China, and regulatory or community hurdles related to the Codelco JV. Supply additions from competitors, especially in Chile, could pressure both lithium and iodine pricing. CAPEX discipline must be balanced with the need to maintain technological and cost leadership in a rapidly evolving market.
Forward Outlook
For Q4 2025, SQM guided to:
- Continued strong lithium sales volumes, similar to Q3 levels in both Atacama and Australia
- Stable to modestly improved realized lithium prices, with ongoing cost reduction focus
For full-year 2025, management maintained guidance:
- 230,000 tons of lithium production in Chile, with 180,000 processed locally and 50,000 in China
- 23,000-24,000 tons LCE spodumene sales from Australia
Management highlighted several factors that will shape next year:
- Ramp-up of Quinana hydroxide plant to enhance margin and price realization
- JV with Codelco to close by year-end, impacting dividend and profit-sharing structure
Takeaways
SQM’s Q3 results reinforce its position as a global lithium leader with operational and capital flexibility, but also underscore the importance of disciplined execution and partnership management as the industry transitions to a new supply-demand equilibrium.
- Record Lithium Volumes: Atacama and Australia delivered all-time high sales, supporting near-term revenue despite market turbulence.
- CAPEX Cut Signals Discipline: The $800 million reduction preserves growth optionality while protecting the balance sheet and investment grade rating.
- JV and Mix Shift Are Critical: The Codelco partnership and expansion into value-added products will determine SQM’s margin profile and global positioning into 2026 and beyond.
Conclusion
SQM’s Q3 2025 was marked by operational execution, a prudent CAPEX reset, and strategic momentum on partnerships. The company remains well positioned to navigate volatility and capture value as the lithium and specialty chemicals landscape evolves.
Industry Read-Through
SQM’s record lithium output and CAPEX discipline signal a maturing phase for the lithium industry, where scale, cost leadership, and capital allocation are increasingly critical. The company’s commentary on strong energy storage demand and EV growth in China and Europe suggests underlying support for lithium demand, even as pricing remains volatile. Competitors with less diversified segment exposure or higher cost structures may face greater pressure as new supply comes online. The Codelco JV highlights the importance of regulatory alignment and resource security in Chile, a dynamic likely to shape future industry consolidation and investment decisions.