(Updates with additional statements from Ramos, details from earnings call)
By Dave Sherwood
SANTIAGO, May 20 (Reuters) - Chilean miner SQM, the world's No. 2 producer of lithium, said on Wednesday profits plunged by nearly half in the first quarter as prices for the battery metal continued to freefall during the novel coronavirus pandemic.
Supply swamped demand earlier this year, and now lithium earnings have tumbled further on sliding automobile sales and economic malaise caused by the pandemic.
SQM posted a 44% drop in first-quarter net income to $45 million. The company said health concerns around the coronavirus had also prompted it to put off $100 million in non-essential capital expenditures in 2020, or around one-quarter of its planned investment for the year.
"Average lithium prices were almost 50% lower than average prices seen during the same period last year," Chief Executive Ricardo Ramos said in a statement, adding that sales of the white metal slipped more than expected.
Sales to China, a priority market for SQM, dropped by 2,000 tonnes in the first quarter, Ramos said in an earnings call.
The sharp fall in prices and lagging sales dragged lithium revenue down 58% versus the previous year, the company said.
Gross profits from lithium operations, half of SQM´s business during the first quarter of 2019, now account for just 12% of its total, the company said.
Ramos said he expected a recovery in China would ensure a strong third and fourth quarter, and allow SQM to increase market share as competitors falter.
"We expect to sell more this year as compared to the previous one," he said. "We are building inventory, and this will help us to have better flexibility."
SQM, which operates in Chile´s far-flung Atacama salt flat, said safety measures implemented early during the country´s coronavirus outbreak had spared it the worst.
Chile, a South American mining powerhouse and the top global producer of copper, has seen cases of COVID-19 spike in the past week as its health care system teeters on collapse.
"Today we operate at normal levels, so much so that production today in all of our facilities is above...our original budget for the year," Ramos said in the earnings call.
Ramos said he was confident the company would move forward with expansion plans in 2021 to compensate for coronavirus-related setbacks.
"Our strong balance sheet and firm commitment to the lithium market allows us to continue moving forward with our capacity expansion plans in lithium carbonate and lithium hydroxide," the company said.
SQM´s tough first quarter is likely to weigh heavily on Tianqi Lithium Corp, a top shareholder and another of the world's biggest lithium producers.
The Chengdu, China-based lithium giant has been struggling to repay loans to finance its high-profile $4.1 billion acquisition of nearly a quarter of SQM - agreed in 2018 when prices for lithium were much higher. (Reporting by Dave Sherwood; editing by Jason Neely and Bernadette Baum)