April 23, 2020 / 6:04 PM / a month ago

Chile´s lithium miner SQM warns plans could change as coronavirus hits demand

SANTIAGO, April 23 (Reuters) - Chilean miner SQM said on Thursday the coronavirus outbreak had yet to hit its lithium output, but warned it might have to scale back plans for 2020 if a slump continues in demand for the coveted battery metal.

The world´s No. 2 miner of lithium had planned to unleash at least $330 million in 2020 to expand production capacity out of Chile´s Atacama salt flat, according to SQM board chairman Alberto Salas. The region is among the world´s richest in lithium.

Economic slowdowns during the coronavirus pandemic have ravaged demand in top markets like China, prompting a closer look, Salas said in a letter to shareholders.

"As we continue to assess the changing global economic environment and the impacts it might have on demand growth in the industries we sell to, we may find it prudent to delay or modify our capital spending plan for this year," Salas said.

With automakers reeling during the crisis, both the United States and China have talked recently of moving more slowly on regulations designed to encourage production of electric vehicles.

Such decisions in large markets could dent demand for lithium, a key metal used in the batteries that power the vehicles.

The pandemic is the latest headache for SQM and the lithium industry at large, with prices for the powdery white metal down 37 percent in the past year due to mounting supply, according to data from Benchmark Minerals Intelligence.

Chile, home to SQM and top competitor Albemarle , saw the value of its lithium exports plunge 38.5% in the first quarter of 2020, according to Customs trade data, consistent with the global downturn in prices.

Indigenous leaders in the Atacama region where both companies operate have asked SQM and Albemarle to shut down their operations to stave off spread of the virus. Several villages near the salt flat have closed their communities to outsiders.

But Albemarle and SQM say they have taken the necessary precautions to limit the spread of the virus. Both report minimal impact on production.

"Until now, our operations have no seen any material impact related to the coronavirus outbreak," Salas said in the letter to shareholders on Thursday. (Reporting by Dave Sherwood; Editing by David Gregorio)

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