How have SQM’s operations in Chile developed over the last years?
Despite the pandemic and its challenges, we were able to continue production at all of our plants at a cost equal to or lower than we had budgeted before the pandemic started. However, our operations’ logistics and administrative day to day operations were impacted. As a result of the outbreak, we had to implement a series of protocols to ensure the safety of our workers, contractors and local communities.
During all of this, we have been working on expanding our lithium production capacity while implementing our very ambitious sustainability plan.
Can you elaborate on the sustainability plan phases and how it will decrease SQM’s environmental impact?
The plan focuses on four initiatives. We plan to reduce our continental water consumption, as we operate in the driest place on earth, so water scarcity is pivotal to the region. Our goal is to reduce our consumption by 40% by 2030 and 65% by 2040. One of the most relevant initiatives we are working on to achieve this is developing a seawater pipeline.
Even though SQM is the lithium player with the lowest carbon footprint, the second initiative addresses carbon emissions. We are aiming for carbon neutrality in our production of lithium, iodine and potassium chloride by 2030 and for all our products by 2040. Thirdly, SQM will reduce brine extraction by 50% by 2030 in the Salar de Atacama, which will be a challenge as we plan to quadruple our lithium production. Our production of lithium was 48,000 mt/y, which we expect to increase to 180,000 mt/y within the next two to three years. Finally, the last initiative includes developing our relationship with surrounding communities by ensuring an ongoing dialogue with them.
What investments is SQM making to increase its production capacity of lithium carbonate and lithium hydroxide?
We are investing approximately US$400 million to expand our production capacity of lithium carbonate in Chile, which currently stands at 70,000 mt/y, to 120,000 mt/y by the end of 2021. By 2023, we will expand production in Chile to 180,000 mt/y. On the other hand, lithium hydroxide production will increase from 13,500 mt/y to 30,000 mt/y by 2023.
Do you see challenges for Chile as a lithium mining destination amid the regulatory uncertainty surrounding the metal?
Chile has a strong mining history. The regulatory framework has always been clear, and that is why so many companies have invested so much over the past several decades to develop the mining industry. On our end, we are making considerable investments in developing not just our lithium operations but also our iodine and nitrates operations in Chile. Rules are enforced, as they should be, to make sure mining activities have minimal to no impact on the environment and local communities. We have a great partnership with CORFO to operate the Salar de Atacama in the most sustainable and efficient manner, and we are working very hard to make this partnership stronger and more beneficial to CORFO, the local communities, the country and our shareholders.
What are some of the critical drivers of the lithium market globally?
In the recent past, the main drivers for the demand growth were traditional applications, such as aluminium alloys, ceramics, lubricants and many others, along with batteries for portable electronic devices and some for electric vehicles (EVs). These days, demand for EVs has grown tremendously as most automakers are switching to this new technology, resulting in more alternatives for end-users, with better performance and at a lower cost, all while taking care of the environment. We see demand growing at a high pace over the following years, resulting in a threefold increase in lithium demand before doubling again in the next five years.
Where does SQM see the highest growth potential?
The obvious answer to this question is lithium, as the market is growing at a very high pace, based on solid fundamentals, and this high growth is expected to continue for many years in the future. But the potassium nitrate business is expected to continue growing at a healthy 5% per year, and SQM is very well positioned to capture part of this growth. The iodine business, on the other hand, continues to be a very attractive business as we are the lowest-cost producer in an attractive market. Finally, the solar salts industry has a huge potential as the world transitions towards greener ways to produce and store energy.