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Operator: Good day, and thank you for standing by. Welcome to the SQM Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Megan Suitor, Investor Relations team. Please go ahead.
Megan Suitor: Good day, and thank you for joining SQM's earnings conference call for the third quarter of 2025. This call is being recorded and webcast live. Our earnings press release and accompanying results presentation are available on our website, along with a link to the webcast. Today's participants include Mr. Ricardo Ramos, Chief Executive Officer; Mr. Gerardo Illanes, Chief Financial Officer; Mr. Carlos Diaz, CEO of the Lithium Chile division; Mr. Pablo Altimiras, CEO of the Iodine and Plant Nutrition division; and Mr. Mark Fones, CEO of the International Lithium Division. Also joining us today are members of our commercial and business intelligence teams. Mr. Felipe Smith, Commercial Vice President of the Lithium Chile division; Mr. Pablo Hernandez, Vice President of Strategy and Development of the Lithium Chile division; Mr. Juan Pablo Bellolio, Commercial Vice President, Plant Nutrition and Specialty Products; and Mr. Andres Fontannaz, Commercial Vice President of International Lithium Division. Before we begin, please note that statements made during this call regarding our business outlook, future economic performance, anticipated profitability, revenues, expenses and other financial items, along with expected cost synergies and product and service line growth are considered forward-looking statements under U.S. federal securities laws. These statements are not historical facts and are subject to risks and uncertainties that could cause actual results to differ materially. We assume no obligation to update these statements, except as required by law. For a full discussion of forward-looking statements, please refer to our earnings press release and presentation. With that, I will now turn the call over to our Chief Executive Officer, Mr. Ricardo Ramos.
Ricardo Ramos: Thank you. Good morning, everyone, and thank you for joining us today. 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. Demand fundamentals remain strong, not only for electric vehicles, but also from energy storage systems, which already account for more than 20% of global lithium demand. Operationally, the quarter was very strong. We delivered the highest lithium sales volumes in SQM history, supported by low cost and strong efficiencies at our Atacama operations. Our Australian operation also continued to progress as planned. Spodumene sales increased significantly. We initiated lithium hydroxide production, and we reached record sales volumes of spodumene concentrate, an important milestone from this project. We expect commercial activity to remain robust in the fourth quarter. Outside the Lithium segment, performance was also solid. In Iodine and Plant Nutrition, results remained strong. Iodine prices continue at high levels with a balanced supply-demand environment. Construction of our seawater pipeline is now more than 80% complete, giving us the ability to bring additional iodine to the market earlier than expected, if required. We are also expanding our iodine production capacity through the development of a third operation in Maria Elena, which will add 1,500 tons of iodine capacity. This further strength our long-term supply position and reinforces our reputation as a reliable supplier. In fertilizer, we continue to see healthy demand and stable price across most key markets. Our Specialty Plant Nutrition business delivered discrete but sustainable growth compared with last year, both in volumes and revenues. The shift toward tailor-made solutions and higher value blends continues to improve our product mix and supports our strategy of allocating products to the most attractive markets. In iodine, revenues increased 5% year-on-year with prices averaging close to $73 per kilogram. The x-ray contrast media segment, the largest end-use application continues to grow steadily and remains a key driver of long-term demand. We also complete a detailed review of our CapEx program for the period 2025, 2027. Total CapEx is now estimated at $2.7 billion over the 3-year period. Our plan maintains a focus on increasing production capacity, preserving low cost, ensuring high product quality and upholding strong sustainability standards. While some investment decisions have been delayed, this does not affect our ability to meet the production and sales objectives set for each of our divisions. Finally, as announced last week by SQM and Codelco, we received approval from China's antitrust authority. We look forward to advancing this joint venture before the end of the year. Thank you.
Operator: [Operator Instructions] Our first question comes from the line of Joel Jackson from BMO Capital Markets.
Joel Jackson: I'll ask my questions one by one. Can you talk about what you're seeing right now in lithium demand? Particularly, I wanted to maybe investigate, it seems like inside China, the demand forecast for lithium are a lot higher, like for forecast, they're coming from Chinese forecasters as opposed people outside China in the Western world seem to have lower demand forecast. Do you see this disconnect? Is it around energy storage in China? Can you talk about that?
Pablo Hernandez: Joe, Pablo Hernandez here. So regarding 2025 demand expectations, we have recently improved since our last earnings call, so driven by stronger-than-expected EV sales, particularly in Europe and the sharp increase that you mentioned in BSS shipments. So we expect demand to reach over 1.5 million metric tons this year, representing an over 25% growth. In terms of China, it continues to maintain a significant lead in the EV market. We expected 30% year-on-year growth, representing more than 60% of the global EV sales. And regarding the other significant EV markets, Europe this year had a very strong first 3 quarters with more than 30% year-over-year growth. On the U.S., they still had a slower growth of 10% year-over-year, while the rest of the world, of course, had strong numbers reaching 40% year-over-year growth.
Joel Jackson: Okay. You, on your last quarter talked about Chilean production for lithium to be up about 10% for you, and then you have about -- excuse me, 20,000 tons for your share at Mt. Holland. Are you still maintaining that 10% year-over-year our at Atacama? And then should we now expect something closer to 24,000, 25,000 tons for the year out of Mt. Holland in spodumene.
Gerardo Illanes: Joe, this is Gerardo. Just to be clear, are you asking about production or sales?
Joel Jackson: Well, you gave guidance last quarter that Atacama production or sales at the [indiscernible] would be up 10% this year, and then you'd have 20,000 tons out of Mt. Holland. In this particular quarter release, you said Q4 volumes would be similar to Q3 at Mt. Holland, which would imply more than 20,000 tons out of Mt. Holland. So I mean, maybe what do you expect out of Atacama? Like what production do you expect in Chile this year? What production do you expect in Australia this year? Let's do like that.
Carlos Diaz Ortiz: Joe, this is Carlos Diaz. Well, our production in Chile is going according to what is schedule. We expect to produce this year close to 230,000 that is lithium coming from the Salar de Atacama. 180,000 of those processed in Chile and 50,000 is going to be processed in China, starting for our lithium sulfate production that we have been very successful with that. We'll continue working with expansion for next year, and we expect to grow next year. We still don't have the final figure, but we continue working to increase the production. That is regarding to the lithium production in Chile.
Mark Fones: Joe, this is Mark Fones. To answer the second part of your question, yes, we maintain our production estimation or forecast for this year, which you may recall it was between 150,000 to 170,000 tons of spodumene concentrate at 5.5%. So that still holds. And regarding the sales projection, which you were referring to of 20,000 tons LCE for this year, that you're also right, we are increasing that to a range between 23,000 and 24,000 tons.
Joel Jackson: Okay. That's perfect. And then my last question would be, when we look at the different average selling price for lithium that you get between Chile and international, it's about a $3,000 to $4,000 a ton discount. Should we think of that as that's the conversion costs that are basically embedded because you have to pay a toller to produce spodumene on an LCE basis? And then would we expect that international price discount versus the Chilean price realized to decrease across 2026 as you ramp up the Kwinana hydroxide conversion plant?
Andres Fontannaz: Joel, this is Andres Fontannaz. Regarding prices for the SQM International Lithium division, please keep in mind that most of our sales are concentrated on spodumene. So more than 90% of our third quarter sales were explained by spodumene. And right now, we are reporting all of our sales as lithium carbonate equivalent. So in order to compare those prices with the prices that we are getting in the Chilean operation, you need to take into consideration the conversion factors and also the refining cost. So that would make a more fair comparison.
Joel Jackson: Right. So my question is then across 2026, as Kwinana ramps up, shouldn't your -- shouldn't the international price rise -- realized price on an LCE basis rise closer to the Chilean price as Kwinana ramps up next year?
Gerardo Illanes: Joel, this is Gerardo. Don't worry, next year or starting from next quarter, we're going to report the numbers from Australia as the product is sold. So if it's spodumene or lithium hydroxide, you will see the breakdown. So you will not have this confusion of prices without the conversion cost or not.
Operator: Our next question comes from the line of Lucas Ferreira from JPMorgan.
Lucas Ferreira: Hope you can hear me well. My first question is just to make sure I understand the part of China production. So are you already running 50,000 tons there? Because I remember the capacity was something around 30,000 tons with potential tolling of another 20,000. So I was wondering if there is more capacity to be used in China next year if the market remains good as it is right now in terms of prices. Is China ready full capacity? And the other question I have is also a follow-up on the JV with Codelco. If, imagine the signing, like Ricardo mentioned now by the end of the year, if there is any sort of a retroactive payment that SQM has to do for the year 2025, given that it took long to sign the contract. So in other words, when you look at the free cash flow of the company, even though you consolidate -- most likely consolidate the full thing, is there any sort of adjustment effect or cash transfers that we should be aware of when the contract is fully signed?
Ricardo Ramos: Lucas, Ricardo speaking here. First, you're right in terms that we have to pay a dividend to Codelco during next year. This dividend will be in relation of the tonnage volume that belongs to Codelco according to the joint venture agreement. And we will put in our accounting this value as soon as we finish the agreement. That -- it has been stated very clearly in our financial statements that we have to do it as soon as we have the agreement with Codelco. And it is reflected, and you can calculate the number because it's quite clear in the agreement with SQM and Codelco that is public agreement.
Carlos Diaz Ortiz: Lucas, Carlos Diaz again. With respect to your first question, our production in China, let me tell you that first that we expect to produce this year like 100,000 metric tons of lithium sulfate. So when you compare to lithium carbonate and hydroxide, you have to divide by 2. So it's equivalent to 50,000 around that. And 20,000 of those is going to be produced in our [indiscernible] plant in China and 30,000 is going to be produced with third parties. So we -- for the next -- for the coming year, we expect to keep increasing the production in lithium sulfate, and we're studying and evaluating to expand our capacity in China in our own plant. That is our plan.
Operator: Our next question comes from the line of Ben Isaacson from Scotiabank.
Lucy Zhou: This is Lucy on for Ben. And I have 3 questions. With the CapEx plan lower and lithium prices start to rise, how should we think about the need to raise capital in 2026? Is it fair to say that the base case scenario is no capital raise?
Gerardo Illanes: Lucy, this is Gerardo. Well, you can see our balance sheet. We have a very strong balance sheet, and we have had always a strong balance sheet. And on these days, even at the current pricing environment, some of our main KPIs are improving. We are deeply committed to maintaining a strong investment grade. And there are several levers we believe can be pulled before pulling the last one, which is raising capital. So we're working on several initiatives. And as long as we keep on having a strong balance sheet, it may not be needed.
Lucy Zhou: And for my second question, earlier this year -- earlier this week, Ganfeng suggested 30% to 40% lithium demand growth next year. Do you have any preliminary thoughts on demand growth next year? And in particular, how do you see demand for ESS developing next year?
Pablo Hernandez: Lucy, Pablo Hernandez here. So regarding Ganfeng, of course, we will need to look into their assumptions. But of course, this looks like a good and optimistic projection for next year. In our case, regarding 2026, we're still assessing demand growth expectations, and we remain relatively conservative with the expectation to reach more than 1.7 million metric tons. And the main driver will continue to be the EVs and of course, as you mentioned, the very strong demand that we've seen on the BSS side.
Lucy Zhou: Perfect. And finally, how much R&M production growth do you expect to see in 2026 that is not from SQM? And is it all Chile based?
Pablo Altimiras: Pablo Altimiras speaking. Well, regarding to the third-party production, I mean, with the public information that we have, we believe that most of that will come from Chile, from caliche ore. And we don't have the exact figure, but our expectation is that, that amount will not surpass the growth of the total demand.
Operator: Our next question comes from the line of Andres Castanos-Mollor from Berenberg.
Andres Castanos-Mollor: Can you please update us on the progress to closing the deal with Codelco and remind us what the milestones are pending? What happens if it doesn't close by 2025? Is there a long stop close there? What will happen?
Ricardo Ramos: Sorry, Ricardo speaking. First is we are -- as we announced, we closed with an agreement with the antitrust authority in China that was the last remaining external authorization we needed. And now everything is under the review, especially the agreements between CORFO and Codelco under the review of Contraloria in Chile. Contraloria is like an internal auditing body of the government that needs to review this kind of contracts. We expect that this review will be positive and will be before the end of the year. There's no second one. We will close this year. That's for sure.
Andres Castanos-Mollor: That's great. Another question, if I may. This would be asking on 2026 expected mix out of Australia. What mix of spodumene and hydroxide do you expect to get out of Australia in 2026? If you could indicate something about this.
Mark Fones: Andres, this is Mark Fones. We have not yet closed our budget for next year on production for Mt. Holland. What I can tell you is that the mine and concentrator at Mt. Holland, we expect to be producing at capacity. So of course, we will be expecting half of Mt. Holland's capacity in terms of spodumene concentrate. What happens with the ramp-up on the refinery on the other hand, is that we've announced the first product this year, as you well know, and we will be ramping up production until almost reaching nameplate capacity by the end of 2026. What's the exact amount of that lithium hydroxide considering all the good work that has been performing covalent with Wesfarmers and SQM at the refinery in addition to all the challenges as any ramp-up in a capital project will happen next year, still remains to be seen, and we will let the market inform in due time.
Operator: Our next question comes from the line of Corinne Blanchard from Deutsche Bank.
Corinne Blanchard: The first question, I would like to get more color on the CapEx reduction. You reduced it by about 22% versus what we had last year. But I think in the press release, you stated that there will not be -- you will not have an impact on any capacity or projects. So I'm not sure how to think about it. So maybe if you can help us understand the reduction of CapEx and for which business or segment division you come to and maybe any projects that have been pushed out of the 2027 range, that would be helpful.
Gerardo Illanes: Corinne, this is Gerardo. Let me give you a breakdown of what we announced. Well, yesterday, we announced that our CapEx program for the years '25, '27 will be somewhere around $2.7 billion. The breakdown, it's going to be somewhere around $1.3 billion for the Lithium Chilean division that basically has -- the main projects that they have is to finish the expansion of lithium hydroxide to reach 100,000 metric tons that should be ready at the beginning of next year. Then the expansion to reach 260,000 metric tons of lithium carbonate capacity in Chile, while we keep on working on initiatives to keep on producing lithium sulfate that is quite relevant, as Carlos was mentioning before. Then for the International Lithium division, the total CapEx that is included within this $2.7 billion is approximately $700 million, which includes approximately $400 million between the expansion of Mt. Holland and the first steps of Azure. Of course, both projects are subject to approval with our partners, but that's what is included in this time frame. And finally, in the Iodine and Plant Nutrition business line, the total CapEx is approximately $800 million. That includes the seawater pipeline that should be ready next year that is going to be critical to give us flexibility to produce more iodine and also the Maria Elena iodine production site that should let us bring additional production or capacity of iodine as of this moment.
Corinne Blanchard: Maybe the second question, coming back to the Codelco agreement. Are you still waiting for the local group to be concerted? And if so, like can you provide an update of where you stand with them?
Ricardo Ramos: No, no, no. Sorry. Regarding the communities, we had the agreement with the communities that was, I think, a couple of months ago. It was publicly released that we had the final agreement in order to move forward. And the only one that has already explained to you is the internal auditing body of the government that is reviewing the agreements between CORFO and Codelco. And after they finish their review and their approval, we will continue with the joint venture start-up.
Operator: Thank you. Our next question comes from the line of Marcio Farid from Goldman Sachs.
Marcio Farid Filho: A quick follow-up from my side, please. You mentioned the demand expectations. I think you mentioned 25% growth to 1.5 million tons. I wasn't sure if that was related to 2025 or 2026 because in the presentation, you mentioned 20% expectations for demand growth for '25. And if you can also detail how you're seeing demand for 2026? And also maybe provide some more details around ESS demand, which has been calling the market potential for the last few weeks would be great. And then I'll have a few follow-ups as well.
Gerardo Illanes: Marcio, this is Gerardo. Give me one second before answering your question. And just to clarify something over the previous answer I gave. I mentioned 260,000 metric tons of lithium production -- lithium carbonate production capacity in Chile, but it refers to 600 -- sorry, 260,000 metric tons of lithium production overall coming from Chile from lithium chlorine or toll in China from lithium sulfate.
Pablo Hernandez: Marcio, this is Pablo Hernandez. So on your question, the information that I previously provided on the 1.5 million metric tons -- over 1.5 million metric tons on the 25% year-over-year growth, that was related to 2025. And as I also mentioned, our expectations for 2026 is that this number is going to be reaching over 1.7 million metric tons. Specifically to BSS, as you well mentioned, and has been mentioned during the call, there's been a strong growth in demand from BSS, which we estimate over -- between 40% and 50% year-over-year growth this year, and we expect those numbers to remain stable for next year as well.
Marcio Farid Filho: That's great. And maybe another follow-up on the Codelco deal. Can you provide us what are the expectations in terms of -- you probably need a revision of your offer license if you go ahead with the plan to produce nearly 260,000 tons overall with Chilean assets. Obviously, in theory, it would be ideal that you defer as much CapEx as possible for when the JV becomes effective in 2030. So I'm just thinking if there is any CapEx related to Salar Futuro that we can expect to be spent before 2030? Or can you defer that to beyond 2030 when the JV becomes effective? That would be great.
Ricardo Ramos: Okay. First, the agreement will go into effect the same day we signed the agreement that is going to happen in the next few weeks. I hope so. And after we signed the agreement, we signed with Codelco, the agreement is starting. We don't need to wait until 2030. But you are right in terms that Salar Futuro is a great, great project, and we are working very hard on it. We expect to submit the environmental study to the authorities and communities during next year. And it's going to be a complex project and probably we will reach the final agreement during 2029, 2030, means that the initial investment in Salar Futuro that is a big project and a very interesting one, will be 2030 or 2031 starting investment. It means that it will not affect the CapEx in the next 3 or 4 years. It will not affect 2026, '27, '28, and we will continue with our today plan of projects in the Salar de Atacama as usual. That's why this project will have a significant impact, yes, and a very positive one starting, I hope, 2030, if not 2031.
Marcio Farid Filho: That's great. And maybe one last one on iodine. Obviously, market has been strong for a couple of years now. I think you're going to be adding about 5,000 tons of capacity once the new pipeline and Maria Elena is ready. So can you talk a little bit about overall supply and demand conditions on iodine, if you expect these prices above $70 per ton or $70 per kilo to remain sustainable? Where are the other areas of supply growth that could put some pressure on prices, if at all, in the next couple of years?
Pablo Altimiras: Pablo Altimiras is speaking. Well, as we have been said before, supply and demand for this year is tight because we -- this year, we are not seeing additional supply. Actually, the demand of this year is not growing because of the lack of supply. We believe that demand for the next year will grow in the range of 3%. And why the demand will grow? Because we see more capacity arriving to the market next year. As I said before, it's coming from caliche ore mainly. So we believe that we'll have more supply next year.
Operator: Our next question comes from the line of Mazahir Mammadli from Rothschild & Company, Redburn.
Mazahir Mammadli: So my first question is, if we assume that lithium hydroxide and spodumene prices stay kind of at the same level as they are today for 2026, would you expect the stand-alone profitability of Kwinana conversion to be positive?
Mark Fones: Mazahir, this is Mark Fones. Yes, as we've said before, we continue to see the long-term profitability of Kwinana and the Mt. Holland project to be positive. And we still see ourselves committed with our partners, and we will continue to develop this project. And that's the reason also we announced that we expect a final investment decision on the expansion for the mining concentrator for somewhere next year.
Mazahir Mammadli: Okay. And maybe a follow-up on the Codelco deal. So the 201 kilotons of lithium that's attributable to Codelco, do I understand that correctly that will be paid as sort of revenue that's attributable to that amount of lithium? Or is it gross profit? Or is it some other metric?
Gerardo Illanes: This is Gerardo. Yes, the amount that is to be paid to Codelco is paid as a function of a certain amount of tonnage per year, which is 33.5 and is paid as a dividend.
Mazahir Mammadli: Yes. I just want to clarify, is it going to be the revenue that's derived from 33.5 kilotons or gross profit that's derived from that amount of lithium?
Gerardo Illanes: It's the profitability that we get from this tonnage, but the exact calculation and the exact way of how you can get to the number, it's describing the contracts that are publicly available on our website.
Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.