SQM's Lithium Engine Revs, but the Real Story Is in the Brine
Record lithium volumes and a big-ticket Salar Futuro filing mask an iodine market that's finally getting new supply — and a Chile asset that's quietly becoming a tolling machine.
SQM · Earnings Call · 2026-08-19
Record Volumes, Lower Costs, and a Future That's Already Here
SQM's second-quarter print was a story of Salar Futuro finally moving from PowerPoint to permitting. On the call, CEO Ricardo Ramos confirmed the July filing of environmental and technical documentation for the project, a critical milestone that had been pushed out repeatedly over the past year. He framed it as a generational shift:
Salar Futuro represents the next stage in the transformation of our operations in the Salar de Atacama… approximately $3 billion of investment over 7 years.
Underneath that headline, though, the lithium business was quietly hitting records. Volumes reached 84,000+ metric tons LCE in Q2, and management guided to Q3 volumes in line with Q2, with prices roughly flat. Carlos Diaz offered a reassuring note on costs: “we have been working hard in the last year and continuous efficiency and improvement process… in the Q3, we expect a similar cost that we already got in Q2.” — Carlos Diaz Ortiz, Executive (likely CFO or Operations) · 2026-08-19 That's a step-down from the highs of the prior year, and it's not just scale — it's the tolling strategy.
The real quiet revolution is in China. SQM has been expanding lithium sulfate production aggressively, and now expects to produce 80,000–90,000 tons of LCE via sulfate by next year, with a large chunk coming from Mount Holland's tolling partners. When an analyst asked about the durability of these tolling contracts, Diaz was confident: “we're very happy with the contract that we have, and we expect to continue working with those in the coming year.” — Carlos Diaz Ortiz, Executive (likely CFO or Operations) · 2026-08-19 This tolling model flips the narrative from a pure Salar de Atacama producer to a more agile global lithium merchant.
Iodine: The Crown Jewel Is Finally Getting Competition
Iodine has been SQM's profit engine for years, with prices holding up despite occasional supply scares. But this quarter's commentary hinted at a shift. Pablo Altimiras acknowledged that new supply is finally coming, mostly from a Chilean project: “we believe that the main supply could arrive from projects here in Chile… we expect that they will provide more product.” — Pablo Altimiras, Executive (likely in supply or commercial) · 2026-08-19 That's a subtle but important change from prior quarters, when the company repeatedly noted that capacity delays kept the market tight. The guidance for 2026 iodine volumes is roughly flat year-over-year, which implies SQM is ceding some share to the new entrant rather than defending every ton.
On the lithium demand side, SQM raised its 2026 global demand forecast to over 2.1 million tons. Pablo Hernandez explained the incremental demand is coming from energy storage: “there is some gap there that we are monitoring… most of that gap is related to some larger projects being implemented.” — Pablo Hernandez, Executive (market analyst or strategy) · 2026-08-19 He also flagged potential inventory build in BESS, which could cap demand growth over the next 12–18 months—a cautionary note amid the optimism.
What's Changed, What's Not
The market has been focused on lithium prices, and SQM's shares have been volatile, but the company's fundamental positioning has improved. Mount Holland's concentrator is now doubling capacity, with first product from the expansion expected by 2030. Mark Fones stressed the derisking approach: “we are building the [structure] to achieve derisked rather than rushed projects.” — Mark Fones, Executive (project management or operations) · 2026-08-19 Those comments echo the cautious tone from the prior quarter when the company said the expansion would be decided "periodically" — now it's a committed investment.
The prior calls also reveal that the tolling story isn't new — it was part of the 2025 plan — but the magnitude is. In March 2026, Felipe Smith indicated a 15% sales volume increase in Q1, and the focus was on maximizing volumes. Now, the company is deliberately shifting more volume to sulfate and tolling, a strategic choice that trades some margin for flexibility and lower capital intensity.
Meanwhile, the Novandino Litio partnership with Codelco is becoming more tangible. The environmental filing for Salar Futuro is the clearest sign yet that the JV is moving beyond paper. But the real near-term driver is the Chinese sulfate business—the tolling expansion that lets SQM grow without building a new plant in Chile.
The Bottom Line
SQM's second quarter was a tale of two businesses: lithium is scaling fast with costs falling, while iodine is finally facing supply headwinds that could compress margins. The company's ability to maintain lithium profitability at current index prices—while waiting for Salar Futuro to come online—rests on its cost base and the tolling model. If iodine prices soften, the earnings mix will become even more lithium-dependent, making the 2026 demand story—and the BESS inventory concern—all the more critical.
The market hasn't fully repriced the stock for the scale of the lithium volume ramp or the iodine supply shift. Investors should watch whether the Q3 price realization gap between Chile and Australia narrows, and whether management delivers on its promise to update production capacity for 2027 in the next call.