Chilean lithium miner SQM secures supply agreement with Hyundai and Kia

On Monday, SQM, a Chilean lithium mining company renowned as the world's second-largest producer of lithium, announced that it had successfully negotiated and entered into a long-term supply agreement with the Korean automotive manufacturers Hyundai and Kia. This agreement pertains to the provision of lithium, a crucial element in the production of batteries for electric vehicles.

According to the statement released by SQM, the agreement stipulates that Hyundai and Kia will "secure a portion of (their) future lithium hydroxide supply from SQM." It's worth noting that this is not the first such agreement for SQM, as the company has previously established supply arrangements with other major players in the automotive and battery industries, including Ford Motors and the battery manufacturer LG Energy.

While SQM's announcement did not disclose the financial specifics of the deal with the Korean automakers, the company did express that there was a "strong motivation to continue with (its) lithium hydroxide expansion plan." This statement suggests that the agreement may have significant implications for SQM's future production strategies and capacity expansion plans.

Currently, SQM's production capacity for lithium hydroxide in Chile stands at 40,000 metric tons per year, as reported in their first-quarter results. Lithium hydroxide, it should be noted, is produced from lithium carbonate. Looking ahead, SQM has ambitious plans to substantially increase its output in Chile. The company is aiming to boost its production to 100,000 tons by the year 2025, representing a significant expansion of its current capacity.

SQM's growth plans are not limited to Chile, however. The company is also actively working on expanding its production capabilities in both China and Australia. This global expansion strategy underscores SQM's commitment to meeting the growing worldwide demand for lithium, driven largely by the rapid expansion of the electric vehicle market.

In a separate but related development, SQM recently took a significant step to secure its long-term production capabilities in Chile. At the end of May, the company signed an agreement with Codelco, the Chilean state-run mining company. This agreement establishes a joint venture between the two entities, which will enable SQM to increase its output at the Salar de Atacama through the year 2060. The Salar de Atacama is widely recognised as one of the world's most valuable regions for lithium extraction, making this agreement particularly significant for SQM's prospects.

This series of developments - the supply agreement with Hyundai and Kia, the planned expansion of production capacity, and the joint venture with Codelco - collectively paint a picture of SQM's strategic positioning in the global lithium market. As the demand for electric vehicles continues to grow, driven by environmental concerns and advancing technology, the importance of securing stable lithium supplies has become a critical consideration for automakers worldwide. SQM's actions suggest that the company is actively working to capitalise on this trend and strengthen its position as a key player in the global lithium supply chain.