SQM, the Chilean lithium giant, missed Q1 earnings and sales estimates late Wednesday, but confirmed an inflection point for lithium pricing and demand. SQM, which has lagged other lithium stocks amid uncertainty over Chile's partial privatization, fell in early Thursday stock market action.
But other opportunities are popping up as lithium prices stage a rebound after a five-month dive. The possibility of more M&A activity after Livent's merger with Allkem last week also is contributing to a positive backdrop.
LTHM stock, Sigma Lithium and Lithium Americas are near buy points.
SQM Earnings
The Chilean lithium and fertilizer supplier posted a first-quarter profit of $2.63, down 6% from a year ago. Analysts had expected EPS to rise 8% to $3.01. Sales also missed, rising 12% from a year ago to $2.26 billion, below estimates of $2.46 billion.
SQM attributed the weaker-than-expected results to weaker demand, mostly in China, amid a decrease in EV subsidies and high inventory levels across the battery supply chain. Lithium sales volumes fell 15% from a year ago, offsetting significantly higher average sales prices.
"Based on the recent increase in customer activity, we believe that the destocking period has concluded and anticipate our sales volumes to recover in the upcoming quarters," CEO Ricardo Ramos said in the earnings statement.
SQM's license to extract lithium from brines in the Salar de Atacama region of Chile runs through 2030, while Albemarle's mining rights extend to 2043. The impact of pending regulation is far from clear, since President Gabriel Boric will need the cooperation of the opposition-led legislature to partially privatize the lithium industry.
Both Albemarle and SQM have expressed optimism that they will be able to reach agreements with Chile to further expand output while adopting methods that use less water.
Lithium Price Continues Bounce
After tumbling 70% from November through April, the spot price of lithium carbonate in China has begun to recover. The rally over the past three weeks has retraced about one-tenth of that decline. After peaking around $85,500 per metric ton, then bottoming near $23,700, lithium carbonate has recovered to $32,500.
In a research note upgrading Albemarle to overweight, KeyBanc analyst Aleksey Yefremov wrote that lithium inventories at Chinese battery and EV suppliers were close to bottoming out and large purchase orders could resume soon.
Lithium Stock M&A
Last week, Philadelphia-based Livent and Allkem, based in Argentina, announced a merger, creating a $10.6-billion lithium company. That's still well below valuations of SQM ($20.8 billion) and Albemarle ($24.2 billion).
Still, Livent-Allkem expects to benefit from greater scale and $125 million in annual synergies tied to proximity of operations in Argentina and Canada. They also expect $200 million in one-time savings.
The Livent-Allkem deal's merger-of-equals structure precluded any notable premium. However, Albemarle's spurned $3.7-billion offer in March to buy Australia-based Liontown Resources packed a 60% premium based on the more junior miner's share price.
Sigma Lithium, which just began production in Brazil, has also been the subject of merger speculation, with Tesla among the rumored suitors. Nothing has come of that so far.
Lithium Stocks: SQM, ALB, LTHM, SGML, LAC
SQM stock slipped 3.6% to 70.01 in early Thursday stock market action, after losing 1.2% on Wednesday. SQM is still trying to recover from its 18.6% sell-off on April 21 on Chile nationalization news. The recent rally attempt has paused at SQM's 50-day moving average, about 37% below its record high.
ALB stock rose 1.1% to 207.99, edging past its 50-day moving average. However, ALB stock is too far below its 200-day line to get constructive here.
LTHM is worth keeping on your radar. LTHM rose 1.8% to 25.34. Currently, LTHM stock appears to have put in a bottom and is now in the fourth day of etching out a handle. After one more day, LTHM stock may have a 26.10 buy point. The buy point would largely coincide with the 200-day line.
SGML stock rose 4.9% to 42.40, now out of a buy zone, according to MarketSmith. The buy zone runs from 40.03 through 42.03.
LAC stock rose 3.65% to 23, still some distance from the 200-day line. On Tuesday, Lithium Americas said it's on track to begin production at its Thacker Pass, Nev., lithium mine in the second half of 2026. It also announced board approval of a plan to separate its North American and Argentine operations into two separate companies.
LAC stock could be headed for an early entry opportunity, if it can decisively move past its 200-day line while breaking the trend line of lower highs dating back to April 2022.
