By Micah Maidenberg

Demand for lithium products roared back as 2020 closed out, according to Pablo Altimiras, senior vice president of sales for lithium and iodine at Sociedad Quimica y Minera de Chile SA, or SQM for short.

The industry's recovery "was really impressive in the last quarter of the year" following the pandemic driven economic pause earlier in 2020, Altimiras said. The company's lithium-related revenue jumped 37% in the fourth quarter to about $137 million, as volumes more than doubled to almost 26,000 metric tons and average prices stabilized, indicating to SQM a potential price bottom after a yearslong supply glut.

While the Chilean company operates businesses producing iodine, potassium, industrial chemicals and other products, it is SQM's lithium unit that many investors have focused on of late. That is because lithium products, including a carbonate material and a hydroxide, are used in the batteries that power electric vehicles. EVs--cars, trucks, delivery vans and more--are forecast to grow in the years ahead as countries look to reduce carbon-dioxide emissions, manufacturers focus their fleets on such vehicles and costs for consumers fall.

In March, SQM said it expects demand for lithium to rise to 900,000 to one million metric tons by 2025 from 330,000 metric tons last year, a forecast that is similar to those from competitors like Albemarle Corp. Anticipating the growth, SQM shareholders recently approved a capital increase of $1.1 billion to help pay for lithium developments, including the Mt. Holland project in Australia, where SQM and a partner plan to develop 50,000 metric tons of battery-grade lithium hydroxide capacity to start.

"The demand is coming," Mr. Altimiras said.

Dow Jones Newswires recently caught up with Mr. Altimiras to discuss the lithium market. The following interview has been condensed and edited for clarity.

Dow Jones: The company said it believed prices for lithium products in the fourth quarter may have reached a bottom. What changed at the end of last year?

Pablo Altimiras: Last year was maybe the most important crisis in the last many, many years ... [but] lithium demand grows like 6% compared to 2019. It still grew, which was amazing, in spite of everything. In the first two quarters, the demand for lithium decreased, and decreased a lot. So the recovery in the last quarter was amazing. What was the driving force there? Electric vehicles.

DJ: How would you describe the marketplace for lithium in the first quarter?

PA: We believe that in general terms, this trend is there as well in the first quarter. So we still see a lot of activity, a lot of orders.

DJ: Do you also expect to have some pricing power in 2021 for lithium?

PA: It's difficult to say. Our guess is that prices will be, of course, better than last year, for sure, we believe that ... We are seeing that in the spot price. And this is also because we have some delays in the supply. When you decide to close a plant, it's not so easy to just say, okay, let's go now, we will start producing. You need to set a lot of things before coming back to production again. However, because of the experience of the past, we still believe it's a question mark ... what will finally be, you know, the price level? Right now it's a matter of how fast can we add supply and specifically, Chinese supply.

DJ: SQM has said it believes demand for lithium may reach 900,000 metric tons to one million metric tons by 2025. How much that demand is expected to be driven by the electric vehicle market?

PA: Today, we know that more than 50% of the lithium demand is already explained by EV batteries. That means when you are in the case of 2025, it will be ... 70%, 75% for sure. And again, that's why we're so positive. We increased our forecast for this to [900,000 to one million tons from 800,000 tons] because for us it was really important what happened last year.

DJ: What are you hearing from customers that are tied to electric vehicles and electric-vehicle batteries? Are the big auto makers focused on the lithium-production supply chain?

PA: I would say you have different cases. I would say that some of them already realize that if they really want to move forward with the plans that they have, they need to secure lithium as soon as possible. Others are still, you know, wondering what they should do regarding lithium access.

DJ: Do you think that the industry will be able to supply the demand that SQM has forecast, of up to one million tons by 2025, or do you foresee a shortage?

PA: I would say between now and 2025, I tend to think the supply will be there because at the end, you see the big players are working hard ... I think we are investing a lot of resources to be there. Of course that is not enough. But I think the demand will be there. I am optimistic about prices. After that period, it's a real question mark. When you reach 1 million [metric tons] of demand, and again, if you use this 20% growth, or 25% ... that means next you will need 200,000 metric tons. And this is totally different.

DJ: Given the new supply projects underway and potentially starting, how does SQM distinguish itself in a marketplace that likely will have more options and suppliers that are also responding to the demand trend?

PA: We really would like to see more projects working and offering lithium products to different customers because we really believe when you have an industry that has a lot of issues to get the product [needed], at the end, it's not a very sustainable industry ... Having said that, it's very important to be a low-cost producer. It's one thing to think of the long-term trend, and long-term prices, but in this kind of industry you have ups and down. You need to be prepared to capture the value in the good moments but also to survive in the bad moments ... In this kind of industry, scale is [also] important. In our case, some years ago, we had a capacity of 45,000 metric tons per year. Right now, we are working to reach, by the end of this year, 120,000 and in 2023, 180,000. We have the natural resources to support that expansion. That means we will not depend on others to secure the raw materials to produce the lithium chemicals.

MM: Why is sustainability a focus for SQM at this point in time? Is it because of investor pressure? Is it because of customer pressure?

PA: We have been working in that regard for many, many years. However, today, I think that we have more pressure for sure because ... the profile of the customers we have relationships with today is different. That is very important, because maybe for OEMs today--the main mission of the OEM with electric vehicles is to reduce CO2 emissions. That's what they're looking for. But also, they're a b-to-c business ... In the past we used to have b-to-b relationships with the cathode producers ... We are [working] to communicate better what we are doing but also ... to get more certifications from third parties to allow us to prove that we are doing things in a good way. We are really convinced in the future, and in the near future, companies that buyers of lithium will be even willing to pay maybe more for lithium that is more sustainable.

Write to Micah Maidenberg at micah.maidenberg@wsj.com

(END) Dow Jones Newswires

04-15-21 1346ET