SECTOR OVERVIEW

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Lithium / Specialty Chemicals / Mining

Company Focus: SQM (Sociedad Quimica y Minera de Chile S.A.)

Geographic Focus: Chile (Salar de Atacama) | Global Lithium Market

March 2026

Agentic Finance Chile

1. Executive Summary

The global lithium market is experiencing a structural transformation driven by electrification of transport and energy storage. The lithium-ion battery market reached USD ~135 billion in 2025 and is projected to grow at a 22-23% CAGR through 2035, reaching ~USD 888 billion. Global lithium demand is forecast at 1.8 million tonnes LCE in 2025, doubling to 3.7 million tonnes by 2030 (Albemarle estimates), with some forecasts reaching 4.6 million tonnes LCE by 2030.

SQM (Sociedad Quimica y Minera de Chile) is the world's largest lithium producer by market capitalization (~USD 10.5 billion as of March 2025), operating from the Salar de Atacama — the world's highest-grade lithium brine deposit. The company generated USD 4,576 million in revenues in FY2025, with lithium (50% of revenue, 45% of gross profit) and iodine (23% of revenue, 42% of gross profit) as dual pillars.

The sector faces a pivotal regulatory inflection: Chile's National Lithium Strategy mandates state participation via the Codelco-SQM joint venture (NovaAndino Litio SpA), restructuring the industry through 2060. Lithium carbonate prices have rebounded from 2024 lows, trading at ~USD 17,000-22,000/tonne in early 2026, with the surplus narrowing from 141,000 mt LCE in 2025 to an expected 109,000 mt in 2026.

2. Market Sizing: TAM / SAM / SOM

2.1 Total Addressable Market (TAM)

The TAM encompasses the global lithium market across all end-use applications — electric vehicles (EVs), battery energy storage systems (BESS), consumer electronics, industrial applications, and emerging uses (eVTOL, robotics).

• Global lithium-ion battery market: USD 135B (2025) growing to USD 888B by 2035 (CAGR ~23%)
• Global lithium demand: 1.8M tonnes LCE (2025E), projected 3.7M-4.6M tonnes by 2030
• EVs represent ~75% of battery demand; BESS is the fastest-growing segment (+51% YoY in 2025)
• EV battery materials market alone projected at USD 38B+ by 2030

2.2 Serviceable Addressable Market (SAM)

The SAM focuses on lithium carbonate and lithium hydroxide production from brine-based operations (SQM's core technology), plus SQM's specialty chemicals portfolio (iodine, SPN, potassium, industrial chemicals).

• Lithium carbonate market (brine-sourced): ~40-45% of global lithium supply comes from South American brines
• Chile lithium production: 305,000 tonnes LCE in 2025 (Cochilco), second globally after Australia
• Global iodine market: SQM is a leading producer, contributing to USD 1,043M in iodine revenue (FY2025)
• Specialty plant nutrition (SPN): USD 942M revenue (FY2024), primarily potassium nitrate and sodium nitrate

2.3 Serviceable Obtainable Market (SOM)

SQM's realistically capturable market based on current capacity, competitive position, and regulatory constraints:

• Lithium: SQM targets 240,000 mt Li2CO3 + 100,000 mt LiOH capacity by end-2026, representing ~13-15% of global supply
• Iodine: Global market leader with ~30% market share, pricing power demonstrated by record margins
• SPN: Leading position in specialty potassium and sodium nitrate for high-value agriculture
• Total SOM revenue potential: USD 5,000-6,000M annually at mid-cycle pricing

3. Growth Drivers

3.1 EV Adoption Acceleration

Global EV sales reached 20.7 million units in 2025 (up from 17.8M in 2024), with projections exceeding 25 million units in 2026 and 50 million by 2030. China continues to lead with >10M EV sales annually, while Europe and North America follow with accelerating adoption curves. Each EV requires approximately 8-12 kg of lithium carbonate equivalent, creating a direct linear relationship between EV volumes and lithium demand.

3.2 Battery Energy Storage Systems (BESS)

BESS is the fastest-growing demand segment, recording a 51% year-on-year increase in 2025. China's BESS installations are expected to maintain 40-60% growth in 2026. Grid-scale storage is increasingly critical for integrating intermittent renewable energy, creating a structural demand floor independent of EV cycles. BESS now represents ~20-25% of battery demand, up from ~15% two years ago.

3.3 Supply Discipline and Price Recovery

After lithium prices crashed from ~USD 80,000/t peaks in late 2022 to lows of ~USD 8,000/t in mid-2025, the market is rebalancing. Multiple projects were postponed or cancelled in 2024-2025 due to sub-economic prices, reducing future supply growth. The surplus is narrowing from 141,000 mt LCE (2025) to 109,000 mt (2026E), supporting price recovery to the USD 15,000-22,000/t range.

3.4 Chilean Regulatory Framework — Codelco-SQM JV

The formation of NovaAndino Litio SpA (Codelco-SQM joint venture) provides regulatory clarity through 2060. Key terms:

• 2025-2030: SQM leads operations; targets 300,000 mt additional LCE production in the period
• 2031-2060: Codelco takes 50%+1 share control; production targets 280,000-300,000 mt/year LCE
• SQM authorized to expand production immediately under existing Corfo lease

Risk: Tianqi Lithium (SQM's second-largest shareholder) has filed legal challenges to the deal, arguing lack of transparency and shareholder vote. Chile's presidential transition in early 2026 adds political uncertainty.

3.5 Iodine Structural Demand

SQM's iodine business delivered USD 1,043M in revenue and ~42% of gross profit in FY2025 at record pricing. Iodine demand is driven by X-ray contrast media, LCD polarizing films, biocides, and pharmaceutical applications — defensible end markets with limited substitution risk. SQM's position as the global #1 producer (extracting iodine as a byproduct of lithium brine processing in the Atacama) provides a structural cost advantage.

4. Competitive Landscape

4.1 Global Lithium Producers — Market Position

4.2 Competitive Advantages — SQM

• Lowest-cost production: Salar de Atacama has the world's highest lithium brine concentration (~1,800 ppm Li), enabling cash costs of ~USD 4,000-5,000/t LCE
• Dual-product extraction: Co-produces lithium + iodine + potassium from same brine, maximizing resource value per hectare
• Scale: Expanding to 340K mt combined Li2CO3 + LiOH capacity by 2026, largest single-site operation globally
• Diversification: Non-lithium segments (iodine, SPN, potassium) provide earnings stability through lithium price cycles
• Long-dated resource access: Codelco-SQM JV secures Atacama operations through 2060

4.3 Supply by Country

Note: Argentina is poised to nearly double production between 2025-2027 under favorable regulatory conditions (Milei government), potentially shifting competitive dynamics.

5. Regulatory Environment

5.1 Chile — National Lithium Strategy

President Boric announced the National Lithium Strategy (NLS) in April 2023, declaring lithium a strategic resource requiring state participation in all new projects. Key elements:

• All new lithium projects require state partnership (Codelco or other state entity)
• Existing concessions (SQM, Albemarle) negotiate transition partnerships
• Environmental protection of salares elevated to constitutional level
• Technology transfer and local value-added manufacturing incentivized

5.2 Codelco-SQM Joint Venture: NovaAndino Litio SpA

The landmark agreement (signed December 27, 2023) restructures Chile's largest lithium operation:

• Phase 1 (2025-2030): SQM leads operations. Target: 300,000 mt additional LCE production.
• Phase 2 (2031-2060): Codelco takes 50%+1 control. Target: 280,000-300,000 mt/year LCE.
• SQM retains operational expertise and technology; Codelco provides sovereign legitimacy and environmental oversight.
• Pending risk: Tianqi Lithium legal challenge (shareholder vote argument); Chilean presidential transition early 2026.

5.3 Argentina — Pro-Investment Framework

Under President Milei, Argentina has adopted an aggressively pro-mining stance with a new 10-year lithium plan. Provincial-level permitting (not federal) enables faster project approvals. Argentina's lithium triangle (Jujuy, Salta, Catamarca) hosts massive resources (23M tonnes — largest globally). This poses a medium-term competitive risk to Chilean producers as Argentine supply ramps.

5.4 Other Regulatory Considerations

• EU Battery Regulation: Requires supply chain due diligence, carbon footprint declarations, and minimum recycled content — favoring established producers with ESG credentials
• US Inflation Reduction Act (IRA): Tax credits for EVs using lithium from FTA countries (Chile qualifies, China does not) — structural advantage for SQM
• China: Dominant in midstream processing (>65% of lithium refining); geopolitical risk if supply chains diversify

6. Sector KPIs and Monitoring Framework

7. Investment Implications

7.1 Bull Case

• Lithium prices continue recovery toward USD 25,000-30,000/t as surplus shrinks and demand accelerates
• SQM production expansion to 340K mt capacity delivers volume growth + operating leverage
• Iodine prices remain elevated, providing >40% of gross profit as a defensive anchor
• Codelco-SQM JV resolves smoothly, removing sovereign risk overhang and unlocking long-dated resource value (2060)
• IRA benefits increase as US/EU auto OEMs prioritize FTA-sourced lithium

7.2 Bear Case

• Lithium oversupply persists (Argentine ramp, Chinese lepidolite expansion) — prices stagnate below USD 15,000/t
• Tianqi lawsuit delays or disrupts Codelco-SQM JV, creating operational uncertainty
• New Chilean government (post-2026 transition) adopts more aggressive nationalization stance
• Technology risk: Sodium-ion batteries gain share in BESS/low-cost EVs, reducing lithium demand growth
• Direct lithium extraction (DLE) technology enables competitors to unlock previously uneconomic resources

7.3 Key Catalysts to Monitor

• Codelco-SQM JV final regulatory approvals (expected H1 2026)
• Tianqi Lithium court ruling on JV challenge
• Chile presidential election outcome and policy continuity
• Lithium carbonate price trajectory — breakout above USD 25,000/t would signal tightening
• SQM capacity expansion milestones (LiOH plant commissioning)
• Argentine project commissioning timelines (Arcadium, Ganfeng, Eramet)

8. SQM Business Segment Overview

Disclaimer

This sector overview is prepared for informational and educational purposes only. It does not constitute investment advice, a recommendation, or an offer to buy or sell any security. All data is sourced from publicly available information including company filings, government agencies (USGS, Cochilco), and reputable industry research providers. Forward-looking statements are based on current expectations and are subject to risks and uncertainties. Past performance is not indicative of future results.

Sources: Benchmark Mineral Intelligence, S&P Global, Albemarle forecasts, SQM IR filings (FY2025 earnings release), Cochilco, USGS Mineral Commodity Summaries 2025, Goldman Sachs research, Investing News Network, IEA Global EV Outlook.

Prepared by Agentic Finance Chile | March 2026