Q2 2025 Sociedad Quimica y Minera de Chile SA Earnings Call

Operator: Good day, everyone, and welcome to the SQM Second Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To participate, you will need to press *11 on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, simply press *11 again. Please note this conference is being recorded. Now, it's my pleasure to turn the call over to the Investor Relations Officer, Isabel Bendeck. Please proceed.

Speaker #2: Good day, everyone, and welcome to the SQM second quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session.

Speaker #2: To participate, you will need to press *11 on your telephone. You will then hear a message advising that your hand is raised. To withdraw your question, simply press *11 again.

Speaker #2: Please note this conference is being recorded. Now it's my pleasure to turn the call over to the Investor Relations Officer, Isabel Bendek. Please proceed.

Isabel Bendeck: Thank you, operator. Good day, everyone, and thank you for joining SQM Earnings Conference Call for the second quarter of 2025. This call is being recorded and webcast live. Our earnings press release and results presentation have been uploaded to our website, where you can also find the link to the webcast. Today's participants include Mr. Ricardo Ramos, Chief Executive Officer; Mr. Gerardo Illanes, CFO; Mr. Carlos Diaz, CEO of Lithium Chile Division; Mr. Pablo Altimira, CEO of the Iodine and Plant Nutrition Division; Mr. Mark Ponce, CEO of the International Lithium Division. Also joining us today are members of our Commercial and Business Intelligence team: Mr. Felipe Smith, Commercial Vice President of the Lithium Chile Division; Mr. Pablo Hernandez, Vice President of Strategy and Development of Lithium Chile Division; Mr. Juan Pablo Bellolio, Commercial Vice President of Plant Nutrition and Specialty Products; and Mr.

Speaker #3: Thank you, operator. Good day, everyone, and thank you for joining SQM's earnings conference call for the second quarter of 2025. This call is being recorded and webcast live.

Speaker #3: Our earnings press release and results presentations have been uploaded to our website, where you can also find a link to the webcast. Today's participants include Mr. Ricardo Ramos, Chief Executive Officer; Mr. Gerardo Illanes, Chief Financial Officer; Mr. Carlos Díaz, CEO of the Lithium Chile Division; Mr. Pablo Altimira, CEO of the Iodine and Plant Nutrition Division; and Mr. Mark Fons, CEO of the International Lithium Division.

Speaker #3: Also joining us today are members of our commercial and business intelligence teams: Mr. Felipe Smith, Commercial Vice President of the Lithium Chile Division; Mr. Pablo Hernández, Vice President of Strategy and Development of the Lithium Chile Division; Mr. Juan Pablo Belolio, Commercial Vice President of Plant Nutrition and Specialty Products; and Mr. Max Villal, Head of Studies of the International Lithium Division.

Isabel Bendeck: Max Bial, Head of Studies of the International Lithium Division. Before we begin, please note the statements made during this call regarding our business outlook, future economic performance, anticipated profitability, revenues, expenses, and other financial items, along with expected cost synergies and product or service lines growth, are considered forward-looking statements under the U.S. Federal Securities Law. These statements are not historical facts and are subject to risks and uncertainties that could cause actual results to differ materially. We assume no obligation to update these statements except as required by law. For a full discussion of forward-looking statements, please refer to our earnings press release and presentation. With that said, I will now turn the call over to our Chief Executive Officer, Mr. Ricardo Ramos.

Speaker #3: Before we begin, please note that statements made during this call regarding our business outlook, future economic performance, anticipated profitability, revenues, expenses, and other financial items, along with expected cost synergies and product or service lines growth, are considered forward-looking statements under U.S. Federal Securities Law.

Speaker #3: These statements are not historical facts and are subject to risks and uncertainties that could cause actual results to differ materially. We assume no obligation to update these statements, except as required by law.

Speaker #3: For a full discussion of forward-looking statements, please refer to our earnings press release and presentation. With that said, I will now turn the call over to our Chief Executive Officer, Mr. Ricardo Ramos.

Ricardo Ramos: Good morning, everyone, and thank you for joining us. I would like to take a few minutes to share some highlights and provide a bit of color before we move to your questions. As expected, during the second quarter, we faced lower lithium prices compared to earlier this year, which drove revenues down by more than 30% year-on-year. More recently, we have seen a change in market dynamics, with prices improving in the past few weeks compared to the level observed in May and June. We are seeing strong demand growth coming from EV and battery energy storage, particularly in China, but also Europe has surprised us with a stronger-than-expected demand growth. I am pleased to share some positive news from Australia.

Speaker #4: Good morning, everyone, and thank you for joining us. I would like to take a few minutes to share some highlights and provide a bit of color before we move to your questions.

Speaker #4: As expected, during the second quarter (Q2), we faced lower lithium prices compared to earlier this year. We dropped revenues down by more than 30% year on year.

Speaker #4: More recently, we have seen a change in market dynamics, with prices improving in the past few weeks compared to the levels observed in May and June. We are seeing strong demand growth coming from EV and BES, particularly in China; but also, Europe has surprised us with a stronger-than-expected demand growth.

Speaker #4: I'm pleased to share some positive news from Australia. Despite the expected lower sales volume seen in the second quarter, we are updating our sales guidance for the International Lithium Division to approximately 20,000 metric tons of lithium carbonate equivalent for the full calendar year 2025.

Ricardo Ramos: Despite the expected lower sales volume seen in the second quarter, we are updating our sales guidance for the International Lithium Division to approximately 20,000 metric tons of lithium carbonate equivalent for the full calendar year 2025. As the mine is reaching full capacity, in addition, Kwinana Refinery is now complete and delivered its first product on spec, on budget, and on time last month. The ramp-up is underway, and when at full capacity, the project is expected to produce 50,000 metric tons of lithium hydroxide annually, with half attributable to SQM. Lithium sales volumes from products coming from the Salar de Atacama were almost flat compared to last year, as lower prices triggered contract price floors that impacted volumes. Nevertheless, we expect the yearly sales volume from our Chilean operations to increase by at least 10% versus 2024. Beyond lithium, our business continued to deliver solid results.

Speaker #4: As demand is reaching full capacity, in addition, Q1 refinery is now complete, and delivery is first product on spec, on budget, and on time last month.

Speaker #4: The ramp-up is underway, and at full capacity, the project is expected to produce 50,000 metric tons of lithium hydroxide annually, with half attributable to SQM.

Speaker #4: Lithium sales volumes from product coming from the Salar de Atacama were almost flat compared to last year, as lower prices triggered contract draws that impacted volumes.

Speaker #4: Nevertheless, we expect the yearly sales volume from our Chilean operations to increase by at least 10% versus 2024. Beyond lithium, our business continued to deliver solid results.

Ricardo Ramos: Iodine was our most profitable segment in the second quarter, with an adjusted gross margin of 57% and contributing more than 50% to the total company gross profit. Prices remain strong, supported by healthy demand and tight supply, and we expect this strength to continue into the coming years. In fertilizers, our specialty plant nutrition business remains stable, reflecting resilient demand across our key markets, while potassium volumes are lower as guided, but prices remain firm. Overall, our diversified portfolio positions us well to navigate in a volatile environment. We are confident that SQM is well placed to capture the strong fundamentals of the lithium market while continuing to deliver solid results across all our businesses. Thank you, and we look forward to your questions.

Speaker #4: Iodine was our most profitable segment in the second quarter, with an adjusted gross margin of 57% and contributing more than 50% to the total company gross profit.

Speaker #4: Prices remain strong, supported by healthy demand and tight supply. We expect this strength to continue into the coming years. In fertilizers, our specialty plant nutrition business remains stable, reflecting resilient demand across our key markets.

Speaker #4: While potassium volumes are lower, as guided, prices remain firm. Overall, our diversified portfolio positions us well to navigate a volatile environment. We are confident that SQM is well placed to capture the strong fundamentals of the lithium market while continuing to deliver solid results across all our businesses.

Speaker #4: Thank you, and we look forward to your questions.

Operator: Thank you. As a reminder, to ask a question, press *11 to get in the queue. One moment for our first question, please. It comes from the line of Ben Isaksson with Scotia Bank. Please proceed with your question.

Speaker #2: Thank you, Natalie. Reminder: to ask a question, press star 11 to get in the queue. One moment for our first question, please. It comes from the line of Ben Isaacson with Scotiabank.

Speaker #2: Please proceed with your question.

Ben Isaksson: Thank you very much, and good day, everyone. I hope you are doing well. I have three questions, and I will ask them one by one, if that is okay. The first question is on specialty plant nutrition. Ricardo, we do not talk about it much, but it continues to be a really solid contributor of gross profit to the business. Can you talk about what is your midterm or long-term goal for where you want specialty plant nutrition to be? In your answer, is that based on a volume goal or an EBITDA goal or maybe a margin per metric ton goal? Thank you.

Speaker #5: Thank you very much, and good day, everyone. I hope you're doing well. I have three questions, and I'll ask them one by one, if that's okay.

Speaker #5: The first question is on SPN. Ricardo, we don't talk about it much, but it continues to be a really solid contributor to gross profit for the business.

Speaker #5: Can you talk about what your mid-term or long-term goal is for where you want SPN to be? In your answer, is that based on a volume goal, an EBITDA goal, or maybe a margin per ton goal?

Speaker #5: Thank you.

Juan Pablo Bellolio: Hi, Ben. This is Juan Pablo. First of all, it is important to mention that our business in specialty plant nutrition is not only the potassium nitrate that we sell. Also, we have been developing for a couple of years a complementary business of blends based on MPKs that we have been deploying in our markets. That has been giving us the chance to keep growing in this market, keeping the margins that we are having and the success to remain as a main player in this industry. Our midterm and long-term are related to the same strategy, to keep growing, adding services and products to our customers in different regions, giving us the chance to remain our brand as a solid one and to keep being able to keep the prices where also we want to have.

Speaker #4: Hi, Ben. This is Juan Pablo. Look, first of all, it is important to mention that our business in SPN is not only the potassium nitrate that we sell; we have also been developing, for a couple of years, a complementary business of blends based on MPKs that we have been deploying in our markets.

Speaker #4: So that has been giving us the chance to keep growing in this market, keeping the margins that we are having and the success to keep, I don't know, to remain as a main player in this industry.

Speaker #4: So, our midterm and long-term strategies are related to the same goal: to keep growing by adding services and products for our customers in different regions. This strategy allows us to maintain our brand as a solid one and to keep our prices at the levels we want.

Juan Pablo Bellolio: I would say it is an idea of having more products, more services available for our customers, growing in volume, but remaining with a solid brand to have the prices at this level.

Speaker #4: So, I would say it's an idea of having more products and more services available for our customers, growing in volume but remaining with a solid brand to have the prices at this level.

Ben Isaksson: That is great. Thank you. My second question is on Mount Holland. If you had asked me two months ago, I probably would have bet that the expansion would not go ahead, but maybe that is not right now with lithium prices starting to improve. Can you comment on what your thinking is on the expansion right now? How does the CapEx outlook impact your thinking as it comes to Salar Futuro?

Speaker #5: That's great. Thank you. And my second question is on Mount Holland. You know, if you had asked me two months ago, I probably would have bet that the expansion wouldn't go ahead.

Speaker #5: But maybe that's not right now, with lithium prices starting to improve. Can you comment on what you're thinking regarding the expansion right now?

Speaker #5: And how does the cash flow spending, or, sorry, how does the CapEx outlook impact your thinking as it comes to Solar Futuro?

Pablo Altimira: Hi. Mark Ponce here. Yes, as you probably have seen on our web page, we made a recent announcement that the expansion decision will not be taken during 2025. We continue to progress, of course, with the relevant approvals and engineering and studies over that project. The final decision will be periodically reviewed during next year. We will consider not only market context, we will also consider how we are progressing with those engineering studies and particularly the approvals. Finally, with all that information on the table, we will make a decision formed on the financial evaluation and also on the progress of the refinery.

Speaker #4: Hi, Mark Fons here. Yes, as you probably have seen on our webpage, we made a recent announcement that the expansion decision will not be taken during this year, 2025.

Speaker #4: And we continue to progress, of course, with the approvals relevantly, and engineering and studies over that project. The final decision will be periodically reviewed during next year and will consider not only the market context but also how we are progressing with those engineering studies and particularly the approvals.

Speaker #4: And finally, with all that information on the table, we will make a decision informed by the financial evaluation and also on the progress of the refinery.

Ben Isaksson: Thank you. That makes sense. My last question, I have asked this question before in iodine. It is a simple question. What is going to break iodine prices? Are we starting to see any signs of demand destruction, any changes to the new supply outlook over the next couple of years? Can you talk about that? It just continues to be so strong, and I am not sure if anything will break it soon. Thank you.

Speaker #5: Thank you. That makes sense. And then just my last question, and I've asked this question before in iodine: it's a simple question. What is going to break iodine prices?

Speaker #5: Is it, are we starting to see any signs of demand destruction? Any changes to the new supply outlook over the next couple of years?

Speaker #5: Can you talk about that? It just continues to be so strong, and I'm not sure if anything will break it soon. Thank you.

Pablo Altimira: Hi, Ben. Pablo Altimira speaking. Regarding the iodine, for this year, as we said in our earning release, we expect that the demand will grow less than 1%, but the main reason is because we do not have supply. That is the reason also that the demand is being impacted. Having said that, for the next year, we expect that the growth will be there if the capacity also is there. We see solid fundamentals in all the applications, especially in the X-ray contrast media, which is needing more iodine every year. For the next year, we expect some capacity coming because it is supposed that some capacity should arrive this year. We see some delays, so we expect some additional capacity for the next year.

Speaker #4: Hi, Ben. Pablo Ramirez speaking. Well, regarding the iodine, for this year, as we mentioned in our earlier release, we expect that the demand will grow less than 1%. The main reason is because we don't have supply.

Speaker #4: So that is the reason also that the demand is being impacted. Having said that, for the next year, we expect that the growth will be there, if the capacity also is there.

Speaker #4: But we see solid fundamentals in all the applications, especially in the X contrast media, which is needing more iodine every year. For next year, we expect some capacity coming, because it’s supposed that some capacity should arrive this year.

Speaker #4: We see some delay, so we expect some additional capacity for the next year. However, because the demand is strong, we don't see for the next year a big change in the dynamics of the market that we see today.

Pablo Altimira: However, because the demand is strong, we do not see for the next year a big change in the dynamic of the market that we see today.

Ben Isaksson: The last time iodine prices were high, I cannot remember how long it was, maybe about 12 years ago, when iodine prices started to fall, you started to cut your production, and that strategy did not seem to work, then you went full volume. Can you talk about if iodine prices start to break, have you thought about your strategy?

Speaker #5: And just in theory, the last time iodine prices were high, I can't remember how long it was, maybe about 12 years ago. When iodine prices started to fall, you started to cut your production.

Speaker #5: And that strategy didn't seem to work, and then you went full volume. Can you talk about if iodine prices start to break? Have you thought about your strategy?

Pablo Altimira: I would say that you cannot compare the dynamic of the market that we have today with some years ago. We see new applications that are growing much more than before. Our strategy is clear. It is always to have the capacity to be prepared to provide the best iodine to our customers. That we have been doing in the last year. We are growing in Nueva Victoria. We built Pampa Blanca. We are also opening a new facility. We are growing with our seawater pipe project because our strategy is to have enough capacity to be there to respond to the demand. Not a big change on that.

Speaker #4: Well, I would say that you cannot compare the dynamics of the market that we have today with some years ago. We see new applications that are growing much more than before.

Speaker #4: And our strategy is clear: it's always to have the capacity to be prepared to provide the best iodine to our customers. That is what we have been doing in the last year. We are growing in Nueva Victoria, we built Pampa Blanca, and we are also opening a new facility. We are expanding with our seawater pipe project because our strategy is to have enough capacity to be there to respond to the demand.

Speaker #4: So, not a big change on that.

Ben Isaksson: Great. Thanks so much.

Speaker #5: Great. Thanks so much.

Operator: Thank you. Our next question comes from the line of Joel Jackson with BMO Capital Markets. Please proceed.

Speaker #2: Thank you. Our next question comes from the line of Joel Jackson with BMO Capital Markets. Please proceed.

Joel Jackson: I have a few questions too, and I will also ask them one by one. Just going back to Mount Holland and Kwinana, can you just confirm, so we have the numbers right, to hit 20,000 metric tons for your share in 2025? What would the volumes be in the second half of the year? Some of the earlier lithium hydroxide plants that came out in Australia, as we all know, have had lots of problems. Do you have a sense yet if you will have a similar ramp-up, if you are going kind of better than the two plants that came ahead of you? Thanks.

Speaker #5: I have a few questions too, and I'll also ask them one by one. Just going back to Mount Holland and Quinona, can you just confirm so we have the numbers right to hit 20,000 tons for your share in 2025?

Speaker #5: What would the volumes be in the second half of the year? And then some of the earlier hydroxide plants that come out in Australia, as we all know, have had lots of problems.

Speaker #5: Do you have a sense yet if you will have a similar ramp-up if you're kind of doing better than the two plants that came ahead of you?

Speaker #5: Thanks.

Pablo Altimira: Hi, Joel. Mark here. Regarding your first question, regarding the volumes for this year, what we have announced in the press release about being 20,000 metric tons for lithium carbonate equivalent for this year in sales, mostly comes from sales of spodumene concentrate. They will be mostly heavy into the second half of this year, between two quarters, so Q3 and Q4 of this year, probably evenly distributed among them. Regarding your second question, which is probably a more long one to answer, I think let me start first with the factual perspective of it because we have last week announced a very relevant milestone, which is first product. First product in quality, on budget, and on specifications. That result arises from a lot of work done during the years between the teams.

Speaker #4: Hi, Joe, Mark here. Regarding your first question about the volumes for this year, what we have announced in the press release about being 20,000 tons for LCE for this year in sales mostly comes from sales of sodium concentrate.

Speaker #4: And it will be mostly heavy into the second half of this year. Between the two quarters, so Quarter 3 and Quarter 4 of this year, it will probably be evenly distributed among them.

Speaker #4: Regarding your second question, which is probably a longer one to answer, I think let me start first with the factual perspective of it, because we announced last week a very relevant milestone, which is the first product.

Speaker #4: First product in quality, on budget, and on specifications. And that result arises from a lot of work done during the years between the teams.

Pablo Altimira: It was a collective effort from planning to engineering to execution, which counted with the support and the contribution of the knowledge from SQM in lithium processing from Chile and China. Also, with partners with their processing technology and experience in Kwinana. That is how we reached that relevant milestone. As we now look ahead at the additional challenge we have for ramping up now the operations in Kwinana, we will face it the same way. I cannot talk about third parties or others, how they have done it, but I can tell you that we are facing that challenge again with a lot of planning and a lot of knowledge. We only started the construction of the refinery when we had 80% of engineering in detail design, and that is not what usually you do in the market.

Speaker #4: And it was a collective effort from planning to engineering to execution, which counted with the support and contribution of the knowledge from SQM in lithium processing from Chile and China, also with farmers, with their processing technology and experience in the Quinona Strip.

Speaker #4: And that's how we reached that relevant milestone. So as we now look ahead at the additional challenge we have from ramping up operations in Quinona, we'll face it the same way.

Speaker #4: I cannot talk about third parties or how they have done it, but I can tell you that we are facing that challenge again with a lot of planning.

Speaker #4: A lot of knowledge; we only started construction of the refinery when we had 80% of engineering in detailed design. And that's not what you usually do in the market.

Pablo Altimira: We started when we were ready and we knew what we were doing. In addition to that, we have established provisions at the refinery, provisions that come also in having additional capacity on critical equipment, as well as additional physical space to install additional equipment for refining if we need so. Finally, I can name our relevant vendors. We have very good vendors supporting us in this ramp-up period, particularly two technology partners which are day and night together with us today in the refinery, particularly in the areas of pyro calcination and crystallization. As you see, this is a collective effort started many years ago, and we will tackle it together with our partners and our great team in Kwinana and Lithium. Thank you.

Speaker #4: So we started when we were ready, and we knew what we were doing. In addition to that, we have established provisions at the refinery, provisions that come from having additional capacity on critical equipment.

Speaker #4: As well as additional physical space to install more equipment for refining if we need to. And finally, I can name our relevant vendors. We have very good vendors supporting us in this ramp-up period.

Speaker #4: Particularly, two technology partners that are day and night together with us today in the refinery, particularly in the areas of pyro calcination and crystallization.

Speaker #4: So, as you see, this is a collective effort started many years ago, and we will tackle it together with our partners and our great team at Coveil and Lithium.

Speaker #4: Thank you.

Joel Jackson: Okay. Obviously, we have seen a turn of the lithium market in the last couple of months. Everyone sees it. Everyone knows it. Can we talk about your order book and your discussion with customers and how they have changed the last month or two? You were going into the end of Q2, early Q3, you were selling, the prices were going below the floors in your contracts, volumes are being changed. Suddenly, prices have gone up now, a lot, maybe 20,000 RMB a metric ton for lithium carbonate equivalent, and now you are having different discussions. Can you talk about how the discussions have changed, how your order books have changed, have some of your contracts, short-term contracts now broken because the customers did not pay the floor and so now you went out and sold elsewhere?

Speaker #5: Okay. Obviously, we've seen a turn in the lithium market in the last couple of months. Everyone sees it, everyone knows it. Can we talk about your order book and your discussions with customers and how they've changed in the last month or two?

Speaker #5: So you were going into the end of Q2, early Q3. You were selling; the prices were going below the floors in your contracts, and volumes were being changed.

Speaker #5: Suddenly, prices have gone up now, you know, a lot—maybe 20,000 RMB a ton for LCE. And now, you're having different discussions. Can you talk about how the discussions have changed?

Speaker #5: How have your order books changed? Have some of your short-term contracts now broken because the customers, you know, didn't pay the floor, and so you went out and sold elsewhere?

Joel Jackson: Just tell me what has changed in the last two months, if anything. Thanks.

Speaker #5: Like, just tell me whatever. What's changed in the last two months, if anything? Thanks.

Pablo Altimira: Hi, Joel. This is Felipe. Look, I would like to comment, first of all, what we see for the second semester. I think it is important to share that with you. I will speak about the volume and the prices. Regarding the Chile lithium division, I would like to say that sales volume reached 51,700 metric tons in Q2, which is similar as Q2 last year and slightly lower than Q1. However, I am very optimistic and I expect that our sales in Q3 should be at least 10% higher than Q2. Also, the sales in the second semester of this year are expected to be higher than the first semester and higher than the second semester of last year, which would allow us to increase the yearly volume by at least 10%. This is regarding the volume and regarding the price.

Speaker #4: Hi, Joe. This is Felipe. Look, I would like to comment, first of all, on what we see for the second semester. I think it's important to share that with you. I will speak about the volume and the prices.

Speaker #4: Concerning the Chile Lithium Division, I would like to mention that the sales volume reached 51.7 thousand tons in Q2. This is similar to Q2 last year and slightly lower than Q1.

Speaker #4: However, I am very optimistic, and I expect that our sales in Q3 should be at least 10% higher than Q2. Also, the sales in the second semester of this year are expected to be higher than the first semester.

Speaker #4: And higher than the second semester of last year, which would allow us to increase the yearly volume by at least 10%. So, this is regarding the volume and regarding the price.

Pablo Altimira: During Q3 2025, lithium carbonate prices in China have been recovering and over the last two weeks at high speed following the news about potential supply reductions. Prices in Asia, ex-China, have also been recovering but at a reduced pace when compared to Chinese prices. Since our sales volumes are concentrated in China and the realized prices remain mainly linked to price indices, we expect that with the recent price recovery in China, our sales price in Q3 should be higher than Q2. The good news here is that we will have a better volume next quarter and a better price next quarter. Regarding our strategy, I will not go into the details of the contracts because, you know, these are confidential. Regarding our strategy, as we have done always, our strategy remains to produce at full capacity, to expand such capacity in line with the expected market growth.

Speaker #4: During Q3 2025, lithium carbonate prices in China have been recovering, and over the last two weeks, at highest speed, following the news about potential supply reductions.

Speaker #4: Prices in Asia ex-China have also been recovering, but at a reduced pace compared to Chinese prices. Since our sales volumes are concentrated in China, and our realized prices remain mainly linked to price indices, we expect that with the recent price recovery in China, our sales price in Q3 should be higher than in Q2.

Speaker #4: So the good news here is that we will have a better volume next quarter and a better price next quarter. And regarding our strategy, I will not go into the details of the contracts because, you know, these are confidential.

Speaker #4: But regarding our strategy, as we have done always, our strategy remains to produce at full capacity to expand such capacity in line with the expected market growth.

Pablo Altimira: We do not speculate and we sell and serve the needs of our customers.

Speaker #4: We do not speculate, and we sell and serve the needs of our customers.

Joel Jackson: Maybe just following up on that one last try here. So, going into Q3 and Q4, are your prices really reflective of spot prices at this point? If we follow the spot prices, we should really get your price about right?

Speaker #5: Maybe just following up on that, one last try here. So, you know, going into Q3 and Q4, are your prices really reflective of spot prices at this point?

Speaker #5: Like, if we follow the spot prices, we should really get your price about right?

Pablo Altimira: Depending on the contracts, we tend to be very close to the spot price. We only have small differences or gaps from the moment you apply the index calculation in the contract and the actual spot, but we are really close to the spot levels.

Speaker #4: Well, depending on the contracts, we tend to be very close to the spot price. We only have small differences or gaps from the moment you apply the index calculation in the contract.

Speaker #4: And the actual spot, but we are really close to the spot levels.

Joel Jackson: Thank you very much.

Speaker #5: Thank you very much.

Operator: Thank you so much. As a reminder, if you do have a question, press *11 to get in the queue. Our next question is from the line of Cesar Perez Novoa with VTG Pactual. Please proceed.

Speaker #2: Thank you so much. And as a reminder, if you do have a question, press *11 to get in the queue. Our next question is from the line of Cesar Pérez Novoa with PTG Pactual.

Speaker #2: Please proceed.

Ben Isaksson: Good afternoon. Could you please comment on Mount Holland's mine economics, namely your short-term cost, maybe your startup cost, and long-term cost when the asset is fully ramped, I believe, 18 months from now? How comparable is that OpEx relative to the Salar de Atacama? If I may, a second question on Salar Futuro, where do we stand on its implementation? Has SQM already presented the conceptual engineering design? If so, what CapEx deployment should we think of on an annual basis? Thank you very much.

Speaker #5: Good afternoon. Could you please comment on Mount Holland mine economics, namely your short-term costs, maybe your startup cost, and long-term costs when the asset is fully ramped, I believe, 18 months from now?

Speaker #5: How comparable is that OPEX relative to the Salar de Atacama? And if I may, a second question on Salar Futuro. Where do we stand on its implementation?

Speaker #5: Has SQM already presented the conceptual engineering design? If so, what CapEx deployment should we think of on an annual basis? Thank you very much.

Pablo Altimira: Hi, Cesar. Mark here again. We continue to be in ramp-up mode, both in the Kwinana Refinery and also still to reach 100% capacity production in Mount Holland. As such, our current production cost is not yet reflective of our long-term projections. We are, though, profitable in the current scenario, but our reasons remain to produce lithium hydroxide, and our sales of spodumene concentrate is a temporary solution while we ramp up the Kwinana Refinery. We remain flexible to sell between one and the other. On the long-term projection for spodumene concentrate, though, we expect to be between the top producers in Western Australia concentrate. Regarding the Kwinana Refinery, the success of the development of the refinery production in the long term will generate satisfactory returns, considering the structure where we expect to be around the middle of the industry cost curve. Thank you.

Speaker #4: Hi, Cesar. Mark here again. Well, as you know, we continue to be in ramp-up mode both in the refinery and also still to reach 100% capacity production in Mount Holland.

Speaker #4: And as such, our current production cost is not yet reflective of our long-term projections. We are, though, profitable in the current scenario. But our business remains to produce lithium hydroxide.

Speaker #4: And our sales of sodium concentrate are a temporary solution while we ramp up the refinery. We remain flexible to sell between one and the other.

Speaker #4: On the long-term projection for sodium concentrate, though, we expect to be between the top producers in Western Australia concentrate. Regarding the refinery, the success of the development of the refinery production in the long term will generate satisfactory returns, considering the structure where we expect to be around the middle of the industry cost curve.

Speaker #4: Thank you.

Ben Isaksson: Thank you very much.

Speaker #5: Thank you very much.

Pablo Altimira: Cesar, Ricardo speaking. About Salar Futuro.

Speaker #4: Cesar, Ricardo speaking. About Salar Futuro. Hi. We are working very hard with Codelco in order to be ready to submit our environmental study to the authority during next year.

Joel Jackson: Hi.

Pablo Altimira: About Salar Futuro, we are working very hard with Codelco in order to be ready to submit our environmental study to the authority during next year. It's a huge project. It's a complex project, a beautiful project. We are not going to be ready until probably the beginning second half next year. At that moment, when we file the environmental study, just before that, we will be very clear and we will disclose the CapEx in detail together with Codelco. Anyway, because it is a complex project and it will be an interesting analysis and study at different levels, we think it's reasonable to expect to have an approval of the project during the beginning, maybe during 2030, I hope next first half of 2030. As you may know, we cannot invest in Salar Futuro until we have the total approval. You cannot start investing in the project without approval.

Speaker #4: It's a huge project. It's a complex project, a beautiful project. But we are not going to be ready until probably the beginning of the second half of next year.

Speaker #4: At that moment, when we file the environmental study, just before that, we will be very clear and we will disclose the CapEx in detail together with Codelco.

Speaker #4: Anyway, because it is a complex project and it will be an interesting analysis and a study at different levels, we think it's reasonable to expect to have an approval of the project during the beginning, maybe in the first half of 2030. I hope for that.

Speaker #4: As you may know, we cannot invest in Salar Futuro until we have total approval. You cannot start investing in the project without approval.

Pablo Altimira: That's why the CapEx of Salar Futuro, it will be starting to be reflected probably during the second half of 2030, the beginning of the project, the CapEx. Most of the CapEx will be reflected in 2031, 2032, and some of 2033. That's why it will not affect in a significant term the CapEx of next year, 2026, not 2027, or 2028, or 2029. Anyway, of course, we have some expenses and CapEx related to the environmental study, but compared to the full project, CapEx is not relevant.

Speaker #4: That's why the CapEx of Salar Futuro will likely start to be reflected during the second half of 2030, which is the beginning of the project—CapEx.

Speaker #4: And most of the CapEx will be reflected in 2031-2032 and some in 2033. That's why it will not significantly affect the CapEx of next year, 2026, nor 2027, 2028, or 2029.

Speaker #4: Anyway, of course, we have some expenses and CapEx related to the environmental study, but compared to the full project, CapEx is not relevant.

Ben Isaksson: All right. Thank you very much, Ricardo and Mark.

Speaker #5: All right. Thank you very much, Ricardo, and Mark.

Operator: One moment for our next question. It comes from Isabela Simonato with Bank of America. Please proceed.

Speaker #2: One moment for our next question, please. And it comes from Isabela Simonato with Bank of America. Please proceed.

Isabela Simonato: Hi. Good afternoon, everyone. Thank you for taking my questions. I wanted to go back a little bit to the iodine business. I think it is pretty clear, your views on demand and how strong the market is. When you what is, I think, what is mapped in terms of supply for the next couple of years? How do you see the balance of the market? I think it is still a little bit unclear what type of supply additions we are talking about in this environment, considering these prices. What do you guys see as the bottleneck for that supply to continue to grow more sustainably, given where prices are? I think that is my first question. The second one, back to the deal with Codelco, I think there was an expectation that this would get done by September.

Speaker #6: Hi. Good afternoon, everyone. Thank you for taking my questions. I wanted to go back a little bit to the iodine business. I think it's pretty clear, right?

Speaker #6: Your views on demand and how strong the market is. But when you what is, I think, what is mapped right in terms of supply for the next couple of years?

Speaker #6: And how do you see the balance of the market? I think it's still a little bit unclear what type of supply additions we're talking about.

Speaker #6: In this environment, right? In considering these prices, what do you guys see as the bottleneck for that supply to continue to grow more sustainably given where prices are?

Speaker #6: I think that is my first question. And the second one, back to the deal with Codelco, right? I think there was an expectation that this would get done by September. Just wondering if there is any new update in terms of timing.

Isabela Simonato: Just wondering if there is any new update in terms of timing. Thank you.

Speaker #6: Thank you.

Pablo Altimira: Hi, Isabela. Pablo Altimira speaking. As you have seen, in the last year, we have seen a lack of supply. It is not the case of SQM. Actually, we have been one of the only companies that has been able to provide more iodine in the last years. That is our plan. As I said before, we are not only growing in Nueva Victoria, we are also open in Pampa Blanca, and now we are working in a new greenfield project where the idea is to provide 1,500 additional metric tons of iodine. On top of that, we are continuing growing in our seawater pipeline to provide more iodine and to increase significantly in capacity in Nueva Victoria. So, regarding SQM, we are investing a lot of money to be prepared to supply more iodine because of the needs of our customers.

Speaker #4: Hi, Isabela. Pablo Altimira speaking. Well, have you seen that in the last year we have observed a lack of supply? This is not the case for SQM.

Speaker #4: Actually, we have been one of the only companies that have been able to provide more iodine in the last years. That is our plan.

Speaker #4: As I said before, we are not only growing in Nueva Victoria; we are also opening Pampa Blanca, and now we are working on a new Greenfield project where the idea is to provide an additional 1,500 metric tons of iodine.

Speaker #4: And on top of that, we are continuing to grow our seawater pipeline to provide more iodine and to significantly increase our capacity in Nueva Victoria.

Speaker #4: Regarding SQM, we are investing a lot of money to be prepared to supply more iodine because of the needs of our customers.

Pablo Altimira: Regarding the other players, as I said before, we expect some supply in the next year. Regarding the next years, we are following what is going to happen. We do not know. What is important here is to consider the capacity of planning because today, environmental restrictions and these kinds of things maybe are the main bottlenecks for seeing a new supply. Planning is very important, and that is what we have been doing as a company, to plan and to have a very good lecture about the demand and then to build the new supply. Okay. About the project with Codelco, just to inform you that we are very positive about the results of the process. We are moving really fast, and we maintain our schedule. It means that it has to be ready during September, maybe October, but it is going to be ready during this year anyway.

Speaker #4: Regarding to the other players, well, as I said before, we expect some supply in the next year. Regarding to the next years, we are following I mean, we are following what's going to happen.

Speaker #4: We don't know what is important; here it is crucial to consider the capacity for planning because today environmental restrictions and these kinds of things may be the main bottlenecks to seeing a new supply.

Speaker #4: Planning is very important, and that's what we have been doing as a company: to plan and to have a good lecture about the demand, and then to build the new supply.

Speaker #5: Okay.

Speaker #4: About the project with Codelco, I just want to inform you that we are very positive about the results of the process. We are moving really fast, and we maintain our schedule.

Speaker #4: It means that it has to be ready during September, maybe October, but it's going to be ready during this year anyway.

Isabela Simonato: Thank you very much.

Speaker #5: Thank you very much.

Operator: Thank you. One moment for our next question, please. It comes from the line of Emerson Viera with Goldman Sachs. Please go ahead.

Speaker #2: Thank you. One moment for our next question, please. And it comes from the line of Emerson Vieira with Goldman Sachs. Please go ahead.

Ben Isaksson: Good morning, everyone. I have two questions. The first one on the cost curve of the sector. If I recall, in the previous earnings conference, you guys mentioned that you estimate about 40% of the supply was under the water at the low prices at the time. Can you provide us an update on what is the supply amount right now that could still be underwater at current prices? That is question number one. Question number two, can you please provide us an update on CapEx expected for 2026 and 2027, given that the construction of the Kwinana Refinery was already completed and you have the seawater pipeline coming in line with expectations? Thank you.

Speaker #7: Good morning, everyone. I have two questions. The first one, on the cost curve of the sector, if I recall, in the previous earnings conference, you guys mentioned that you estimate about 40% of the supply was under water.

Speaker #7: The low prices at the time. Can you provide us an update on what the supply amount is right now that could still be underwater?

Speaker #7: At current prices? So that's question number one. And question number two, can you please provide us an update on CapEx expected for 2026 and 2027, given that the construction of the refinery was already completed and you have the seawater pipeline?

Speaker #7: I mean, in line with expectations, please. Thank you.

Pablo Altimira: Hey, Alessandro. This is Pablo Hernandez speaking. Regarding your first question on the cost curve, today prices, which have increased significantly since what we saw a couple of weeks ago, we believe are still below what the balance would be between the supply and demand. We still believe that there are some competitors in the space that are with costs that are higher than current pricing. Of course, therefore, in the long run, if we think about long-term pricing, everybody in the space, I guess, believes that the prices should be a little bit higher than what we are today. Hi, Emerson. This is Gerardo Illanes. Regarding your question about CapEx, usually once a year, we make a full review of our CapEx plan for the next few years. Once we do that, we present it to the market.

Speaker #5: Hey, listen, this is Pablo Hernández speaking. So regarding your first question on the cost curve: today, prices, which have increased significantly since what we saw a couple of weeks ago, we believe are still below what the balance would be between supply and demand.

Speaker #5: So, we still believe that there are some competitors in the space that have costs higher than current pricing. And of course, therefore, in the long run, if we think about long-term pricing, everybody in the space, I guess, believes that the prices should be a little bit higher than what we are today.

Speaker #4: Hi, Emerson. This is Gerardo. Regarding your question about the CapEx, usually once a year we make a full review of our CapEx plan for the next few years, and once we do that, we present it to the market.

Pablo Altimira: We expect to do that during this quarter and be in a position to share updates with the market during the third quarter's earnings call. In any case, it is important to remember that out of approximately $1 billion of CapEx that we have announced before per year for the years 2025 to 2027, the very vast majority of that CapEx is growth CapEx. Maintenance CapEx is approximately $250 million per year across all our divisions. What we do in this exercise that I explained before is we review which other opportunities we have there and how each of these projects are evolving to see whether we have other opportunities or something in these projects could change. As soon as we have that, we will share it with the market.

Speaker #4: And we expect to do that during this quarter and be in a position to share updates with the market during the Q3 earnings call.

Speaker #4: In any case, it's important to remember that out of approximately $1 billion of CapEx that we have announced before per year for the years 2025 to 2027, the very vast majority of that CapEx is growth CapEx.

Speaker #4: Maintenance CapEx is approximately $250 million per year across all our divisions. So what we do in this exercise that I explained before is we review which other opportunities we have there and how each of these products are evolving to see whether we have other opportunities or if something in these products could change.

Speaker #4: So as soon as we have that, we will share it with the market.

Ben Isaksson: All right. Thank you. Thank you for the answers.

Speaker #5: All right. Thank you. Thank you for the answers.

Operator: Thank you so much. Our next question is from Corinne Blanchard with Deutsche Bank. Please proceed.

Speaker #2: Thank you so much. Our next question is from Corey in Blanchard with Deutsche Bank. Please proceed.

Corinne Blanchard: Good morning. Two questions here. Can you speak first about, give us an update on the progress with the conversation with Codelco and the local groups? Anything you can give here in terms of future steps and when you expect to have that completed would be helpful. The second question, if you can speak about your current lithium inventory level, just to give us an idea, that would be helpful. Thank you.

Speaker #6: Hey, good morning. Two questions here. Can you speak first about giving us an update on the progress with the conversation with Codelco and the local groups?

Speaker #6: Anything you can give here in terms of future steps and kind of when you expect to have that completed would be helpful? And the second question, if you can speak about your current lithium inventory level just to give us an idea, that would be helpful.

Speaker #6: Thank you.

Pablo Altimira: Okay. Hi. Corinne, about Codelco, the process, as I mentioned before, is moving in the right direction and we are really moving fast. As you may know, the process with the communities, which is led by Corfo, is moving in the right direction and is according to the stated deadlines. We are very positive. It is going to resolve in the next few weeks. Everything is going to be positive, in our opinion. We have to keep in mind and remember that SQM Codelco project is very positive for Chile, for the Antofagasta region, and mainly for the nearby communities. That is why I think it is a strong point, our relation with the communities, and it is going to be positive. There are other issues that we are working on.

Speaker #4: Okay. Hi. Corine, about Codelco, the process, as I mentioned before, is moving in the right direction, and we are really moving fast. As you may know, the process with the communities, which is led by Corfo, is moving in the right direction.

Speaker #4: And it's according to the stated deadlines, and we're very positive it's going to result in the next few weeks. Everything is going to be positive, in our opinion.

Speaker #4: We have to keep in mind and remember that SQM's Codelco project is very positive for Chile, for the Antofagasta region, and mainly for the nearby communities.

Speaker #4: That's why I think it's a strong point in our relationship with the communities, and it's going to be positive. There are other issues that we are working on.

Pablo Altimira: One of them, of course, is to have all the regulatory authorizations, as it has been informed, the Chinese regulatory authorities reviewing the transaction. We have provided them all the information and explained the agreement with Codelco in full detail. This agreement, again, is a positive one for all consumers, both in China and around the world. We are really optimistic about the review, and we think it will conclude positively in the next coming weeks. Those are the main topics. Points are pending, and we are advancing other small points. That is why, as I mentioned before, we foresee a final full approval of the transaction during the next two months. Thank you.

Speaker #4: One of them, of course, is to have all the regulatory authorities' authorizations, as has been informed, the Chinese regulatory authorities reviewing the transaction.

Speaker #4: We have provided them with all the information and explained the agreement with Codelco in full detail. This agreement, again, is a positive one for all consumers, both in China and around the world.

Speaker #4: We are really optimistic about the review, and we think it will conclude positively in the next coming weeks. That's our domain. Topics and points are pending, and we are advancing on other small points.

Speaker #4: That's why, as I mentioned before, we foresee a final full approval of the transaction during the next two months. Thank you.

Carlos Diaz: Hi, Ben. This is Carlos Diaz. Regarding the lithium inventory, we have a healthy position right now that is according to our production of this year. We expect to be close to 230,000 metric tons, and our sales, as Felipe Smith already explained, will be 10% higher compared with last year. Our inventory is according to that sales and what we have projected for next year. Just to finalize, we are really optimistic about the business of this year. The lithium demand remains strong, and price environment, although it is extremely volatile, has shown positive signals of recovery. SQM is a long-term player, and we are cost-competitive. We are a high-quality producer, and we have developed a strong commercial and logistic infrastructure. What I said before, we keep very optimistic about the business and our inventory keeping in a healthy position.

Speaker #7: Hi, Corine. This is Carlos Diaz. Regarding the lithium inventory, we have a healthy position right now. That is according to our production for this year.

Speaker #7: We expect to be close to $230,000 per ton, and our sales, as Felipe already explained, will be 10% higher compared to last year.

Speaker #7: So our inventory is according to that sales and what we are projected for next year. And just to finalize that, to talk about that, we are really optimistic about the business of this year.

Speaker #7: The lithium demand remains strong and the price environment, although extremely volatile, has shown positive signals of recovery. SQM is a long-term player and we are cost competitive.

Speaker #7: We are a high-quality producer, and we have developed a strong commercial and logistic infrastructure. So, as I said before, we remain very optimistic about the business.

Speaker #7: And our inventory is keeping in a healthy position.

Operator: All right, ladies and gentlemen, thank you. This concludes our Q&A session and conference for today. Thank you all for participating. You may now disconnect. Everyone, have a great day.

Speaker #2: All right, ladies and gentlemen, thank you. This concludes our Q&A session. End conference for today. Thank you all for participating. You may now disconnect.