21.01.2016, 07:25
SQM reports market update and 2016 expectations for some of its key businesses
OREANDA-NEWS. Sociedad Química y Minera de Chile S.A. (SQM) (NYSE: SQM; Santiago Stock Exchange: SQM-A, SQM-B) reports market update and 2016 expectations for some of its key businesses.
In the potassium nitrate market – the most important product within our specialty plant nutrition business line – we saw demand growth in 2015, and we expect this trend to continue in 2016. Our sales volumes for 2015 were similar to 2014, and we expect to report higher volumes in 2016. Prices for both potassium nitrate and the specialty plant nutrients in general were slightly lower in 2015 compared to 2014, with a more significant decrease during the fourth quarter. Average prices should be slightly lower in 2016.
In the potassium chloride market, although world demand was lower in 2015 than in 2014, we expect slight demand growth in 2016, and we hope to have more visibility in the market once annual negotiations between the bigger potassium chloride suppliers and customers in China have concluded. In our potassium chloride and potassium sulfate business line, we saw low sales volumes during the first half of 2015. We previously expected to compensate with higher sales volumes in the second half of 2015. However, due to market conditions, we will not be able to fully offset the low sales volumes from the first half, and volumes will reach around 1.2-1.3 million tons for the entire year. Our sales volumes in this business line could increase about 10% in 2016, returning to levels similar to those seen during 2014.
Potassium chloride prices fell throughout 2015, with the most significant decrease in prices seen during the fourth quarter. In the final months of 2015, we saw prices of MOP-G in Brazil of approximately US$280. We expect average prices in this business line in 2016 to be lower than average prices in 2015.
In the iodine market, we saw demand growth during 2015, and we expect to see further growth in 2016. As anticipated, our sales volumes in this business line will increase approximately 4-5% in 2015 when compared to 2014, and could increase again in 2016. Prices remain an area of concern in this market, and this has had and will continue to have a major impact on our margins in this business line. The downward trend continued throughout 2015, and we saw prices around US$26 per kilogram during the fourth quarter. We believe that some further price deterioration is likely in 2016. We currently have an effective capacity of 10,000 MT/year, with 9,000 MT coming from our most efficient plant in Nueva Victoria.
World demand growth in the lithium market should continue to be robust, exceeding 5% in 2015, and again in 2016. Delays in some lithium projects have created tightness in the market; therefore, we believe that prices could increase significantly in 2016, continuing the upward trend seen in 2015. Sales volumes for 2015 should be similar to sales volumes for 2014; we expect our sales volumes to increase in 2016.
Finally, we mentioned on the last earnings conference call that we had sold over 35,000 MT of solar salts during the first nine months of 2015, and that we expected further sales in the fourth quarter, totaling about 75,000 MT for the full year. However, these sales have been postponed from 2015 to 2016. Therefore, we expect solar salts sales volumes for 2015 of less than 40,000 MT and over 75,000 in 2016.
As a result of lower potassium chloride and iodine prices, and lower volumes in the solar salt business, the gross margin for the fourth quarter 2015 will be lower than the gross margin reported for the third quarter 2015.
Chief Executive Officer, Patricio de Solminihac, commented: "We look forward to seeing potassium chloride and potassium sulfate sales volumes increase around 10% during 2016, similar to our 2014 sales volumes. We also look forward to increased iodine sale volumes in 2015 and again in 2016." He added that, "While 2015 has proven to be a challenging year, we cannot ignore the positive changes made within the Company. We have decreased costs in a sustainable way, increased efficiencies throughout the Company and maintained a strong balance sheet within a tough commodity environment. We have a great team in place and I look forward to taking on new challenges and opportunities in 2016."
About SQM
SQM is an integrated producer and distributor of specialty plant nutrients, iodine, lithium, potassium-related fertilizers and industrial chemicals. Its products are based on the development of high quality natural resources that allow the Company to be a leader in costs, supported by a specialized international network with sales in over 110 countries. SQM’s development strategy aims to maintain and strengthen the Company’s position in each of its businesses.
The leadership strategy is based on the Company’s competitive advantages and on the sustainable growth of the different markets in which it participates. SQM’s main competitive advantages in its different businesses include:
Low production costs based on vast and high quality natural resources;
Know-how and its own technological developments in its various production processes;
Logistics infrastructure and high production levels that allow SQM to have low distribution costs;
High market share in all its core products;
International sales network with offices in 20 countries and sales in over 110 countries;
Synergies from the production of multiple products that are obtained from the same two natural resources;
Continuous new product development according to the specific needs of its different customers;
Conservative and solid financial position.
In the potassium nitrate market – the most important product within our specialty plant nutrition business line – we saw demand growth in 2015, and we expect this trend to continue in 2016. Our sales volumes for 2015 were similar to 2014, and we expect to report higher volumes in 2016. Prices for both potassium nitrate and the specialty plant nutrients in general were slightly lower in 2015 compared to 2014, with a more significant decrease during the fourth quarter. Average prices should be slightly lower in 2016.
In the potassium chloride market, although world demand was lower in 2015 than in 2014, we expect slight demand growth in 2016, and we hope to have more visibility in the market once annual negotiations between the bigger potassium chloride suppliers and customers in China have concluded. In our potassium chloride and potassium sulfate business line, we saw low sales volumes during the first half of 2015. We previously expected to compensate with higher sales volumes in the second half of 2015. However, due to market conditions, we will not be able to fully offset the low sales volumes from the first half, and volumes will reach around 1.2-1.3 million tons for the entire year. Our sales volumes in this business line could increase about 10% in 2016, returning to levels similar to those seen during 2014.
Potassium chloride prices fell throughout 2015, with the most significant decrease in prices seen during the fourth quarter. In the final months of 2015, we saw prices of MOP-G in Brazil of approximately US$280. We expect average prices in this business line in 2016 to be lower than average prices in 2015.
In the iodine market, we saw demand growth during 2015, and we expect to see further growth in 2016. As anticipated, our sales volumes in this business line will increase approximately 4-5% in 2015 when compared to 2014, and could increase again in 2016. Prices remain an area of concern in this market, and this has had and will continue to have a major impact on our margins in this business line. The downward trend continued throughout 2015, and we saw prices around US$26 per kilogram during the fourth quarter. We believe that some further price deterioration is likely in 2016. We currently have an effective capacity of 10,000 MT/year, with 9,000 MT coming from our most efficient plant in Nueva Victoria.
World demand growth in the lithium market should continue to be robust, exceeding 5% in 2015, and again in 2016. Delays in some lithium projects have created tightness in the market; therefore, we believe that prices could increase significantly in 2016, continuing the upward trend seen in 2015. Sales volumes for 2015 should be similar to sales volumes for 2014; we expect our sales volumes to increase in 2016.
Finally, we mentioned on the last earnings conference call that we had sold over 35,000 MT of solar salts during the first nine months of 2015, and that we expected further sales in the fourth quarter, totaling about 75,000 MT for the full year. However, these sales have been postponed from 2015 to 2016. Therefore, we expect solar salts sales volumes for 2015 of less than 40,000 MT and over 75,000 in 2016.
As a result of lower potassium chloride and iodine prices, and lower volumes in the solar salt business, the gross margin for the fourth quarter 2015 will be lower than the gross margin reported for the third quarter 2015.
Chief Executive Officer, Patricio de Solminihac, commented: "We look forward to seeing potassium chloride and potassium sulfate sales volumes increase around 10% during 2016, similar to our 2014 sales volumes. We also look forward to increased iodine sale volumes in 2015 and again in 2016." He added that, "While 2015 has proven to be a challenging year, we cannot ignore the positive changes made within the Company. We have decreased costs in a sustainable way, increased efficiencies throughout the Company and maintained a strong balance sheet within a tough commodity environment. We have a great team in place and I look forward to taking on new challenges and opportunities in 2016."
About SQM
SQM is an integrated producer and distributor of specialty plant nutrients, iodine, lithium, potassium-related fertilizers and industrial chemicals. Its products are based on the development of high quality natural resources that allow the Company to be a leader in costs, supported by a specialized international network with sales in over 110 countries. SQM’s development strategy aims to maintain and strengthen the Company’s position in each of its businesses.
The leadership strategy is based on the Company’s competitive advantages and on the sustainable growth of the different markets in which it participates. SQM’s main competitive advantages in its different businesses include:
Low production costs based on vast and high quality natural resources;
Know-how and its own technological developments in its various production processes;
Logistics infrastructure and high production levels that allow SQM to have low distribution costs;
High market share in all its core products;
International sales network with offices in 20 countries and sales in over 110 countries;
Synergies from the production of multiple products that are obtained from the same two natural resources;
Continuous new product development according to the specific needs of its different customers;
Conservative and solid financial position.
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