SQM raised US$1.1 billion in a capital increase completed at the end of April. The company placed 97% of the 22.4 million series B shares offered at a price of US$50. The capital increase is intended to finance the company's US$1.9 billion investment plan approved for the 2021-2024 period. Of this total, approximately US$1 billion will be used to expand the company's lithium production in Chile. SQM's plan is to increase its lithium carbonate production from 70,000 to 180,000 tons per year by 2023 and lithium hydroxide production from 13,500 to 30,000 tons per year. The investment plan also includes the Mt Holland lithium project in Australia, where SQM has a 50% interest, and the expansion of iodine and nitrate production in Chile.

We recommend buying at a P.O. of US$65 per share. 

The visibility for lithium demand has been improving because of all the incentives for renewable energies and electromobility (accentuated by the pandemic and now with the Biden administration), and perfectly what we can start to see is a reversal of the price adjustment process we saw starting in 2018, due to an oversupply of lithium and move very quickly to a deficit market, also considering that it is not so easy to materialize plant expansions and less new projects.

The big winner in this new landscape is SQM. Given its strong competitive position, it can respond faster than its competitors to this growth in demand and at a lower cost. Its comfortable level of leverage, coupled with the recent capital injection, creates a growth potential that, in our opinion, the market is just beginning to incorporate, without considering, additionally, the recovery of the lithium price. 

Lithium carbonate prices in China have risen 70% in 2021 and 140% in 12 months and industry sources were forecasting prices above RMB100,000 / t (USD15,300 / t) in 2021, according to Benchmark.