Critical Materials
PrivateA world-class, lowest-cost brine + monopoly-iodine cash machine whose lithium upside is now (a) mostly priced in after a 2x TTM run and (b) structurally capped — from 2031 the Chilean state (Codelco) owns >50% of Atacama and takes control, so you are buying the cyclical recovery of a business SQM is being paid to hand over. Own the iodine, rent the lithium.
Research
The verdict
A world-class, lowest-cost brine + monopoly-iodine cash machine whose lithium upside is now (a) mostly priced in after a 2x TTM run and (b) structurally capped — from 2031 the Chilean state (Codelco) owns >50% of Atacama and takes control, so you are buying the cyclical recovery of a business SQM is being paid to hand over. Own the iodine, rent the lithium.
Primary sources
SEC filings
Source documents — open to read in full
SQM operates six business lines, all rooted in two Chilean geological endowments: the brine of the Salar de Atacama (lithium + potassium) and the caliche ore of the northern nitrate fields (iodine + nitrates + specialty plant nutrients). FY2025 revenue split:
| Segment | 2025 rev (US$m) | % | 2024 | 2023 |
|---|---|---|---|---|
| Lithium & derivatives | 2,288.2 | 50% | 2,241.3 | 5,180.1 |
| Iodine & derivatives | 1,042.8 | 23% | 968.3 | 892.2 |
| Specialty plant nutrition | 982.4 | 21% | 941.9 | 913.9 |
| Potassium | 155.5 | 3% | 270.8 | 279.1 |
| Industrial chemicals | 75.4 | 2% | 78.2 | 175.2 |
| Other | 31.9 | 1% | 28.3 | 27.0 |
| Total | 4,576.2 | 100% | 4,528.8 | 7,467.5 |
The revenue line is flat 2024→2025 (+1.0%) but that masks a violent mix rotation: lithium fell from 69% of revenue (2023) to 50%, while iodine and SPN roughly held in dollars and rose in mix. In 2023 lithium was 69% of a $7.5B top line; today it's half of a $4.6B one.
Customers. In 2025 SQM sold lithium in 38 countries to ~165 customers; 95% of lithium sales went to Asia; two customers accounted for ~25% of lithium & derivatives sales (~24% of lithium revenue), and the top-10 customers ~63% of that business line's revenue. Contracts are a mix of spot purchase orders and supply contracts with min/max annual volumes and index-linked pricing — SQM is a price-taker on a globally-cleared commodity, not a contract-locked utility.
The key "supplier" is the state. One "supplier" — Corfo, the Chilean production-development agency that owns the Atacama concessions and leases them to SQM — accounts for ~25% of the lithium business line's cost of sales. This is the defining feature of the whole company: SQM does not own its best orebody. It leases it, and the lease rate is a progressive royalty that reaches 40% of the sale price above $10,000/t lithium carbonate. Corfo payments were $302.9M (2025), $397M (2024), and $1,868.9M (2023) — the take scales brutally with price.
Named, end-to-end:
Upstream / inputs → SQM:
SQM → downstream:
Chokepoints: (1) the Atacama concession itself — single asset, state-owned, now state-controlled; (2) Chilean regulatory/permitting and community consent (Atacameños Indigenous Organization is a formal party to the 2060 extension); (3) demand concentration in Asian battery supply chains; (4) a single Chinese FX/geopolitical counterparty risk given 95% Asia exposure and a 21.9% Chinese shareholder (Tianqi).
The real moat: the Salar de Atacama is the best lithium orebody on earth. Highest lithium concentration, highest evaporation rate, co-located potassium — SQM self-describes as "one of the lowest cost producers of lithium worldwide", and the cost data backs it: even at a collapsed 2025 realized price of $9,174/t, the lithium segment still earned a 26% gross margin. Almost no hard-rock/spodumene converter is cash-generative at that price. That is a genuine, durable cost moat.
The iodine moat is arguably stronger and quieter. SQM is the world's largest iodine producer at ~37% of global sales by volume (Chile ~60% of world supply). Iodine earned a ~54% gross margin in 2025 (realized ~$71.9/kg vs cost $33.1/kg ). Demand is inelastic (X-ray contrast media ~38% of demand, growing with global CT-scan volumes), supply is geologically constrained to Chilean caliche + Japanese brine. This is a near-oligopoly with pricing power — and it is the segment the market ignores.
Bargaining power: weak upstream, weak downstream on lithium. SQM does not own its concession (Corfo does, now Codelco controls it) and sells into a globally-cleared spot market to concentrated Asian buyers. Its pricing power on lithium is essentially zero — it earns the cost curve, not a spread. On iodine, bargaining power is genuinely strong (oligopoly, inelastic medical demand).
The moat erosion is structural, not competitive. The threat is not Albemarle or Ganfeng — it is the Chilean state taking the asset. Under the Codelco Partnership Agreement (formed 27 Dec 2025 via merger of Codelco's Minera Tarar SpA into SQM's SQM Salar SpA, surviving as Nova Andino Litio SpA):
So the moat is real but the equity claim on it is shrinking on a known schedule. From 2031 SQM is a ~49% financial partner in the mine it built, run by a state copper company. This is the single most important fact in the file and the reason the multiple should carry a permanent Chile/state discount.
Segment gross margins, FY2025:
| Segment | Rev (US$m) | COGS (US$m) | Gross margin | 2024 GM (implied) |
|---|---|---|---|---|
| Lithium | 2,288.2 | 1,684.8 | 26% | 26% |
| Iodine | 1,042.8 | 481.2 | 54% | 54% |
| SPN | 982.4 | 837.3 | 15% | 18% |
| Potassium | 155.5 | 143.3 | 8% | 13% |
| Industrial chem | 75.4 | 44.8 | 41% | 39% |
| Consolidated | 4,576.2 | 3,223.6 | 29.6% | 29.3% |
Geography (revenue by destination, 2025): Asia & others 95%, North America 3%, Europe 3%, Chile 0%. This is an almost pure Asia-facing exporter (96.5% of net revenues are exports). Volume trends 2025 vs 2024:
Read: The company is rotating the Salar de Atacama toward maximum lithium output, monetising the trough on volume, and letting iodine + SPN carry the earnings. The mix is now defensively balanced in a way it was not in 2022-23 (when lithium was 69% of revenue).
FY2025 (the 20-F, the trough):
Q1 2026 (the inflection):
Why the violent turn: the lithium price doubled. Battery-grade carbonate ran to ~$26,278/t in Q1 2026 vs SQM's FY2025 realized $9,174/t — roughly 2.9x. Because SQM's cost base is the lowest on the curve, essentially all of that price move drops through to gross profit (partially clawed back by the progressive Corfo royalty, which climbs to 40% at high prices — a built-in state-owned "profit share" that flattens SQM's upside on the way up just as it cushioned the downside on the way down).
Balance-sheet flags: clean. Net financial debt $1,944.8M, NFD/adj. EBITDA 1.3x, current ratio 3.27, cash + time deposits $2.5B, ~$1.74B undrawn credit. Shareholders' equity jumped to $8,053.9M (from $5,198.1M) — largely the accounting gain on the Codelco JV intangible recognition (flagged as a critical audit matter by the auditor, see Lens 10). Debt is long-dated (bulk maturing 2030+), all USD or USD-hedged.
Market reaction: stock rose on the Q1 print; SQM is +97.9% over the trailing twelve months — the tape has already voted that the trough is over.
No transcripts on the research-layer shelf (transcripts/ empty). From ``:
SQM current: price $73.52, market cap $21.0B, EV $22.35B, 285.6M shares, trailing P/E 25.8, forward P/E 8.6, EV/EBITDA 11.4, EV/Sales 4.2, P/B 3.6, dividend yield 0.9%.
| Company | Ticker | Mkt cap | EV/EBITDA | P/E (fwd) | Div yield | Notes |
|---|---|---|---|---|---|---|
| SQM | SQM | ~$21.0B | 11.4 (trailing FY25 EBITDA: 14.2x ) | ~8.6 | 0.9% | Lowest-cost brine + iodine; state-JV overhang |
| Albemarle | ALB | ~$12–16B | n/a (trades <12x fwd earnings ) | ~12–13 | ~1.2% | #1 by volume; higher-cost, more diversified; no iodine cushion |
| Ganfeng Lithium | 002460.SZ / 1772.HK | n/a | n/a | n/a | n/a | Chinese integrated; ~6% share |
| Tianqi Lithium | 002466.SZ | n/a | n/a | n/a | n/a | ~5% share; also 21.9% SQM holder |
| Pilbara Minerals | PLS.AX | n/a | n/a | n/a | n/a | Pure spodumene; P1000 ramp mid-2026 |
| Rio Tinto (lithium) | RIO | ~$100B+ (diversified) | n/a — pure-play n/a | n/a | ~3-4% | Acquired Arcadium $6.7B (Mar 2025); lithium is a sleeve |
Market shares in lithium chemicals, 2025: SQM ~14% (233.1 kt from Novandino), Albemarle 12%, Ganfeng 6%, Tianqi 5%, Rio Tinto 4%. By this measure SQM is #1 by chemicals share (the "world #2" label reflects total lithium including hard-rock miners' spodumene, or prior-year rankings).
Pattern from:
CEO — Ricardo Ramos (industrial engineer, PUC Chile), CEO since 2018 (previously CFO), led the SQM negotiating team in the Codelco deal, described in coverage as "highly professional". Career SQM insider; a competent operator who navigated a nationalization threat into a 40-year lease extension while retaining First-Term control — a defensible outcome given the alternative was expropriation.
The controller — the Ponce/Pampa story (the governance red flag). SQM is controlled not by management but by the Pampa Group — Inversiones Oro Blanco / Global Mining / Potasios de Chile, historically linked to Julio Ponce Lerou, Pinochet's former son-in-law and Chile's "lithium king," who built control of SQM via a leveraged "cascade" of holding companies. The controller groups held 47.38% of total shares and 94.19% of Series A shares, electing six of eight directors as of 2026. Ponce left the board in 2015 amid the "Caso SQM" political-financing scandal (fines and settlements followed). In June 2025 he announced he would pass control to his daughter Francisca Ponce, collapsing the cascade from six companies to two (Oro Blanco + Potasios), effective 2026. Board leadership also turned over in 2025 (Gina Ocqueteau became Chair; Gonzalo Guerrero and Patricio Contesse — another scandal-linked surname — stepped down from Chair/Vice-Chair).
Second major shareholder — Tianqi (China, 21.9%) with board representation, subject to a 2018 FNE (Chilean antitrust) governance/information-firewall agreement. Tianqi's subsidiary Inversiones TLC is the party that legally challenged the Codelco JV (lost at the Supreme Court Jan 2026), and Tianqi has been selling down (fully exited its Series B shares by the 20-F date). A large, activist, conflicted Chinese holder that is both a competitor (~5% lithium share) and a seller.
Capital allocation: Historically disciplined on the operating side (lowest-cost expansions, the Mt Holland/Wesfarmers and Azure/Hancock JVs, the China refinery). Dividends are formulaic — Chilean law mandates min 30% of net income; SQM paid $2.11/sh in 2023 ($1.5B total) then cut to near-zero ($67.2M in 2024, $4.3M in 2025) as earnings fell. New hybrid bonds (Series S, Jan-2026 $600M subordinated notes) carry dividend-stopper provisions. So dividends will rebuild with 2026 earnings but the yield is not the reason to own this.
Archetype: professional-manager operator (Ramos) under a founder-family controlling shareholder with a scandal history and a conflicted foreign co-owner. The governance is the classic emerging-market controlled-company setup — minority ADR holders ride behind the Pampa Group and the Chilean state. Skin in the game is high but not aligned with the ADR.
Accounting risks:
Regulatory findings:
Bottom-up from FY2025 actuals ($640.6M net income to all holders; $588.1M to controlling; 285.6M ADR-equiv shares → ~$2.06 controlling EPS FY2025) and the Q1 2026 run-rate. All outputs; inputs labelled.
Anchors: Q1 2026 net income $364.7M ($1.28/sh); management guides lithium volume +15% and Q2 > Q1; lithium price the dominant swing; Corfo royalty claws back ~40% of high-price upside; iodine + SPN ~$700M+ combined stable gross profit; Codelco takes "preferential economics" on Atacama lithium retroactive to Jan-2025 (SQM's share of lithium profit is now <50% economically in substance, even in the First Term — this is the key haircut).
| Scenario | FY2026E EPS | FY2027E EPS | FY2028E EPS | Key assumption |
|---|---|---|---|---|
| Bull | ~$5.50 | ~$6.50 | ~$7.00 | Carbonate holds $25-30k; +15% vol; iodine $50+/kg; deficit narrative confirmed |
| Base | ~$4.30 | ~$4.00 | ~$3.80 | Carbonate averages ~$18-22k FY26 then eases to ~$15-17k as supply responds; +15% vol FY26 then +5%; Corfo royalty rises with price; Codelco preferential econ. caps SQM lithium share |
| Bear | ~$3.00 | ~$2.20 | ~$2.00 | Price round-trips to $12-14k as Chinese/African supply restarts; volume growth slows; iodine flat |
Base-case logic: Q1 2026 alone did $1.28; annualising the first quarter naively gives ~$5.12, but (a) Q1 caught the sharpest part of the price spike, (b) the Corfo progressive royalty escalates as price rises (mechanically transferring upside to the state), and (c) supply will respond to $25k lithium within 12-18 months (Pilbara P1000 mid-2026, converter overcapacity, African/Chinese restarts). So I fade FY26 to ~$4.30 and decline FY27-28 as price normalises — SQM's EPS peaks FY26 on this recovery leg, not FY28. This is the critical, non-consensus call: because SQM is a price-taker into a supply-elastic commodity with a state royalty that rises with price, its earnings are near-peak now, not troughing. The forward P/E of ~8.6 looks cheap only if you believe FY26 EPS persists; on a normalised ~$3.50-4.00 mid-cycle EPS the multiple is ~18-21x — not cheap.
(No forecast.ts create — unattended watchlist run; base case not committed. Suggested Brier forecast when actioned: "SQM FY2026 diluted EPS ≥ $4.00", p≈0.55, resolves 2027-04-30.)
Bull case. SQM owns the lowest-cost lithium orebody on earth and is running it flat out into a market that just flipped from surplus to (arguably) deficit — carbonate doubled to ~$26k and management raised volume guidance to +15% with a record Q2 coming. It earns a 26% gross margin on lithium at the bottom and 44% consolidated in Q1 2026. On top of that sits a near-monopoly iodine business (37% world share, 54% gross margin, inelastic medical demand) that the market values at roughly zero inside the lithium story — a hidden compounder worth arguably $6-9B standalone. Balance sheet is fortress-grade (1.3x net leverage, $2.5B cash). The existential overhang (nationalization) has resolved into a 40-year lease and First-Term control, and the Supreme Court cleared the legal cloud in Jan 2026. Forward P/E ~8.6, +98% TTM and still below where lithium bulls think it goes.
Bear case (2-3 permanent-impairment risks). (1) The asset is being handed to the state. From 2031 Codelco owns >50% and controls the mine; even in the First Term Codelco takes "preferential economics" retroactive to Jan-2025. You are buying a company whose best business converts, on a known schedule, from a controlled subsidiary into a minority stake in a state-run entity. This is a permanent, structural cap on the equity's claim — and it should compress the terminal multiple, not expand it. (2) SQM is a price-taker at cyclical peak margins. The +98% TTM run has already priced the recovery; the Corfo royalty escalates to 40% as price rises, mechanically donating the upside to the state; and lithium supply is highly elastic at $25k (Pilbara, African, Chinese restarts) — so the price and the margin are more likely near a peak than a trough. (3) Governance: a scandal-lineage controlling family (Pampa/Ponce) transitioning control intra-family, plus a conflicted, selling Chinese 21.9% holder (Tianqi) that just litigated against the company. Minority ADR holders are third in line behind the Pampa Group and the Chilean state.
Pre-mortem (18 months out, thesis broke): Lithium carbonate round-tripped from $26k back toward $14k as Q3-Q4 2026 supply restarts (Pilbara P1000, CATL's Jiangxi mine, African tonnes) overwhelmed the deficit narrative; SQM's realized price and margin compressed; the Corfo royalty had already skimmed the peak so the downside hit clean; and the stock gave back most of its 2x as the market re-recognised that FY2026 was a cyclical peak, not a new base — with the 2031 Codelco control transfer capping any re-rating. Iodine held up but couldn't offset a 50%-of-revenue lithium reset.
Are multiples too high? On peak FY2026 earnings, ~8.6x forward looks cheap; on normalised mid-cycle EPS (~$3.50-4.00) it's ~18-21x — a full multiple for a state-minoritized, price-taking commodity producer. The market is extrapolating the recovery; the risk is it's paying a trough multiple for peak earnings.
Contrarian view (what the market refuses to see): The consensus treats the Codelco JV as a resolved overhang ("nationalization avoided, lease extended to 2060 — de-risked!"). That's backwards. The JV is not a resolution; it is a slow-motion transfer of the equity's best claim to the state, already economically live via preferential economics and total by 2031. The market is also mis-weighting the mix: it prices SQM as a leveraged lithium call and ignores that the durable value is the iodine monopoly. The correct trade structure is: own SQM for the iodine + trough-cost lithium optionality at a fair price — not chase it up 98% treating peak-cycle lithium EPS as permanent.
Dismantling the bull case:
A two-asset Zambian copper miner wearing a three-asset valuation — long the Panama re-rate and the copper deficit, but the price already underwrites a restart that is a political grant, not a corporate decision; own it for the option, size it for the binary.
A well-run, growing mid-cap copper producer that has just turned the corner on Tucumã and deleveraged to 1x — but it is a single-country (Brazil), copper-price-levered, no-yield growth story already trading near analyst targets after an 83% run, so the easy money has been made; own it as a high-beta copper call (Furnas optionality + grade recovery), not as a value entry.
EMX no longer exists as a standalone — it was absorbed into Tether-controlled Elemental Royalty (ELE) in Nov-2025; the only tradeable expression is ELE, a fast-growing mid-tier gold royalty whose central, non-diversifiable risk is that a stablecoin issuer owns 51% and runs the board.