Operator
Good day, everyone, and thank you for standing by. Welcome to the SQM's second quarter 2026 conference call. At this time, all participants are in a listen-only mode. After the presentation, there will be a question and answer session. To ask a question, you will need to press star 11 on your telephone. You will then hear a message advising your hand is raised. To withdraw the question, press star 11 again. Please be advised that today's conference is being recorded. Now it's my pleasure to hand the conference to Megan Suter with Investor Relations. Please proceed.
Good day, and thank you for joining SQM's Earning Conference Call for the second quarter of 2026. This call is being recorded and webcast live. Our earnings press release and the accompanying results presentation are available on our website, where you can also find a link to the webcast. Today's participants include Mr. Ricardo Ramos, Chief Executive Officer, Mr. Gerardo Ayanez, Chief Financial Officer, Mr. Carlos Díaz, CEO of Novandino, Mr. Pablo Altimidas, CEO of the Iodine and Plant Nutrition Division, and Mr. Mark Fons, CEO of the International Lithium Division. Also joining us today are members of our commercial and business intelligence teams, Mr. Felipe Smith, Commercial Vice President of Novandino, Mr. Pablo Hernandez, Vice President of Strategy and Development of Novandino, Mr. Juan Pablo Del Olio, Commercial Vice President for Plant Nutrition and Specialty Products, Mr. Alvaro Araya, CFO of the International Lithium Division, Mr. Andreas Fontanaz, Commercial Vice President of the International Lithium Division, and Mr. Maxial, Head of Studies of the International Lithium Division. 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 line growth are considered forward-looking statements under U.S. federal securities laws. 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, I will now turn the call over to our Chief Executive Officer, Mr. Ricardo Ramos.
Good morning, and thank you for joining us today. I'm pleased to report SQM's second quarter results, which reflect a strong performance across our main business lines. I would like to start by highlighting an important milestone for our lithium operations in Chile. In July, Novandino Lithio, our association with CODELCO, submitted the environmental and technical documentation for the Salar Futuro project to the authorities. Salar Futuro represents the next stage in the transformation of our operations in the Salar Atacama, subject to the required approvals. The project contemplates approximately $3 billion of investment over seven years and is designed to increase production while significantly reducing the environmental footprint of our operations. I would also like to highlight the contribution that our operations make to Chile. During the first half of this year, SQM and its subsidiaries accrue more than $1.6 billion in payments to the Chilean government, including taxes, contribution to local governments, and payments to Corfo. Moving to the lithium market, we achieved record quarterly sales volumes of more than 84,000 metric tons of lithium carbonate equivalent from our operations in Chile through Novandino Lithium and in Australia through covalent lithium. As anticipated in our previous earnings report, lithium prices increased during the second quarter, supported by a strong than expected market demand. We now expect global lithium demand to exceed 2.1 million metric tons in 2026. We continue to expand our production capabilities in both Chile and Australia. In Chile, we expect Nova Andino Lithium to produce between 280,000 and 290,000 metric tons of lithium carbonate equivalent this year, and to have approximately 300,000 metric tons of production capacity by next year. In Australia, together with our partner with farmers, we recently announced the expansion of the Moon Haaland Mine and Concentrator, which is expected to double the podium and concentrate production capacity to approximately 350,000 metric tons per year, corresponding to SKM's shares of the project, with first production expected in 2030. These investments reflect our long-term view of the lithium market and our confidence in the fundamentals of the energy transition. Moving to Ajudin, we once again deliver good results, supported by robust market demand and favorable pricing. We expect demand to remain robust. Our seawater pipeline is currently in its commissioning phase and will provide additional flexibility to optimize our production and respond to market conditions. We are now producing iodine from our four different operations, and we expect total iodine production to reach approximately 15.5 thousand metric tons this year. Turning to specialty plant nutrition, we deliver another strong quarter, supported by higher sales prices and volumes. We continue to expect full-year sales volumes to increase by approximately 10% compared to 2025. Market conditions have benefited from supply constraints in certain markets, and we expect this condition to gradually normalize toward the end of the year. Finally, we have updated our capital expenditure outlook. We now We now included 2028, and we expect approximately total capital expenditures of approximately $3 billion over the three years, 26-28 period. This investment is mainly focused on supporting future growth and enhancing the competitiveness of our operations through lower production costs. Overall, we are encouraged by the performance delivered during the first half of the year and remain focused on executing our growth plans and creating long-term value from our shareholders. With that, I will turn the call, and we can go operator to the Q&A.
Operator
Thank you so much. And as a reminder, if you do have a question, simply press star 11 to get in the queue and wait for your name to be announced. To withdraw your question, press star 11 again. One moment, please. Our first question is from Joel Jackson with BMO Capital Markets. Please proceed.
Hi, thank you. I'm going to ask a couple of questions one by one. Can you talk about Q3 for a second? If I look at Q3 for the lithium segment, you're guiding to prices about flat, volumes, seems like about flat. And then costs I had a question about because costs step down a lot in Q2. Should we expect Q3 lithium earnings, gross margin, to be about the same as Q2?
Hello, Joel. This is Felipe.
I will comment about the Novandino part, of course. So, yeah, indeed, we had a very good second quarter. We are very enthusiastic about how the market is doing. Regarding Q3, first of all, in terms of sales volume, we expect Q3 2026 to remain strong in line with Q2. and in terms of the price I would say that the average price based on the indexes because you know that our contracts are all based on indices and indices are well known based on that we believe that the price of Q3 should be more or less in line with what we saw as the average of the first semester but again nobody can predict where the indexes are going it's a very volatile market today
still difficult to predict prices too long Hi Joe this is Carlos Diaz you asked about the cost mainly we have been working harder the last year in continuous efficiency and improvement process and that is together with the economic scale as we have been increasing the production level we have been constantly been able to make a cost improvement. But in the Q3, we expect similar costs that we already get in the Q2. But this year, at least 26, it should be lower compared with the last year.
Thank you for that. I want to ask about price realizations between Novandino and International Australia. I understand some of the math that works with toll and things like that. But like the premium, the Chile AS, the Novandino average selling price is really expanding. Like the discount, the premium of Novandino average selling price, the premium is really widening versus international. Should we expect a catch up in Q3? Like even if Novandino average selling price is about the same in Q3, should we not expect international selling price to catch up, like go up and the gap to reduce?
Hey, Joel, this is Andrés Fontanas from SGM International. Well, you know, most of our sales are based on spodium in concentrate, so in order to compare, you need to add some conversion costs and also to take into consideration the conversion So that's where the main difference is. And at the end, what matters the most that we are also following the market, these shipments that are discrete because not every month we have sales. All these shipments are following market conditions at the moment of shipment.
That's the point of my question, though. The Spodumene average selling price by your own numbers increased by $600 from Q1 to Q2. Spodumene went up, $600 a ton price, Q1 to Q2, but your LCE equivalent international selling price barely went up. That's what I'm confused about.
Yeah, well, as we commented before, our prices are affected by the timing of the shipments. Again, not every month we are having shipments. And as I said, in the coming quarters, you will see this better reflected in our price reporting.
Let's ask one more question to be greedy. So you've raised your lithium demand expectations for the full year by 200,000 tons. I imagine you're going to tell me us on the demand side, it's all from energy storage. Where's the extra 200,000 tons of supply coming from? Is that restart in Australia? Is that Africa? Is that lipidolite in China? Where's the extra 200,000 tons of supply coming this year to meet the growing demand?
Hey, Joel. This is Pablo Hernandez speaking. Of course, these are just our estimations, so we cannot predict what's actually happening fully in the market. But we believe there's some increase of supply, mainly coming from China, both from spodumene and brine, but also some ramp-up projects in Africa and Argentina. And, of course, as you've heard, because of the current price scenario, there are some restarts in Australia also as well coming into the market.
Operator
Thank you. One moment for our next question that comes from Isabella Simonato with Bank of America. Please proceed.
Tabella, your line is open.
Hi. Good afternoon, everyone. Do you hear me?
Operator
Yes, please proceed.
Thank you. Hi, everyone. Thank you. I have two questions. First, it's still on the lithium market, right? I believe you guys are ramping up production in Avondina faster, right, than initially expected when the deal was signed. So I wonder if you could update us on, and you mentioned about 300,000 tons next year, but beyond that and when the new concession starts in place, what could be a feasible production level, especially when Salad Futuro is in place in terms of annual production? That would be my first question. And my second question on the iodine market, right? It was a pretty good quarter in terms of volumes as well as prices. And you mentioned some sort of slowdown in sales, I think, as more supply is coming. Can you elaborate a little bit on where this supply from third parties coming to the market and what that could mean in terms of prices for the second half?
Sorry, this is Carlos Diaz again. Well, this year we expect, as our CEO said before, we expect to produce around 280,000 to 290,000 metric tons. And looking ahead, growth will initially be more motivated as we continue reducing the price fraction. Specifically for next year, we expect a production close to 300,000. And for the coming year, we're still starting different initiatives in order to keep and to increase a little bit their production. But you have to have in account that we have been reducing the prime extraction. So it's an exercise we are not ready yet. So in the coming, probably, call conference that we can share with you.
Hello, Isabel, I'm Eltenito speaking. Well, regarding to your question about the Aya and the new supply, again, this is our estimations, but we believe that the main supply could arrive from projects here in Chile. We see a particular new project that is coming. It's a project of Caliche Oil. Respective to the amount of product that will come into the market, we actually don't know, but we expect that they will provide more product. That's the reason why we believe that our sales volume this year will be similar to what we see last year. Of course, there is something different happens with the supply. where we could potentially see more sales in our case, but everything will depend on the supply and demand.
Just thank you very much. But just a final comment on the iodine. But do you think that, can you quantify a little bit what this new project in Chile means in terms of volumes and, again, any significant disruption in terms of supply and demand and ultimately prices?
Well, it's important to remain that we have seen a good demand Our demand forecast for this year is that the growth will be around 3%. So we expect that the new capacity that will come into the market will compensate that growth, but we don't see more than that.
Great. Thank you very much.
Operator
Thank you. Our next question comes from Emerson Vieira with Goldman Sachs. Please proceed.
Hello, good morning. Thanks for the time. A couple of questions here. First, can you guys please break down on the expected production capacity increased to 300,000 tons in 2027. I mean, how much is coming from Chile, given that you're converting the hydroxide plant, and how much is coming from tooling contracts? That's the first question, and I have some follow-up.
Okay, Emerson, Carlos Diaz speaking. Well, first of all, all our production is coming from the Salera da Gama in two different One is lithium chlorine that is refinated in Chile, and lithium sulfate, we are refining in China. So what I said before this year, with respect to 80 to 90, and for next year, 300,000 of those, we estimate now this 80 of those is going to be from lithium sulfate, along the other 220 for lithium clarine or for our antophagasta chemical plant.
Sorry. You asked for the hydroxide production? And carbonate. We don't see more than 20,000 or 30,000 of those of total. I mean, 10% of those production will be hydroxide and the remining, obviously, carbonate.
Okay, thank you. Just on one talent, very quickly, you guys recently approved the expansion, right, on the mining, the concentrator. So just wondering about a potential expansion in the refinery. Are you guys planning maybe to do this just after the expansion is concluded? How are you thinking about the mix between hydroxide and spodumene sales going in 2007 and later on?
Hi, Emerson. This is Mark Fones here. Thanks for your question. First of all, we're very proud of the decision of expanding Mon Holland. first the minor concentrator regarding the refinery we still remain open to that decision we have not yet came to a conclusion or a decision here there yet and this will be continued analyst by covalent and with farmers our partner and it will be depending also on the reaching our ramp up at full extent by second semester next year they're on in regarding the balance for next year in In terms of sales and production, we expect next year to be a higher lithium hydroxide production than this year, for sure, based on the same ramp-up curve. Therefore, our sales of direct sodium and concentrate cells should be probably lower than this year.
Operator
One moment for our next question, please. It comes from Lucas Ferreira with J.P. Morgan. Please proceed.
Good afternoon. Thanks for the time. My first question is a follow-up on the sulfate production, especially in regards to the tolling process in China. This production, I mean, surprised me a lot. I mean, I never thought you guys could ramp up this tolling and find too much capacity in sort of a short period of time. So my question is regarding these tolling contracts. I just wanted to understand, you know, how long they are and if you guys see any risk of, you know, over the next few years, you have to give some away or find new partners for this tolling at maybe different costs. if these fees, they are sort of fixed and predictable, just to understand sort of the operational risk of running, you know, if not mistaken, something around 50,000 tons, right, of sulfate tolling with these third parties. And then my second question is regarding, follow up on Mount Holland, since the expectation is for a first production in 2030, this seems to be sort of extended period of time, considering this is a brownfield, Wondering what are sort of the next sort of big milestones there that you think you should deliver to expand the production capacity or the main challenges to bring this capacity online. Thank you very much.
Hello, this is Carlo D.S. speaking here. Well, regarding to the lithium sulfur production, yes, we have been increasing the production very strongly in the last three or four years. And what we said before, we expect this year, we expect to produce or next year in a range of 80,000 to 90,000 as LCE equivalent. First of all, we have to remind that we have the one, our own plan in China, the chain plan that we produce close to 24, 25. We're expanding with respect to rate, to reach 30,000 around that level. and the different we do the doling with the different supplier that we don't disclose that contract but we will feel very happy with the contract that we have and we expect to continue working with those in the coming year.
Lucas, hi, this is Mark Fones. Regarding the Mount Holland timeline and you're right, the first product is expected by first half 2030. Well, the shadow reflects the normal sequencing of for a project of this scale and we have been building the shell to achieve the risk rather than rushed project you need to consider also that this is a relevant not a marginal brownfield increase so we're loving the capacity where our operation already exists and giving some milestones which you asked for i would say the next relevant milestone has to do with the start of the construction of the facility itself which should happen in mid next year. A construction of a facility of this nature takes between 18 and 24 months in duration. Ahead of that, we need to, of course, purchase long-lead items, prepare earthworks, and earth folk movement. After the construction of these 18 to 24 months, there's a period there of commissioning, which will follow in 2019, to reach our first product by the beginnings of 2030. So that's the overall scheme of things and the relevant milestones in there. In terms of if there are any opportunities to compress this shuttle, yes, there are opportunities. Covalent and our technical teams are actively advising, analyzing those, and we will continue to push it forward.
But please take in consideration that this brownfield, of course, has relevant opportunities, since we're working on an existing operation, but also it increases levels of challenges, and we need to be always mining and safety thank you perfect thank you very much guys thank you one moment for our next question that comes from Corrine Blanchard with Deutsche Bank please proceed hey good good afternoon team Mary can you can we come back to your commentary about the stretch you said been in line with 2q um how do we think about it for 4q because normally 4q i think on seasonality is your highest quarter do you also expect 4q to be high 70 to maybe like you know 80 kiloton each or are you expecting a strong 3q followed maybe by a softer 4q hello corinne this is Felipe.
You know 4Q is so far away now. So I will try to speak about the future, the long future, but I only have hopes that we can at least have the volume of a second and third quarter because as I said before, third quarter we expect to have similar volume as second quarter. So I expect minimum that in the fourth quarter but hope that could be more but I again my boss is looking at me like what are you doing but this is my personal hope okay so that I will try so that should bring your total lithium volume to 315 320 kiloton which is much much more than what you have guided right yeah if you add only the novandino part I mean And I will speak about the Novandino part is hopefully above 280. And then my colleagues in the international could comment, maybe Andres, good luck.
Yeah, Andres speaking here. We are expecting sales to be around 27,000 to 30,000 tons LCE for the full year.
Okay, thank you very much. Therefore, that made it a bigger picture question because I think we think you have some investors starting to think a little bit more longer term. Can you just talk a little bit about what happened after 2030, 2031? I mean, we know that Cordelco will be probably much more in charge than you guys.
But I think if you can just provide a high-level view to frame it for us and how we should think about you know strategic decision and and capex and etc i think that will be helpful thank you okay we got the ramos speaking yes as felipe said fourth quarter is a really long term it's it's really far far away uh 2031 it's just a little bit more difficult to have predictions what's going to happen, but again, I think that we are working very good now in Novandino. I think the agreement with CODECO has been even better than expected in terms of coordination, working together, and the board level having cooperation between both companies. That's why we are very positive about that. We already commented in the press release that we are starting the submission. We did it in July of the Salar Futuro. We're working in engineering and everything in order to be ready for the investment. That's why I hope in 2031 we will be in the middle of the investment of Seller Futuro. We think it's going to be a great project. We are really committed with CODELCO in order to do so. I think everything is included in our long-term projections, all the investment of the work we want to do. And what Carlos is doing today with their team is trying to have a very good expectation about the volumes, sales volumes for the future. And I think we will share with you in the next conference call our first view about what we expect for the next year. And we will continue to have a long-term view. But we are working very hard. I'm very good agreement so far. And Coelho is a very good partner.
Operator
One moment for our next question. that comes from Ben Isakson with Scotia Bank. Please proceed.
Thank you very much and good afternoon. Just two questions for me. Number one is I think there's a bit of confusion among investors in terms of your recent filing of spending $3 billion at Solar Futuro and some are drawing the conclusion that it is all going towards increasing capacity by 30,000 tons, and therefore your CapEx is $100,000 per ton. And I think that's wrong. Can you just separate the $3 billion spend from the 30,000 ton increase in capacity?
Ben, it's very important to consider that the Salar Futuro project is not only increasing capacity. It's changing technology. It means we are, as you know, we are offering a very good technology in terms of cost, in terms of production, in terms of environmental footprint. That's why you have to analyze the Salar Futuro project as a whole in terms of having a new beginning of the Salar Takama for the next 60 years' operation. That's exactly our 30 years' operation that we have. That's the whole idea. And, of course, we expect to have more production. We're working on it, and it will depend on the deals and depend on the quality of the solutions that we're going to bring to the process. And we will disclose our best estimate in the next two years. But the whole project, Salar Futuro, is not just an idea to increase production capacity. It's much more than that in terms of having a revamping, having a new Salar de Tacama for the future. That makes sense. Thank you for that.
And then my second question is on the lithium market. I understand that battery storage production has been about one terawatt hours or around that area, but installations have only been about half of that. And so my question is, are we seeing a big inventory build in battery storage, and we could be going into some temporary oversupply over the next 12 to 18 months, and that could put a cap on lithium demand growth, or is this just part of the normal cycle and the lag in terms of it'll just take six months to a year to kind of catch up? I'm just trying to understand if this is an anomaly or if this growth rate is sustainable.
Hey Ben, Pablo Hernandez speaking. So first of all, I agree with your view on the market. Indeed, we have seen much larger shipments of batteries for BSS than actual deployments of those batteries. So there's some gap there that we are monitoring. We believe most of that gap is related to some larger projects being implemented, which larger projects naturally bring some longer terms in terms of implementation and some delays from approvals and everything. So there's a natural delay on that end. But of course as well, I think there's also some push forward of some sales from 2027 because of tax rebates that have been removed from the export side in China. So overall, my view for the longer term is that there indeed for the following years, we might see some slowdown in the pace at which the BSS battery implementation is growing. Great. Sorry, Ben, but just finishing that. But of course, still, BSS will remain a very relevant and strong demand factor for the future. Of course. Thank you very much.
Operator
Thank you, ladies and gentlemen. This will conclude our Q&A session and conference for today. We want to thank everyone for participating, and you may now disconnect.
