[SMM Analysis] Does the Chile Earthquake Impact China's Lithium Salt Market?

According to the China Earthquake Networks Center, a 7.3-magnitude earthquake struck the San Pedro de Atacama region in northern Chile at 9:50 AM Beijing time on July 19, 2024. The epicenter was very close to SQM's Salar de Atacama lithium mine, approximately 53 kilometers away in a straight line. The earthquake caused local power outages. Although Chilean President Boric stated that there were no reports of casualties or significant damage, the event has raised concerns among investors about the potential impact on lithium mining activities.

According to SMM July information, Chile exported approximately 17,400 mt of lithium carbonate to China in June, accounting for about 80% of China's lithium carbonate imports and about 20% of China's total lithium carbonate supply in June. Therefore, if the earthquake affects the production or transportation of local salt lake projects, it may have some impact on the upcoming lithium carbonate imports. However, SMM survey analysis data shows that as of June 2024, the cumulative inventory of lithium carbonate in China's refining, downstream, and other sectors reached 110,000 mt. With the recent weak demand for lithium carbonate from downstream sectors, it is reasonable to predict that this earthquake will have little impact on the domestic supply and demand of lithium carbonate, mainly causing market sentiment fluctuations and thus affecting futures prices. According to SMM July 19 report, lithium carbonate prices consolidated after opening on July 19, then rose significantly by the end of the morning session. After the opening of the afternoon session, the most-traded contract continued to rise slightly until the close, ultimately closing up 2.86%.

Additionally, referring to historical information, a 6.8-magnitude earthquake occurred in northern Chile on June 3, 2020, with a focal depth of 110 kilometers, very close to the current epicenter. At that time, both SQM and Albemarle confirmed that the earthquake did not affect the operation of the salt lake. Although the magnitude of this earthquake is slightly higher, it is not expected to cause long-term impacts. The actual situation still needs to await official announcements from SQM and Albemarle.

In summary, due to the current oversupply of lithium carbonate, even if this earthquake causes short-term disruptions to supply, it is unlikely to lead to shortages, and the substantial impact on lithium carbonate supply is limited.