SQM downgraded at Goldman as shares run ahead of fundamentals

Sociedad Quimica y Minera de Chile (SQM) -4.5% in Thursday's trading after the Chilean lithium company was downgraded to Neutral from Buy with a $63 price target at Goldman Sachs, pointing to lower than expected lithium prices.

Goldman analyst Marcio Farid said his Buy rating on SQM (SQM) had been supported by expectations of a cyclical lithium price rebound and better free cash flow conversion as production grows, but the stock has rallied 80% YTD and 115% since June 2025, which indicates the stock has run ahead of fundamentals.

Farid said SQM (SQM) shares are pricing in a ~$18,000/ton lithium carbonate price, which is 70%-80% above spot and 30% above Goldman's long-term price expectations, as the bank's commodities team sees lithium prices in the $9,250-$11,500/ton range in the next couple of years as strong demand growth in 2026-27 is insufficient to balance a market that is expected to grow by 16%-27% on the supply side.

The analyst also expects SQM (SQM) capex to remain elevated as the company invests in lithium growth in Chile and Australia as well as on iodine capacity expansion, adding these investments should pay off but add pressure to free cash flow generation in 2026-27.

On the positive side, Farid sees solid operational cost and growth performance on lithium in Chile and the ramp-up of Mt. Holland in Australia, as well as strong profitability on Iodine, while SQM's (SQM) "unique position on the cash cost curve and expected production growth should place the company in a privileged position when the lithium market balance is reached/LT prices are achieved," likely not before the end of the decade.