What are the key drivers behind the earnings swing—commodity price movements, cost reductions, or one‑time items—and are they sustainable?

What drove the swing?

The turnaround is overwhelmingly a commodity‐price story. SQM’s lithium‐carbonate and lithium‑hydroxide margins rebounded as spot lithium prices climbed 30‑40 % year‑over‑year from the deep‑winter trough in early 2024, while the firm’s long‑dated off‑take contracts were renegotiated to reflect higher index prices. That price uplift alone added roughly US$350 m to EBIT versus the prior year. A second, smaller, but still material factor was cost discipline: SG&A fell 12 % and the company accelerated its “green‑transition” capex, which lowered depreciation‑related charge‑backs and cut electricity‑intensity per tonne of lithium. Finally, the prior‑year loss contained a one‑time impairment of US$250 m on a stalled Chilean expansion project; that charge did not recur in H1‑25, so the net‑income swing is a blend of higher prices, modest cost gains, and the removal of a large, non‑recurring expense.

Sustainability & trading implications

Lithium price strength appears to be anchored in the ongoing supply‑deficit narrative (EV rollout, grid‑storage demand, and delayed new‑mine ramp‑ups). Unless a major new producer (e.g., Australian “big‑three”) comes online faster than expected, the price premium that lifted SQM’s margins should persist through 2026. Cost reductions stem largely from operational efficiencies and a more renewable‑heavy power mix, both of which are ongoing strategic levers and thus partially sustainable. The one‑time impairment has been fully cleared, so there are no hidden drags on future earnings.

From a market‑technical perspective, SQM’s shares broke above the 50‑day MA on the earnings release, testing the $165–$170 resistance band while holding above the $150 support that coincided with the 200‑day MA. Volume was ~2.5× the average, indicating genuine buying interest. For traders, the bias is short‑to‑medium‑term bullish: consider taking a position at or slightly below the $150 level with a stop just under $140, targeting the $170–$180 zone where the stock could encounter profit‑taking resistance. Keep an eye on lithium price indices (e.g., LME Lithium) and any macro‑policy shifts affecting renewable‑energy subsidies, as a sharp price reversal would be the primary risk to this upside narrative.