(Bloomberg) -- SQM, the world’s second-biggest lithium producer, swung to a first-quarter net loss due to “significantly lower” prices of the battery material and a $1.1 billion tax revision.

Global lithium producers have had a difficult earnings season for a first quarter that saw prices for the metal plunge to three-year lows. SQM’s results were also skewed by the accounting adjustment related to retrospective claims made by Chile’s tax authorities.

The Santiago-based company reported a net loss of $870 million for the three months ended March 31, compared to a net profit of $750 million for the year-earlier period. Sales volumes of lithium rose 34% year-on-year. 

Lithium prices have steadied after a boom-to-bust period that left in its wake an array of stalled projects, scrapped deals and production cuts for some producers. One measure of prices — for lithium carbonate in China — is about 80% below its peak level in 2022. The market is still grappling with inflated inventories from that period.

Setting aside the tax adjustment, SQM said its first-quarter net income was $228.1 million, down about 70% from a year earlier.

Its average sales price of lithium dropped 75% year-on-year in the first quarter to almost $12,600 per metric ton, with about three quarters of its volumes sold in China. Still, SQM is optimistic about longer term consumption of the battery ingredient, estimating global demand will expand this year by 20% to surpass 1.1 million tons. 

The low-cost producer is plowing ahead with plans to expand capacity, in an effort to increase lithium sales guidance to 200,000 tons this year. It expects total capital expenditure of $1.3 billion in 2024. The miner expects to produce about 210,000 tons of lithium this year, Carlos Cesar Diaz Ortiz, executive vice president of lithium, said during an earnings call with analysts on Thursday. 

SQM, which is closely watched because it’s more exposed to spot prices than peers, said it had contracted more than 85% of its production volumes for this year. 

The company is continuing to work on a definitive deal with Codelco over a new operating arrangement under Chile’s new public-private participation model, ahead of an end-May self-imposed deadline. 

The two firms reached a framework accord late last year, with SQM set to hand over a majority stake in its Chilean brine assets to state-owned Codelco in exchange for extending operations for three more decades.

--With assistance from Lou Del Bello and Yvonne Yue Li.

(Adds estimate of lithium production for 2024 in seventh paragraph.)

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