Sociedad Química y Minera de Chile S.A. (NYSE: SQM) — Own the Iodine, Rent the Lithium, Mind the State

Sector: Materials — Specialty Chemicals / Fertilizers & Agricultural Chemicals · lithium + iodine + specialty fertilizers Prepared: June 5, 2026 Price at writing: ~$75 (NYSE ADR, Series B) · Market cap: ~$21.4B · Enterprise value: ~$24–26B (incl. NCI) · Shares out: ~285.7M (Series A + B) Primary filings (foreign private issuer — IFRS): FY2025 Form 20-F (filed 2026-04-22); Q1 2026 6-K earnings (2026-05-27). SEC CIK 0000909037.

⚡ Claude’s Take

This block is the author’s own subjective opinion. It is general information only and is not investment advice. The body of this note (sections 1–15 below) carries no recommendation and no price target — that distinction is observed everywhere except inside this fenced block.

Verdict: HOLD / accumulate-on-weakness — the higher-quality, cushioned-downside way to own the lithium recovery, and my preference over Albemarle for risk-adjusted lithium exposure — but fairly valued at ~$75, not a bargain. Accumulate on a pullback toward the low-$50s–low-$60s (the base-zone floor, where the iodine franchise plus the 2025–2030 lithium cash flows give a margin of safety). Not a short. Directional fair-value zone: base ~$54–90; the asymmetry was at the ~$29 low, not here after a 2.5x. Conviction: medium.

Tag: “Own the iodine, rent the lithium, mind the state.”

Here is the case, made relative to Albemarle. If you are going to own a lithium producer, SQM is the better business — and it is not close. Where Albemarle posted GAAP losses at the trough, SQM never lost money through the entire cycle (it earned ~$588M in 2025 and ~$3.9B at the 2022 peak), because it sits on the lowest-cost lithium on Earth (Atacama brine) and — the part the market under-appreciates — owns a genuine iodine near-monopoly: ~37% of world supply of a commodity that exists in economic form in only two places on the planet, sold into inelastic X-ray-contrast-media demand at record ~$72/kg prices and >50% gross margins. That iodine franchise is the crown jewel; it is counter-cyclical (it was 42% of gross profit at the lithium trough), it is completely independent of the lithium business and the Chilean state deal, and it alone is worth a meaningful chunk of the enterprise value. Add a #1 specialty-nitrate fertilizer business, an investment-grade balance sheet (a notch above Albemarle), no dilutive emergency financing, steady self-funded capex, and a beta of 1.03 versus Albemarle’s 1.37, and you have a commodity producer with a real earnings floor and ~2x Albemarle’s through-cycle return on equity. As a business, this is a clear step up.

So why only a HOLD, and why accumulate lower rather than here? Two reasons, both of which the market is — broadly correctly — pricing. First, the Chilean state is taking the crown jewel. The Codelco “Nova Andino” deal that closed in December 2025 secures SQM’s Atacama lithium tenure out to 2060 (removing a real 2030 cliff), but from 2031 the state company controls the JV and the Chilean state captures the large majority of the lithium operating margin — so SQM’s lithium business is, in NPV terms, a front-loaded 2025–2030 cash-flow stream followed by a state-capped, wasting minority tail. You are paying mainly for iodine and the next six years of lithium; the long-dated lithium upside that would make a pure producer a multi-bagger has been transferred to Chile. Second, this is a controlled company with a governance discount you cannot wish away: Julio Ponce Lerou directs ~25% of the vote through the “cascadas” pyramid on a far smaller economic stake, a hostile ~22% Chinese strategic (Tianqi) just lost a Supreme Court fight over this very deal, the Series A class elects seven of eight directors while your ADR class elects one, and there is a 2017 FCPA settlement plus an open FCPA subpoena. As a minority ADR holder you sit behind the controller, the Chinese strategic, and now the state. The result: SQM trades at roughly the same forward earnings multiple as Albemarle and a higher book multiple (justified by the higher returns) — a “better business at a deserved discount,” fairly valued, not cheap. What flips me more bullish: the market continuing to lump SQM into a “Chilean lithium miner with a state overhang” bucket and ignoring the standalone iodine monopoly — buy that mispricing on weakness. What keeps me cautious: a lithium rollback (swing supply is already restarting), iodine prices mean-reverting from records (a second variable that has to hold), or the post-2031 economics proving worse than hoped. Prefer it to Albemarle, respect the price, and let the cycle bring it to you.

1. Executive Summary

SQM is the Chilean lithium leader and Albemarle’s closest comparable — and, on the evidence, the higher-quality of the two businesses, available at a deserved discount rather than a bargain price. The defining contrast with Albemarle is that SQM stayed solidly profitable through the entire lithium cycle — net income to controllers of ~$586M (2021), a record ~$3,906M (2022), ~$923M (2023), ~$685M (2024), and ~$588M (2025) — where Albemarle swung to GAAP losses at the trough. Two structural advantages explain the resilience: SQM’s Salar de Atacama brine is the lowest-cost lithium resource on Earth (cash cost ~$4–6k/t, cash-flow-positive even at the ~$9k/t trough), and SQM is genuinely diversified across five business lines, of which the iodine franchise is a near-monopoly crown jewel that is high-margin, counter-cyclical, and completely independent of the lithium business.

The diversification math is the heart of the quality case. In FY2025, at the lithium trough, gross profit split roughly 45% lithium ($603M) / 42% iodine ($562M) / 11% specialty plant nutrition ($145M) — iodine, the counter-cyclical business, contributed almost as much profit as lithium precisely when lithium was depressed. Lithium gross profit had collapsed 73% from its 2023 level ($2,224M → $603M) on a ~70% price crash (realized lithium fell from $30,467/t to $9,174/t), yet iodine gross profit rose to $562M on record ~$72/kg prices and >50% margins. Iodine exists in economic form in only two geologies on the planet (Chilean caliche, where SQM is #1 at ~37% share, and Japanese brine), supply is structurally tight (iodine is a nitrate by-product that does not ramp on its own price), and demand is anchored by inelastic X-ray/CT contrast-media use — a genuine supply-side moat that lithium, a commoditizing and China-controlled market, conspicuously lacks.

Financially, SQM is the stronger of the two lithium majors. Net debt is ~$2.3B (Q1 2026), net leverage ~1.1x, and the credit rating (S&P BBB+, Moody’s Baa1, negative outlook) sits a notch above Albemarle’s. SQM funded the downturn without the dilutive emergency financing Albemarle required (Albemarle issued a $2.3B mandatory convertible preferred; SQM did not), kept capex steady at ~$0.9–1.1B/year rather than over-building into the peak and writing it off, and generated positive free cash flow through the trough (+$303M in 2024, +$437M in 2025). Through-cycle ROE is ~13% — roughly double Albemarle’s ~6.6% — and ROIC clears the cost of capital. The dividend is a variable Chilean payout (~50% of prior-year earnings), which swung violently from $1,471M (2023) to $4M (2025); this is arguably superior capital discipline to Albemarle’s balance-sheet-funded dividend-aristocrat streak (pay out when you earn, conserve when you don’t), but it offers no income anchor.

The two structural negatives — both largely priced — are the Chilean state and the governance. The Codelco “Nova Andino” public-private partnership (signed May 2024, closed December 27, 2025) is the central SQM-specific fact: it extends SQM’s Atacama lithium tenure from a hard 2030 expiry out to 2060 and won a near-term quota increase, but from 2031 the state company Codelco holds 50%+1 and controls the JV, with the Chilean state (via CORFO payments, the EIAM mining tax, and Codelco dividends) capturing the large majority of the lithium operating margin (external analyses cite ~70% in 2025–2030 rising toward ~85% post-2031). SQM’s lithium business is therefore best modeled as two regimes: a high-share, front-loaded 2025–2030 cash-flow stream, then a state-capped, minority, wasting tail to 2060. The governance is a genuine discount factor: Julio Ponce Lerou controls via the “cascadas” pyramid (directing ~25% of the vote on a far smaller economic interest), the Chinese strategic Tianqi owns ~22% (hostile — it opposed the Codelco deal and lost its Chilean Supreme Court appeal in January 2026), a two-class structure gives Series A seven of eight board seats versus one for the ADR class, and there is a 2017 SEC/DOJ FCPA settlement plus an open FCPA subpoena disclosed in the FY2025 20-F. SQM is ~100% concentrated in a single country whose resource nationalism has already crystallized.

On valuation, the conclusion is precise: SQM is a better business than Albemarle but not a cheaper stock. It trades at roughly the same forward P/E (~13x) and a higher P/B (~3.8x vs ~2.0x) — the book premium justified by ~2x the ROE. EV/EBITDA is ~13x on SQM’s mid-cycle TTM EBITDA versus ~21x on Albemarle’s trough EBITDA; both compress to ~8–10x on normalized numbers, so neither is cheap relative to the other on a like-for-like basis. A sum-of-the-parts is the distinctive SQM lens: the iodine and specialty-fertilizer franchises (~$7B of Codelco-independent, high-quality enterprise value) plus the 2025–2030 lithium cash flows carry most of the price, with the state-capped post-2031 lithium tail contributing little — i.e., you are paying for the iodine monopoly and the next six years of lithium, not the long tail. As a levered call on lithium, SQM is less geared than Albemarle (beta 1.03) because the iodine floor cushions the downside, and capped on the upside because the state takes the post-2031 gains.

Bottom line: SQM is a genuinely higher-quality, lower-beta, cushioned-downside way to own the lithium recovery — a profitable-through-the-cycle, lowest-cost producer with a real iodine near-monopoly and an investment-grade balance sheet — but it is fairly valued after a 2.5x recovery off its low, its lithium upside is structurally capped by the Chilean state, and it carries a real (and earned) governance and country-concentration discount. The investment debate is whether the under-appreciated iodine franchise makes the discount to a clean peer too wide, against the reality that the crown-jewel lithium economics are being transferred to Chile. This note takes no position; the labeled “Claude’s Take” above is the only place a view is expressed.

2. Business Overview

2.1 What the company does

Sociedad Química y Minera de Chile S.A. (SQM), founded in 1926 and headquartered in Santiago, is a Chilean producer of lithium, iodine, potassium, and specialty fertilizers, drawing on two extraordinary Atacama-desert resources: the Salar de Atacama brine (lithium and potassium) and the caliche ore of the northern Chilean nitrate fields (iodine and nitrates). It is a foreign private issuer, listed on the NYSE as an ADR (Series B) since 1993 and in Santiago, and reports under IFRS in US dollars (Form 20-F annually, 6-K interim). It employs ~7,770 people. (FACT — SQM FY2025 20-F, “Business.”)

2.2 Five business lines

SQM reports five lines, which split into the cyclical lithium swing and a set of more stable, high-quality franchises:

(FACT — SQM FY2025 20-F, segment note; figures approximate, reconciled to the 20-F and Q1 2026 6-K. Total FY2025 gross profit $1,352.6M on revenue $4,576.2M, 29.6% margin.)

The structural point: iodine contributed ~42% of gross profit at the FY2025 lithium trough — almost as much as lithium — and it is the reason SQM stayed profitable while Albemarle (pure lithium plus a smaller bromine business) lost money. When lithium recovers (as in Q1 2026), the mix swings back toward lithium (~75% of gross profit), which is exactly the point: iodine is a counter-cyclical ballast that carries the company when lithium is weak.

2.3 How it makes money

SQM extracts lithium and potassium from Atacama brine via solar evaporation (the lowest-cost lithium route in the world, helped by high brine concentration and by-product credits) and iodine and nitrates from caliche ore. It is a price-taker in lithium (a globally-traded, China-influenced commodity) but enjoys genuine pricing power in iodine (a structurally supply-constrained near-monopoly with inelastic demand). The economic engine is therefore a barbell: a cyclical, high-operating-leverage lithium business sitting on a Tier-1 cost position, plus a stable, high-margin iodine/specialty-fertilizer franchise that provides an earnings floor. This barbell — not present at Albemarle to the same degree — is the defining feature of SQM’s quality.

2.4 Share structure and recurring vs. cyclical revenue

SQM has two share classes — Series A (voting control, elects seven of eight directors) and Series B (the NYSE ADR, elects one director through 2043) — totaling ~285.7M shares. Revenue is highly cyclical in lithium and far more stable in iodine, SPN, and industrial chemicals; the iodine and SPN streams (collectively ~25% of revenue but a much larger share of through-cycle gross profit) are the recurring, defensible core, while lithium is the volatile, secular-demand-driven swing factor.

3. Industry Dynamics

3.1 Lithium — a structurally mediocre, commoditizing industry

SQM’s lithium business sits in a structurally-mediocre, commoditizing, China-controlled, boom-bust industry. In brief: lithium demand (~1.8M t LCE in 2025, growing toward ~3.0–3.7M t by 2030, ~70% EVs plus fast-growing storage) is secular, but supply is commoditizing and China controls ~60–70% of midstream conversion. Prices boomed ~tenfold in 2021–2022 (to ~$80k/t LCE), crashed ~85–90% through 2023–2025 (to ~$8–13k/t), and recovered sharply in Q4 2025–Q1 2026 (battery-grade carbonate roughly doubled to ~$25k/t). The capital cycle is at an early, real, but fragile recovery inflection, distorted by Chinese state capital and capped by quick-restart swing supply (already restarting — Bald Hill/Finniss). (FACT — Fastmarkets, InvestingNews, Q1 2026.) The SQM-specific lithium point: it is a pure Atacama brine producer — the world’s lowest-cost, highest-grade resource, far left of the cost curve, with no money-losing Western hard-rock conversion (unlike Albemarle’s idled Kemerton). On the lithium resource, SQM is equal-to-or-better than Albemarle.

3.2 Iodine — a genuinely attractive, supply-disciplined near-monopoly (the differentiator)

The iodine industry is the structural reason SQM is a higher-quality business than Albemarle, and it is worth understanding precisely. The global iodine market is small (~$3B, ~37–40kt/year) but it is a true resource-scarcity oligopoly: iodine exists in economic concentration in only two geologies — Chilean caliche (~60% of supply; SQM #1, plus Cosayach/ACF) and Japanese gas-brine (~30%; Ise Chemicals, Nihon Tennen Gas). There is no third source and no Chinese chokehold, and entry barriers are very high (you need the orebody). (FACT — industry sources; SQM 20-F.) Demand is anchored by X-ray/CT contrast media (~26–38% of demand) — among the most inelastic industrial-chemical end uses on earth (it is a tiny cost in a medical procedure and has no substitute), plus LCD/LED polarizing films, biocides, nylon, and pharma/nutrition. Contrast-media demand is a secular grower (projected to roughly double over a decade, with multi-year supply contracts).

Critically, iodine prices have risen to record levels (~$72/kg realized for SQM in 2025, up structurally — roughly +200% from the 2017 low) because supply is genuinely tight: iodine is a by-product of Chilean nitrate production, so it does not ramp in response to its own price, and Chilean production has been constrained. The combination — a scarce-resource near-monopoly, structurally tight supply, inelastic and growing demand, and real pricing power — makes iodine a genuinely attractive, supply-disciplined industry, the antithesis of commoditizing lithium. It is to SQM what bromine is to Albemarle, but with a higher margin, a tighter structure, and stronger pricing power. This is the crown jewel and the reason SQM has an earnings floor lithium-pure peers lack.

3.3 The Codelco state JV — the central SQM-specific structural item

The single most important structural fact for SQM is the Codelco “Nova Andino Litio” public-private partnership for the Salar de Atacama — the direct application of Chile’s 2023 National Lithium Strategy (which frames lithium as a strategic asset requiring state control). Timeline and terms: signed May 2024; Chilean antitrust (FNE) approval April 2025; China SAMR conditional approval November 10, 2025 (Tianqi’s ~22% stake gave Beijing jurisdiction and leverage); and the deal closed December 27, 2025 (a merger of Codelco’s vehicle into the renamed Nova Andino Litio), pointedly before the inauguration of president-elect Kast, locking it in. (FACT — SQM 20-F FY2025; Codelco/Bloomberg/Mining.com, Dec 2025.)

The trade-off is stark. What SQM gains: the catastrophic 2030 CORFO lease-expiry cliff is removed — tenure is extended to 2060 — and SQM won a near-term production-quota increase (~+300kt LCE through 2030) by closing pre-2026. What SQM gives up: from January 2031, Codelco holds 50%+1 and nominates the board majority — SQM loses control of its crown-jewel lithium asset, which becomes a minority, equity-method stake; and the Chilean state captures the large majority of the lithium operating margin (external analyses estimate ~70% in 2025–2030 rising toward ~85% post-2031, via CORFO payments, the EIAM mining tax, and Codelco’s dividend share), with minority-interest leakage already beginning (~$50M+/year). The 20-F states plainly that SQM “will lose control of the JV after December 31, 2030.” For valuation, lithium must be modeled as two regimes — a high-share, front-loaded 2025–2030 stream and a state-capped, wasting minority tail to 2060 (Section 10). Tianqi opposed the deal from the start, demanded a shareholder vote, and lost its final Chilean Supreme Court appeal on January 26, 2026 (international arbitration remains open).

3.4 Chile country risk and resource nationalism

SQM is ~100% concentrated in a single country whose resource nationalism has now crystallized — a sharp contrast with Albemarle’s Australia/Chile/US diversification. The Boric administration’s National Lithium Strategy, the EIAM lithium-specific mining tax (effective April 2024, a permanent fiscal step-up), the CORFO progressive sales-based royalty (sliding up to ~40% of the lithium price at high prices), the state-control Codelco deal, and an ongoing SII tax dispute together mean the Chilean state captures a large and rising share of SQM’s lithium economics. The December 2025 election of the right-of-center Kast (won ~58%) has eased the tone at the margin (the peso and Chilean equities rallied, and Kast has signaled he will honor signed deals — hence SQM’s rush to close), but the state-centric model is locked in to 2060; the structural trajectory does not reverse. For SQM, lithium resource nationalism has already happened.

3.5 SPN, nitrates, and the China/Tianqi angle

SQM is the world leader in specialty plant nutrition (natural potassium nitrate; ~39–44% global share in the relevant niches; Ultrasol/Qrop brands) and supplies thermo-solar molten salts for CSP storage — defensible specialty niches built on the same privileged caliche resource, more stable than commodity lithium. On geopolitics, the Tianqi angle is double-edged: the Chinese strategic owns ~22% of SQM and is Albemarle’s Greenbushes JV partner — inside both Western lithium majors. Its stake gave China SAMR veto leverage over the Codelco deal, and it sits just below the 25% Chinese-ownership threshold that would disqualify SQM from US IRA/FEOC critical-minerals eligibility — so SQM narrowly remains FEOC-eligible but with thin margin, and is cleanly aligned with neither the Western nor the Chinese bloc.

3.6 Industry verdict

SQM sits in a better industry mix than Albemarle but a worse jurisdiction. It pairs the world’s lowest-cost lithium resource (in the same mediocre, cyclical lithium industry) with a genuinely attractive iodine near-monopoly (supply-disciplined, high-barrier, inelastic-demand, real pricing power) and leading specialty-nitrate franchises. But all of it is concentrated in a single country whose state has now taken control of the crown-jewel lithium asset and the large majority of its long-run economics. Better industries, worse jurisdiction, and a worse control/economics trajectory on the core lithium asset.

4. Competitive Position

4.1 Two genuine moats, where Albemarle has roughly one

The right discipline for a commodity producer is that the only durable moat is a structural cost/resource advantage that shows up in through-cycle returns. SQM passes that test more convincingly than Albemarle because it has two asset-specific moats, not one.

(1) The lithium cost moat (equal-to-or-better than Albemarle). SQM’s Salar de Atacama brine is among the lowest-cost lithium resources on Earth — high brine concentration, high solar evaporation, and iodine/nitrate by-product credits give a cash cost of roughly $4–6k/t LCE. The proof that this is a genuine cost moat, symmetric to Albemarle’s Greenbushes evidence, is that SQM’s lithium segment stayed gross-profit-positive (~$603M, ~26% margin) at the ~$9k/t trough while the realized price had fallen 70%. SQM is the #1 brine producer and #2 lithium producer overall (~14% of lithium-chemicals supply). (FACT — SQM FY2025 20-F.)

(2) The iodine near-monopoly (the differentiator Albemarle lacks). This is SQM’s best business and the clearest moat in the file. SQM is the world’s #1 iodine producer at ~37% share, drawing on the only large iodine/nitrate orebody on the planet, in a structurally supply-constrained market, selling into inelastic X-ray-contrast-media demand at >50% gross margins and record prices. Iodine gross profit rose through the lithium trough to $562M (~42% of total gross profit). This is a genuine supply/privileged-resource moat with real pricing power — the antithesis of commoditizing lithium, and a moat Albemarle’s bromine business approximates but does not match in margin or tightness. (FACT/INTERPRETATION.)

4.2 The moat shows in through-cycle returns

Where Albemarle’s through-cycle ROE is ~6.6% (below its cost of capital — failing the franchise test), SQM’s TTM ROE is ~13.4% and it stayed positive even at the trough — roughly double Albemarle’s, and plausibly above WACC through the cycle. The 2022 peak (39%+ ROE, $13.67 EPS) was a lithium price spike at both companies; the difference is that SQM’s multi-product, partly-counter-cyclical mix means the advantage shows up in sustained returns, not just at the peak. This is the quantitative evidence that SQM is the higher-quality business. The caveat, developed below, is that the EIAM mining tax and the Codelco state-capture structurally siphon the lithium upside to the Chilean state — so SQM’s future through-cycle lithium returns will be lower than its history implies.

4.3 SPN and the other lines

The specialty-plant-nutrition business (world #1 in potassium nitrate, branded, ~39–44% niche share) is a real but modest specialty moat — scale and branding give some stickiness and ~15% gross margins, but it is not franchise-grade. Potassium (commodity, being deliberately shrunk to free up brine for lithium) and industrial chemicals (small, with solar-salt optionality) are ballast, not moats. Collectively, SPN plus iodine give SQM a non-lithium gross-profit base (~$700M+) that Albemarle’s bromine alone (~$276M) does not match.

4.4 The offsets — governance and the state

Two factors genuinely impair SQM’s competitive quality relative to a clean Western peer, and both warrant a discount. First, governance: the Ponce “cascadas” control structure (directing ~25% of the vote on a far smaller economic interest), the hostile ~22% Tianqi stake, the two-class subordination of ADR holders, and the 2017-plus-open FCPA matters mean minority shareholders’ interests sit behind the controller, the Chinese strategic, and the state. Second, the Codelco state takeover: the resource is secured to 2060, but control and the majority of post-2031 economics pass to the state — so the durability of SQM’s lithium moat, as a shareholder asset, is being progressively transferred away. The moats are real; from 2031 the state is the senior partner in the biggest one.

4.5 Competitive verdict

SQM is the higher-quality business of the two lithium majors — a genuine low-cost lithium resource moat plus an iodine near-monopoly plus a #1 specialty-nitrate position, confirmed by ~2x Albemarle’s through-cycle ROE — but wrapped in an inferior ownership and sovereign envelope. Better assets, worse jurisdiction and governance. The iodine franchise is the under-appreciated anchor that makes SQM more than a levered lithium bet; the Codelco state-capture and the Ponce/Tianqi/two-class structure are the real, largely-deserved offsets. It is a better business than Albemarle at a deserved discount — not a wide-moat compounder, but a quality cyclical with a genuine specialty crown jewel.

5. Growth History and Forward Opportunities

5.1 Lithium — a volume compounder, price as the swing

Like Albemarle, SQM grew lithium volumes hard through the price crash — from ~170kt to ~258kt LCE (2023→2025), an ~23% two-year CAGR, achieved profitably from the lowest-cost position while higher-cost peers curtailed. Realized lithium price fell 70% ($30,467/t → $9,174/t) even as volume rose — the classic “volume into falling price” of a low-cost producer taking share. Q1 2026 confirmed the recovery: ~69kt LCE at full capacity, realized ~$17,800/t (+95% YoY), with FY2026 volume guidance raised +10–15%. (FACT — SQM FY2025 20-F; Q1 2026 6-K.) Forward lithium capacity comes from Atacama expansion, the Codelco quota increase (to 2030), the Mt Holland/Kwinana hydroxide ramp in Australia (a higher-cost geographic hedge, to nameplate ~2027), and China hydroxide. SQM is a volume-compounder riding secular EV/storage demand, with price as the swing — and, post-2031, with the state taking the majority of the upside.

5.2 Iodine — the structural, high-margin grower

The iodine business is the highest-quality growth story: volume growth plus record pricing, into a secular, inelastic, contrast-media-led demand base that is projected to roughly double over a decade, with SQM expanding caliche/iodine capacity to meet it. FY2025 iodine revenue was ~$1.04B (+~8%), at >50% gross margins. This is the part of SQM that grows on quality (pricing power and inelastic demand), independent of the lithium cycle and the Codelco deal — and the part the market most under-appreciates.

5.3 Growth verdict

Higher-quality growth than Albemarle’s pure-lithium swing. SQM pairs low-cost, profitable lithium volume compounding (riding the same secular EV/storage demand) with a genuine iodine pricing-power grower and leading specialty-nitrate positions. The lithium leg is high-quality on cost and volume but capped on long-tail value by the post-2031 state takeover; the iodine leg is unambiguously high-quality growth. The blend is more durable and less price-dependent than Albemarle’s.

6. Financial Quality

6.1 The income statement — profitable through the entire cycle

(FACT — SQM FY2025 & prior 20-Fs; reconciled to the 20-F. FY2025 net income attributable to controllers ~$588M (~$640M including non-controlling interest); the 20-F overview’s “losses” phrasing is a drafting inconsistency — the figure is a profit, confirmed by ~+$815M TTM net income and the +$364M Q1 2026.)

The single most important financial fact about SQM is that it never lost money — net income stayed positive every year of the most violent lithium cycle in the commodity’s history, where Albemarle posted GAAP losses of −$1.2B (2024) and −$0.5B (2025). The 2022 peak ($13.67 EPS) is non-repeatable; the trough (~$2.06 EPS, ~13% ROE) is the relevant number, and it is solidly positive. Q1 2026 (net income +$364M, EPS $1.28, +165% YoY) shows the operating leverage to the lithium recovery, cushioned by iodine.

6.2 The diversification cushion — quantified

The mechanism that kept SQM profitable is visible in the gross-profit mix. As lithium gross profit collapsed 73% from $2,224M (2023) to $603M (2025), iodine gross profit rose to $562M and SPN held ~$145M — so the non-lithium businesses contributed ~$700M+ of gross profit at the trough, almost as much as lithium. At recovered Q1 2026 prices the mix swings back to ~75% lithium / 19% iodine / 5% SPN — which is precisely the counter-cyclical design: iodine is largest when lithium is weakest. This barbell is the structural reason SQM’s earnings floor is so much higher than Albemarle’s.

6.3 Balance sheet — investment-grade, no emergency dilution

(FACT — SQM 20-F / Q1 2026 6-K.)

SQM’s balance sheet is the stronger of the two lithium majors: net debt of ~$2.3B is ~1.1x EBITDA, the credit rating (S&P BBB+ / Moody’s Baa1, negative outlook) is a notch above Albemarle, and — critically — SQM funded the downturn without dilutive emergency equity. Where Albemarle issued a $2.3B mandatory convertible preferred (a ~15–18% future dilution) to plug a cash hole, SQM funded the cycle with steady operations, hybrid/subordinated notes (equity-credit), and positive free cash flow. The one balance-sheet item to track is the ~$2.36B non-controlling interest created by consolidating the Codelco JV — economically the SQM analog of Albemarle’s preferred (a senior-to-common claim on the lithium business that leaks ~$50M+/year out of per-share earnings and grows toward the 2031 control transfer).

6.4 Cash flow and the dividend

*(FACT — SQM 20-F. FY2023 FCF reflects a ~$2.3B tax cash outflow (the 2023 tax shock), not an operating shortfall.)

SQM is asset-heavy but disciplined: capex held steady at ~$0.9–1.1B/year (Atacama, iodine, the Australian Mt Holland/Kwinana hard-rock hedge, China hydroxide) — it did not over-build into the peak and write it off, as Albemarle did, and it stayed free-cash-flow-positive through the trough. The dividend is a variable Chilean payout (~50% of prior-year net income, 30% legal floor) that swung violently from $1,471M (2023) to $4M (2025). This is arguably superior capital discipline to Albemarle’s balance-sheet-funded dividend-aristocrat streak — it pays out when the company earns and conserves cash when it does not, avoiding trough strain — but it offers ADR holders no income anchor (and is subject to Chilean withholding tax of up to 35%, partly creditable). SQM does not buy back stock (Chilean issuers rarely do).

6.5 Returns and financial-quality verdict

Through-cycle ROE is ~13% (≈2x Albemarle), ROIC clears the cost of capital, and SQM is investment-grade with positive trough free cash flow and no dilution — on every financial-quality dimension it is the stronger of the two lithium majors. Verdict: SQM is financially superior to Albemarle — profitable through the cycle, IG-plus, self-funded, with a real (if violently variable) dividend and ~2x the returns. The genuine caveats are the single-country Chilean concentration, the punishing CORFO lease/mining-tax regime, and the growing Codelco minority interest that, from 2025, means SQM no longer keeps 100% of its crown-jewel lithium economics.

7. Capital Allocation

7.1 Disciplined, self-funded counter-cyclical investment

SQM’s capital-allocation record through the cycle is genuinely better than Albemarle’s. Where Albemarle over-built its highest-cost capacity into the 2022–2023 price peak and then wrote off ~$1.6B (Kemerton) and idled it, SQM held capex steady at ~$0.9–1.1B/year — investing in low-cost Atacama brine expansion, iodine capacity, the Australian Mt Holland/Kwinana hydroxide JV (its geographic diversification hedge), and China hydroxide — while staying free-cash-flow-positive and investment-grade, with no write-offs and no dilution. The one quality caveat is Mt Holland/Covalent (a 50/50 JV with Wesfarmers): a higher-cost hard-rock asset whose economics are marginal versus Atacama brine, echoing Albemarle’s Greenbushes-versus-Kemerton split — a reasonable geographic hedge but not a great asset. Overall, SQM did not commit Albemarle’s pro-cyclical over-build error.

7.2 The Codelco JV — disciplined damage-control, not value creation

The dominant capital-allocation decision is the Codelco deal, and the honest assessment is that it was disciplined damage-control forced by political reality, not value-creating capital allocation. SQM traded 50%+1 control and the large majority of post-2031 lithium economics to the state in exchange for tenure to 2060 and a near-term quota bump. That removed the existential 2030 CORFO lease cliff (which would have been catastrophic) and won near-term volume — genuinely the right defensive move given the National Lithium Strategy — but it surrendered control of the crown-jewel asset and most of its long-run margin. It is best read as management making the best of a bad sovereign hand: securing the resource at the cost of the shareholder’s long-tail economics. (INTERPRETATION.)

7.3 The variable dividend — superior discipline, no anchor

SQM’s variable-dividend policy (pay ~50% of what you earn, conserve when you don’t) is, in capital-allocation terms, more disciplined than Albemarle’s protect-the-aristocrat-streak approach: SQM did not fund a dividend from the balance sheet at the trough (the payout fell to $4M in 2025), avoiding the financial engineering Albemarle resorted to. The cost is that the dividend is not a reliable income stream for ADR holders. On balance this is a feature, not a bug — it reflects a controller-and-state ownership base that prioritizes flexibility over a dividend-growth narrative.

7.4 Ownership and governance — the discount factor

This is where SQM’s quality is most impaired, and it is a genuine, structural negative. The control structure is the Ponce “cascadas” pyramid: Julio Ponce Lerou (Pinochet’s former son-in-law) controls SQM through a cascade of holding companies (Norte Grande → Oro Blanco → Pampa Calichera), letting him direct ~25% of the vote on an estimated ~8–12% economic interest. The 2014 Caso Cascadas scandal (circular related-party trades, regulatory fines) is the precise agency risk minority holders carry, and the Chilean regulator’s 2018 finding that the Pampa Group is “not a controller” is a convenient legal fiction. Tianqi (Chinese, ~22%) is a hostile strategic that opposed the Codelco deal, lost its Supreme Court appeal in January 2026, and is only trimming (not exiting) — a large unhappy holder on the FEOC line. There is a 2017 SEC/DOJ FCPA settlement (>$30M) for payments to Chilean politicians, and an open FCPA subpoena disclosed in the FY2025 20-F. The two-class structure (Series A elects seven of eight directors; the ADR Series B elects one through 2043) subordinates minority ADR holders, and the May 2026 board change (appointing Pinochet-era finance minister Hernán Büchi, controller-aligned, as Vice Chair) added no independence. Executive compensation is disclosed only in aggregate (no individual figures, no say-on-pay). Net: SQM warrants a material governance/control discount versus a cleanly-governed Western peer like Albemarle — minority ADR holders sit behind the controller, the Chinese strategic, and the state. (FACT — SQM FY2025 20-F, Items 6–7; SEC 2017 FCPA release; Chilean regulatory record.)

7.5 Capital-allocation verdict

Superior capital discipline inside an inferior governance wrapper — the mirror image of Albemarle. SQM’s allocation craft is genuinely better (no over-build, no impairments, positive trough FCF, IG-plus, no dilution, a self-correcting variable dividend, a defensive Codelco deal that secured the resource). But the Ponce control, the hostile ~22% Tianqi stake, the two-class subordination of ADR holders, the 2017-plus-open FCPA matters, and the Codelco state-capture together subordinate minority interests to the controller, the Chinese strategic, and the state — warranting a real discount. Where Albemarle is a clean-governance company with poor capital discipline, SQM is a well-disciplined allocator with a governance and control structure that minority shareholders cannot ignore.

8. Changes and Headwinds — Last Two Years

A dated timeline of the (largely structural and cyclical) changes:

• April 2024 — EIAM lithium mining tax takes effect (a permanent fiscal step-up that raised SQM’s tax burden); the SII tax-litigation overhang continues. (FACT.)
• May 2024 — Codelco JV signed (the central structural change), beginning the regulatory-approval process.
• 2023–2025 — the lithium crash (realized price −70%) offset by record iodine prices (~$72/kg) and rising lithium volumes — the diversification cushion in action, keeping SQM profitable.
• April 2025 — Chilean FNE antitrust approval of the Codelco deal.
• November 10, 2025 — China SAMR conditional approval (the final gate; Tianqi’s stake gave Beijing leverage).
• December 14, 2025 — Kast elected (~58%), easing the resource-nationalism tone (peso/equity-supportive), though the Codelco terms were already locked.
• December 27, 2025 — the Codelco JV closes (Nova Andino Litio; state control from 2031; tenure to 2060) — pointedly before the new administration.
• Q4 2025–Q1 2026 — the lithium price recovery (carbonate roughly doubled to ~$25k/t) and SQM’s Q1 2026 results (net income +$364M, EPS $1.28, +165% YoY), with Chinese carbonate already fading from a May-2026 high as swing supply (Bald Hill/Finniss) restarts.
• January 26, 2026 — Tianqi loses its Chilean Supreme Court appeal against the Codelco deal (international arbitration remains open) — the last major legal overhang cleared.
• May 26, 2026 — board change: Vice Chairman Guerrero resigned; Hernán Büchi (controller-aligned) appointed Vice Chairman — continuity of the Ponce/Pampa bloc, no independence gain. CEO Ricardo Ramos and CFO Gerardo Illanes continue.

Verdict: mixed-to-clarifying, not thesis-strengthening. Uncertainty is down (the lithium recovery, the Codelco deal closed, Tianqi beaten, Kast easing the tone), but long-term per-share lithium value is structurally lower (the EIAM tax is permanent; the post-2031 economics are transferred to the state). SQM traded the crown jewel’s long tail for certainty. The genuine positive surprise of the window — record iodine prices — reinforces the quality of the non-lithium franchise.

9. Risk Analysis

Risk summary. SQM’s risk profile is the inverse of a typical lithium pure-play in one respect — balance-sheet/solvency risk is low (IG-plus, ~1.1x leverage, profitable, positive FCF), and the iodine floor cushions the lithium downside (beta 1.03 versus Albemarle’s 1.37). The dominant risks are instead structural and sovereign: the lithium price (uncontrollable), the scheduled post-2031 state capture of the crown jewel (a known, large, value-transferring event), and the concentrated Chilean political/governance overhang. Unusually, the biggest risk is not a market event but a contractual one — the 2031 control transfer is already written. The mitigants are the genuine quality (iodine, low-cost lithium, IG balance sheet, profitability) that make a permanent impairment unlikely; the realistic downside is a price-and-discount-driven drawdown, not a wipeout.

10. Valuation Discussion

(Embedded-expectations, sum-of-the-parts, and scenario framing only. No price target. No recommendation. Valued relative to Albemarle, the closest comp, using the same levered-call-on-lithium methodology.)

10.1 Comparables — better business, not a cheaper stock

*(FACT — public market-data aggregators, accessed 2026-06-05. SQM ~13.2x on mid-cycle TTM EBITDA; †ALB ~21.5x on trough EBITDA — both compress to ~8–10x on normalized EBITDA, so neither is “cheap” relative to the other on a like-for-like basis.)

The SQM-versus-Albemarle read is precise: SQM is richer on book (P/B ~3.78x vs ~1.99x) and sales, and identical on forward earnings (~13x both). The P/B premium is justified — SQM earns ~2x Albemarle’s return on equity (~13% through the trough vs ~6.6% through-cycle), and ~2x the ROE supports ~2x the book multiple. So SQM is the better business at a deserved book premium — but it is not a cheaper stock than Albemarle on a like-for-like basis. The quality premium (profitable through the cycle, lowest-cost brine, the iodine moat, IG-plus, lower beta, no dilution) is netted against the discount (Codelco state-capture, single-country Chile, governance) — and on forward earnings they roughly offset.

10.2 Sum-of-the-parts — you are paying for iodine and the next six years of lithium

SQM’s distinctive valuation feature is that its pieces are genuinely separable, and the iodine/SPN franchises are Codelco-independent:

(ASSUMPTION-driven. Summing the parts, then subtracting ~$2.3B net debt and the ~$2.36B NCI, a conservative discounted SOTP lands ~$28–40/share — below the ~$75 market. The gap is a framing artifact: the market values SQM on recovered/mid-cycle earnings power (forward EPS ~$5–6 × ~13x ≈ $65–78) plus iodine as an ongoing-concern multiple, not a conservative discounted SOTP.)

The crucial takeaway: at ~$75, the iodine monopoly (~$5–8B) plus the 2025–2030 lithium cash flows carry most of the enterprise value; the state-capped post-2031 lithium tail contributes little. You are paying for iodine and the next six years of lithium, with the long tail as thin optionality — the opposite of a pure producer where the long-dated reserve life drives the value. The Codelco state-capture destroys an estimated ~$6–12B of theoretical lithium NPV versus an un-encumbered producer; that destruction is the price of securing tenure to 2060, and it is the structural reason SQM cannot be a lithium multi-bagger the way an un-encumbered low-cost producer could.

10.2b Iodine standalone — the under-priced anchor

It is worth isolating the iodine valuation, because it is the part of the SOTP most likely to be mispriced and the part the bull case rests on. On ~$1.04B of FY2025 revenue at a >50% gross margin, iodine generates on the order of ~$450–500M of segment operating income, and — as a structurally supply-constrained, inelastic-demand, growing near-monopoly with genuine pricing power — it merits a premium specialty-chemical multiple. At 12–18x EBIT, iodine alone is worth roughly $5–8B of enterprise value, or ~$18–28 per SQM share — i.e., on the order of a quarter to a third of the entire ~$21.4B market capitalization sits in a single business that has nothing to do with lithium, the Codelco state deal, or the lithium price cycle. That franchise would, in isolation, command a higher multiple and a lower beta than the consolidated stock carries — which is precisely the bull’s mispricing thesis: if the market values SQM as “a Chilean lithium miner with a state overhang,” it is under-crediting a high-quality, Codelco-independent monopoly that happens to be bolted onto a lithium producer. The risk to this anchor is that iodine prices are at records (a level the base/bull cases assume holds); a hard mean-reversion in iodine would simultaneously remove the earnings floor and the SOTP support, which is why iodine-price durability is the single most important non-lithium open question. The standalone iodine value is the reason SQM’s downside is cushioned and its discount may be too wide — and the reason it is a genuinely different proposition from a lithium pure-play.

10.3 Embedded expectations — a two-variable bet with an iodine seatbelt

At ~$24–26B EV capitalized at a normalized ~8–10x, the market is underwriting ~$2.5–3.1B of mid-cycle EBITDA — which requires both a mid-cycle lithium price (~$15–20/kg) AND iodine near its record (~$70/kg) to hold. SQM is therefore a two-variable bet (lithium and iodine), where Albemarle is essentially a one-variable lithium bet. The compensating feature is that SQM is a levered call on lithium with an iodine seatbelt and a state-imposed post-2031 speed limit — the operating leverage to a lithium recovery is real but dampened (beta 1.03 vs 1.37) because ~40% of trough gross profit is inelastic iodine and the ~$7B specialties core does not move with lithium, and the upside is capped because the state takes the majority of post-2031 gains.

10.4 Scenario analysis (per-share equity zones, explicitly not a target)

(ASSUMPTION-driven. Two features distinguish SQM’s distribution from Albemarle’s: the bear is cushioned — the iodine floor, through-cycle profitability, and IG balance sheet mean SQM stays profitable and never traded sub-book (its ~$29 low was ~1.4x P/B, versus Albemarle’s sub-book ~0.64x trough); and the bull is capped — the state takes ~70–85% of post-2031 lithium upside, so SQM cannot be the un-encumbered multi-bagger Albemarle could be. At ~$75, the stock sits mid-base-zone, having round-tripped from a ~$29 low to a ~$97 high — the easy off-trough mean-reversion is largely complete.)

10.5 P/B, own-history, and the correctly-vs-incorrectly-priced read

SQM’s P/B of ~3.78x (vs Albemarle’s ~2.0x) is higher because it earns ~2x the ROE and returns more capital — but P/B is a weaker floor for SQM than for Albemarle, because SQM’s book is net of the ~$2.36B Codelco NCI and the crown-jewel economics transfer to the state post-2031; SQM never traded sub-book (the ~$29 low was ~1.4x P/B) precisely because iodine plus profitability mean the market will not price its assets at liquidation. Own-history valuation sits at roughly the mid-point of its trailing-decade range. On the correctly-vs-incorrectly-priced question:

• Priced correctly: the ~2x P/B premium to Albemarle (matching the ~2x ROE gap); the recovery (the stock is well below its $97 high); that the Codelco deal caps the long-run upside; that SQM is not a sub-book distress story.
• Possibly under-priced (the bull’s edge): the standalone iodine near-monopoly (~$5–8B of high-quality, lithium-cycle-independent, Codelco-independent EV). If the market lumps SQM into a “Chilean lithium miner with a state overhang” bucket, it under-credits a genuine specialty franchise, and the discount to a clean specialty peer is too wide.
• Possibly correctly discounted (the bear’s point): the same ~13x forward P/E as Albemarle despite higher quality may correctly net SQM’s quality premium against the state takeover, single-country Chile, the governance overhang, and the two-variable (lithium and iodine-at-a-record) embedded bet.
• Synthesis: SQM is unambiguously a “better business at a deserved discount” — but not unambiguously cheaper than Albemarle. The live variant-perception crux is whether the iodine franchise is durable and valuable enough that the net should tilt toward SQM — a question that hinges on iodine-price durability and on the market looking through the state overhang, not on the lithium price alone.

11. Variant Perception

11.1 Consensus and positioning

Consensus understands SQM as a cheaper, profitable, diversified lithium play — a levered call like Albemarle but with an iodine ballast and an IG balance sheet — at a deserved discount for Chilean concentration, the Codelco state-takeover, and the Ponce/Tianqi/two-class governance. The stock has already ~2.5x’d off its ~$29 low to ~$75. Positioning offers no edge: short interest is ~1.6%, institutional ownership is only ~34% (the controlled register absorbs the rest), and beta is 1.03 (the iodine/diversification dampens the gearing) — neither a crowded short nor a crowded long. The variant question is therefore about quality-versus-discount, not positioning.

11.2 The bull case

SQM is the cheapest quality lithium exposure: the world’s lowest-cost lithium resource (Atacama brine) plus an iodine near-monopoly that the market under-credits. It stayed profitable, free-cash-flow-positive, and investment-grade through the worst lithium crash in a decade — a real earnings floor Albemarle lacks. It offers genuine operating leverage to the lithium recovery (Q1 2026 net income +165%) plus a structural iodine grower at record prices, with tenure now secured to 2060 and Chilean political risk easing under Kast. If the market values the standalone iodine franchise properly and looks through the state overhang to the strong 2025–2030 lithium cash flows, the discount to a clean specialty peer is too wide.

11.3 The bear case

The Chilean state takes 50%+1 control and the large majority of post-2031 lithium margin — the crown-jewel lithium NPV is being transferred to Chile and is a wasting asset beyond 2030. SQM is ~100% concentrated in a single country, carries a governance discount (Ponce control, a hostile 22% Tianqi, two-class subordination of ADR holders, a 2017-plus-open FCPA), pays a variable dividend that gives no income anchor, and operates in the same commoditizing, China-controlled lithium market with swing supply already restarting. Much of the recovery is already priced after the ~2.5x off the low, and the embedded valuation requires both lithium and record iodine prices to hold.

11.4 The 3–5 assumptions that matter most, and their falsifiers

1. The lithium price path (the master cyclical variable). Falsified for the bull if carbonate rolls back below ~$13–15/kg in 2H 2026 as swing supply restarts.
2. The post-2031 economics and tenure (the bear’s core structural point). Falsified for the bear only if the post-2031 state share proves less punitive than feared — unlikely, as the terms are set.
3. Iodine-price durability (the second variable and the quality anchor). Falsified for the bull if record iodine mean-reverts hard; falsified for the bear if iodine stays a high-margin grower (then the discount is too wide).
4. Chilean fiscal/political stability under Kast.
5. Persistence of the governance discount — does the market ever re-rate a controlled, two-class, state-partnered company?

• The overall bull is falsified if either lithium or iodine rolls over while the state-capture caps the upside; the overall bear is falsified if iodine durability plus the strong 2025–2030 lithium cash flows prove the standalone quality the market is under-crediting.

11.5 Honest framing

SQM is a “better business at a largely-deserved discount.” It beats Albemarle on cost, through-cycle profitability, balance sheet, diversification, and downside protection (beta 1.03, never sub-book, profitable through the trough). But the discount is not pure mispricing — the Codelco state takeover genuinely caps the long-tail lithium upside that makes a levered commodity call a multi-bagger, and the governance/Chile concentration are real. The live variant-perception edge is the iodine near-monopoly: the market may over-apply the “Chilean lithium miner with a state overhang” narrative to a company ~40% of whose trough profit comes from a supply-disciplined, inelastic-demand, Codelco-independent monopoly with nothing to do with lithium or the state. That is the open question — and it is a quality-and-iodine question, not a lithium-price question.

12. Fact vs. Interpretation Table

13. Open Questions

1. How durable are record iodine prices? Iodine is ~40% of trough gross profit and the second variable in the embedded valuation; its durability is the quality anchor and the bull’s edge.
2. What exactly is SQM’s post-2031 economic share of the Codelco JV, and what is the haircut lithium NPV of the 2031–2060 minority tail?
3. Is the lithium recovery durable or a destocking head-fake (swing supply is already restarting)?
4. Does the market ever re-rate the standalone iodine franchise, or does the “Chilean lithium miner with a state overhang” narrative persist?
5. How does the NCI leakage evolve as the Codelco minority grows toward the 2031 control transfer, and how much does it erode per-share earnings?
6. What is the resolution of the open FCPA subpoena and the SII tax dispute?
7. Does Tianqi exit (a possible overhang clearing / FEOC-math change) or stay a hostile holder?
8. What is SQM’s true mid-cycle EPS once the EIAM tax and the rising Codelco NCI are fully reflected?

14. What Must Be True

14.1 Bull case — what must be true

1. Lithium recovers and holds a mid-cycle ~$15–20/kg (or better), and SQM’s low-cost Atacama position captures it through 2030.
2. Iodine stays a high-margin grower near record prices — the earnings floor holds and the market eventually credits the standalone near-monopoly.
3. The market looks through the state overhang to the strong 2025–2030 lithium cash flows plus the iodine/SPN franchises, narrowing the discount to a clean specialty peer.
4. Chilean political/fiscal risk stabilizes under Kast without further extraction.

Falsification test for the bull: if lithium rolls back below ~$13–15/kg or record iodine mean-reverts hard, the two-variable bet fails and the state-capped upside offers no offset — the stock drifts toward the base/bear zones with no multi-bagger optionality (the state took it).

14.2 Bear case — what must be true

1. The post-2031 state capture dominates the long-run value — the crown-jewel lithium NPV is transferred to Chile, so SQM is a wasting lithium asset plus iodine.
2. Lithium stays oversupplied / range-bound (China-controlled, swing supply restarting), and iodine eventually mean-reverts from records.
3. The governance and single-country discount persist — the market never re-rates a controlled, two-class, state-partnered, FCPA-tainted company.

Falsification test for the bear: if iodine proves a durable, growing, high-margin near-monopoly (worth $5–8B on its own) and the 2025–2030 lithium cash flows are strong, the “deserved discount” proves too wide and the standalone quality re-rates — SQM would be revealed as a better business the market mis-bucketed.

Synthesis (no recommendation): SQM is a genuinely higher-quality business than Albemarle — profitable through the cycle, lowest-cost lithium plus an iodine near-monopoly, IG-plus, disciplined — but it is fairly valued, not cheap, after a 2.5x recovery, its lithium upside is structurally capped by the Chilean state, and it carries a real governance and country-concentration discount. The debate is not about business quality (SQM wins that versus Albemarle) but about whether the under-appreciated iodine franchise makes the discount too wide, against the reality that the crown-jewel lithium economics are being transferred to Chile. The stance should rest on conviction in iodine durability and tolerance for a controlled, single-country, state-partnered structure. This note takes no position; the labeled “Claude’s Take” block at the top is the only place a view is expressed.

15. Source Appendix (selected primary sources)

Primary filings (SEC EDGAR, CIK 0000909037; SQM is a foreign private issuer — files 20-F/6-K under IFRS):

• SQM FY2025 Form 20-F, filed 2026-04-22 — financial statements (IFRS), by-segment revenue and gross profit, lithium/iodine realized prices and volumes, the Codelco JV terms and risk factors, ownership/major-shareholders, the FCPA disclosures, the CORFO/EIAM tax regime.
• Q1 2026 6-K earnings release, filed 2026-05-27 — Q1 2026 results (NI +$364M, EPS $1.28), by-segment recovery, realized prices.
• 6-K board changes, filed 2026-05-27 — the Vice-Chair change (Büchi).
• Prior 20-Fs (FY2024, FY2023) — multi-year boom-to-bust comparatives.

Industry / sector data: Fastmarkets, S&P Global, InvestingNews (lithium prices, supply/demand, the Q4’25–Q1’26 recovery); iodine market sources (imarc, FactMR, McGroup) for size, supply structure (Chile caliche + Japanese brine), and the record-price drivers; Codelco/Bloomberg/Mining.com and Chilean government sources on the Nova Andino JV; Chilean court record on the Tianqi litigation; DOE FEOC guidance.

A fuller categorized source list appears in Appendix B.

End of note body. The Diligence Questionnaire (Appendix A) and the Source Appendix (Appendix B) follow.

Appendix A — Diligence Questionnaire

Supplemental. Fact / Interpretation / Assumption labels applied where material.

General

What thoughtful questions have other investors asked about this company? The recurring questions: (1) Is SQM a better way to own the lithium recovery than ALB? (better business, but is it cheaper?). (2) How much of the lithium crown-jewel value does the Codelco state takeover destroy? (3) Is the record iodine price durable — and is the standalone iodine monopoly under-credited? (4) How big a discount does the Ponce/Tianqi/two-class governance warrant? (5) What is SQM worth post-2031 when it loses control of Atacama? The honest frame: SQM is a “better business at a deserved discount” — the debate is whether the iodine franchise makes the discount too wide. (Interpretation.)

Cyclicality & Earnings Nature

Are earnings at a cyclical high or low? Recovering off a low, cushioned. Lithium earnings troughed in FY2024–2025 and are recovering (Q1 2026 NI +165% YoY); but unlike ALB, SQM stayed profitable throughout because iodine (at record prices) and low-cost lithium held the floor. Not a clean cyclical low — a cushioned one. (Fact/Interpretation.)

Are earnings driven by the external environment or internal actions? Both, with a higher internal/structural floor than ALB. External: the lithium price (uncontrollable) and the iodine price (supply-disciplined but still a market). Internal/structural: the lowest-cost Atacama position, the iodine near-monopoly, and — increasingly — the Chilean state (EIAM tax, CORFO royalty, the Codelco take). The state is now a major determinant of SQM’s lithium economics. (Interpretation.)

How stable are revenues? Lithium revenue is highly unstable (price-driven, ±$8B swing 2022→2024); iodine and SPN are far more stable (~$1.9B combined, high-margin, less cyclical). The barbell gives SQM a more stable profit base than a lithium pure-play. (Fact.)

Outlook for products and services? Lithium: secular-demand but commoditizing/China-controlled/state-capped. Iodine: structurally tight supply + inelastic, growing (contrast-media) demand = the best outlook. SPN: steady. (Interpretation.)

How big is this market — growing, shrinking, domestic or international? Lithium ~1.8M t LCE (2025) → ~3–3.7M t by 2030; iodine ~$3B/~37–40kt (a small, tight market SQM dominates); SPN a niche of the global fertilizer market. SQM sells globally; production is ~100% Chile-concentrated. (Fact.)

Business Quality & Competitive Moat

Is the industry getting more or less competitive? Lithium: structurally competitive/commoditizing (China). Iodine: a stable, supply-disciplined near-monopoly (no China, only two geologies). SQM’s relative lithium position is strong on cost; its iodine position is dominant.

How profitable is this business (ROIC, ROE)? Genuinely — and through the cycle. TTM ROE ~13.4% (≈2x ALB’s ~6.6%); ROIC clears WACC; positive even at the trough. Iodine alone runs >50% gross margin. (Fact.)

How profitable is the industry — competitors, barriers to entry? Lithium: low through-cycle returns industry-wide; barriers = resource quality. Iodine: high returns, very high barriers (resource scarcity — only Chilean caliche + Japanese brine). SQM participates in the attractive iodine pool and the lowest-cost lithium.

Can the business be easily understood? Yes — a low-cost lithium producer + an iodine near-monopoly + specialty fertilizers, in Chile, increasingly state-partnered. The complexity is the Codelco two-regime lithium structure and the cascade ownership. (Interpretation.)

Can it be undermined by foreign, low-cost labor? Not labor — by Chinese subsidized lithium capacity/capital (same as ALB). Iodine is protected by resource scarcity (no Chinese source). (Fact/Interpretation.)

Do brands matter? Modestly — SPN carries the Ultrasol/Qrop specialty-fertilizer brands (some stickiness); lithium and iodine are sold on spec/price, though iodine’s scarcity gives pricing power without brand. (Interpretation.)

Nature of competition? Cost-curve competition in lithium (SQM among the lowest); near-monopoly pricing in iodine; specialty positioning in SPN. SQM leads on resource cost in lithium and dominates iodine.

Customers’ switching costs? Low-to-modest in commodity lithium/potassium; higher in iodine (qualified medical/industrial supply, multi-year contrast-media contracts, no alternative source) and SPN (agronomic qualification, branding). (Interpretation.)

Barriers to entry? Resource scarcity is the real barrier — Atacama brine (lithium/potassium) and caliche (iodine/nitrate) are irreplaceable orebodies. Plus the CORFO concession and, now, the state partnership. Very high for iodine; high for low-cost lithium.

Financial Condition & Balance Sheet

Assets not fully recognized on the balance sheet? The iodine near-monopoly value (a high-margin franchise understated in a “lithium miner” framing) and the scarce caliche/brine orebodies. Conversely, the lithium business’s book value overstates its shareholder value post-2031 (the state takes control/economics). (Interpretation.)

Off-balance-sheet liabilities? The ~$2.36B Codelco non-controlling interest is on the balance sheet but functions as a senior-to-common claim on the lithium business (the SQM analog of ALB’s preferred); the CORFO progressive royalty and EIAM mining tax are large contingent/ongoing claims; the SII tax dispute and the open FCPA subpoena are live contingencies. (Fact.)

How conservative is the accounting? IFRS; reasonably conservative, but read carefully — the FY2023 results carried a large tax charge, the 20-F overview wording on FY2025 net income is internally inconsistent (it is a profit), and the by-segment gross-profit disclosure is essential to understanding the diversification. The growing NCI must be tracked to assess per-share earnings. (Interpretation.)

How CapEx-hungry is the business? Capital-heavy but disciplined — ~$0.9–1.1B/year, steady (no over-build/no write-offs, unlike ALB), self-funded from operating cash flow. (Fact.)

Capital Allocation & Management

How much free cash flow, and how is it used? Positive through the trough (+$303M FY24, +$437M FY25); used for capex, debt service, and the variable dividend. Self-funded; no buybacks. (Fact.)

Significant acquisitions recently? The defining transaction is the Codelco JV (a state partnership, not an acquisition — securing tenure to 2060 at the cost of control/economics from 2031). The Mt Holland/Kwinana Australia JV (with Wesfarmers) is the geographic diversification investment. (Fact.)

Buying back shares? No — Chilean issuers rarely do; capital goes to capex and the variable dividend. (Fact.)

Issuing large amounts of new shares to insiders? No material dilution; the cycle was funded with debt/hybrids, not equity (the contrast with ALB’s $2.3B preferred). The growing Codelco NCI dilutes per-share economics, but that is a JV structure, not share issuance. (Fact.)

Compensation policy of directors and management? Disclosed only in aggregate (Chilean practice; no individual figures, no say-on-pay) — a governance weakness. CEO Ricardo Ramos / CFO Gerardo Illanes. The controlled, two-class structure means the board answers to the Series A controller. (Fact/Interpretation.)

Motivations of management? A disciplined operating team (good capital craft) working within a controlled-company structure that serves the Ponce controller, the Chinese strategic (Tianqi), and now the state — minority ADR holders’ interests are subordinate. The Codelco deal was competent damage-control, not value creation. (Fact/Interpretation.)

Valuation & Market Data

Is the stock an ADR, MLP, or K-1 issuer? An ADR (NYSE: SQM, Series B; 1 ADR = 1 Series B share). NOT a K-1/MLP. The dividend is subject to Chilean “Additional Tax” withholding (up to ~35% gross, partly offset by the Chilean corporate credit) — a material consideration for US holders. Two share classes (A voting / B ADR). (Fact.)

Dividend policy? Variable — ~50% of prior-year net income (30% legal floor); swung $1,471M (FY23) → $4M (FY25). Disciplined (no trough strain) but no income anchor; yield ~1.3% in recovery. (Fact.)

How profitable is the business? Genuinely — ~13% TTM ROE, profitable through the cycle, >50%-margin iodine, lowest-cost lithium. The most profitable lithium major through the trough. (Fact.)

Is net income diverging from cash from operations? Less than at ALB (no large non-cash impairments). The key adjustments are the Chilean tax timing (the 2023 charge) and the growing Codelco NCI (which sits below net income to controllers). FCF is positive and tracks earnings reasonably. (Fact/Interpretation.)

Risks & Downside

What would cause the stock to decline? A lithium-price rollback (swing supply restarting); iodine prices mean-reverting from records (the second variable); further Chilean tax/royalty/state extraction; a widening governance discount; or the market fully pricing the post-2031 state capture. Less geared than ALB (beta 1.03) due to the iodine cushion. (Interpretation; risk matrix.)

Risk of catastrophic loss? Low — IG-plus, ~1.1x leverage, profitable through the cycle, positive FCF, an iodine monopoly that won’t be priced at liquidation (the $29 low was ~1.4x book, never sub-book). The realistic downside is a price-and-discount drawdown, not a wipeout. The unusual feature is that the largest risk is contractual (the scheduled 2031 state control transfer), not a market event. (Interpretation.)

Chance of a total loss? Very low — scarce irreplaceable orebodies, an IG balance sheet, two profitable franchises. Even the post-2031 lithium minority tail plus the Codelco-independent iodine/SPN businesses retain substantial value. The genuine risk is capped upside / mediocre long-run returns if the state extracts and lithium stays low — not zero. (Interpretation.)

Recent News & Events

Has the business environment changed recently? Yes, materially: the Codelco JV closed (Dec 2025) — the single biggest structural change (tenure to 2060, state control from 2031); the lithium price recovered (Q4’25–Q1’26) and Q1 2026 results inflected (+165% NI); iodine prices hit records; Tianqi lost its Supreme Court challenge (Jan 2026); and the Kast election (Dec 2025) eased the resource-nationalism tone. Net: uncertainty down, but long-term per-share lithium value structurally lower. The recent news flow is quiet. (Fact.)

Significant acquisitions? The Codelco state partnership (see above) is the defining recent transaction. (Fact.)

Recent change in accounting policies? No material policy change; the notable items are the EIAM mining tax (Apr 2024, a permanent fiscal step-up), the consolidation of the Codelco JV (creating the ~$2.36B NCI), and the by-segment disclosure essential to the diversification analysis. (Fact.)

Recent changes in the business — new markets, facilities, management? The Codelco JV (control transfers 2031); the Mt Holland/Kwinana Australia ramp; the deliberate shrinking of commodity potassium to free up lithium brine; record iodine pricing; a May-2026 Vice-Chair board change (Büchi, controller-aligned); CEO Ramos/CFO Illanes continue. (Fact — 20-F / 6-Ks, 2024–2026.)

Appendix B — Source Appendix

Categorized source list for the SQM research note. Primary sources first. All access dates 2026-06 unless noted.

Filing-status note: SQM is a Chilean foreign private issuer — it files Form 20-F (annual, IFRS) and 6-K (interim) with the SEC, not 10-K/10-Q/8-K, and is exempt from Section 16 (so there are no Form 4 insider filings; ownership data comes from the 20-F “Major Shareholders” and Chilean CMF disclosures).

1. Primary — SEC filings (EDGAR, CIK 0000909037)

Comparative companies (public disclosures): Albemarle (ALB — the primary closest comp); Nutrien (NTR) and ICL Group (specialty/fertilizer references); Pilbara Minerals, Mineral Resources (Australian lithium); Tianqi/Ganfeng (Chinese lithium — Tianqi also a ~22% SQM owner); iodine peers (Cosayach/ACF, Ise Chemicals, Nihon Tennen Gas — private/foreign).

2. Quantitative data (reconciled to filings)

• Public market-data aggregators — current price, market cap, multiples, short-interest/ownership, and own-history valuation percentiles (P/E ~56th, P/B ~52nd, P/S ~63rd, composite ~57th percentile vs the stock’s own trailing decade) and comps for SQM/ALB/NTR/ICL. Accessed 2026-06. Third-party aggregate; reconciled to the 20-F.
• SEC EDGAR — used to retrieve the 20-F/6-K documents directly (CIK 0000909037). Note: SQM is an IFRS foreign filer, so EDGAR US-GAAP XBRL queries are unreliable; financials were taken from the 20-F/6-K text/statements directly.

3. Industry / sector data

• Fastmarkets, S&P Global, InvestingNews, EIA — lithium prices (carbonate/hydroxide/spodumene), the Q4’25–Q1’26 recovery (~$13k → ~$25–26k/t), supply/demand balance, China midstream dominance, swing-supply restarts.
• Iodine market sources (imarc, FactMR, McGroup, einpresswire) — global iodine market size (~$3B, ~37–40kt/yr), supply structure (Chilean caliche ~60% + Japanese gas-brine ~30%; SQM #1 ~37%), the record-price drivers (structural by-product supply tightness + inelastic X-ray-contrast-media demand).
• Codelco / Chilean government / Bloomberg / Mining.com — the Nova Andino Litio JV terms, approvals (FNE Apr-2025, China SAMR Nov-2025), and the Dec-27-2025 close; Chile’s 2023 National Lithium Strategy; the CORFO lease and EIAM mining tax.
• Chilean court / press record — the Tianqi litigation and the Jan-26-2026 Supreme Court ruling; the 2014 Caso Cascadas; the Dec-2025 Kast election.
• DOE FEOC guidance — the 25% Chinese-ownership threshold (relevant to Tianqi’s ~22% stake and SQM’s FEOC eligibility).

4. Trade press / financial media (secondary, for qualitative/event validation)

• Bloomberg, Reuters, Mining.com, El Mostrador, StockTitan — the Codelco deal, Tianqi opposition, the cascadas history, board changes, Q1 2026 results (third-party color; validated against the 20-F/6-K).
• SEC 2017 FCPA press release — the >$30M settlement; the FY2025 20-F discloses an additional open FCPA subpoena.
• General financial media for lithium/iodine price context and the Chilean political read-through (Kast election).

No price target and no buy/sell recommendation appears in the note body. The single, labeled exception is the “Claude’s Take” block at the top, explicitly the author’s own view and not investment advice.