Moody's lowers SQM rating outlook due to lithium uncertainty

Moody's Ratings affirmed the credit rating of Chilean lithium miner SQM but lowered its outlook to negative from stable due to uncertainty around lithium revenue, the agency said on Thursday.

Moody's also noted that SQM's significant capital expenditure and dividend payments have heightened the company's reliance on debt.

Global prices for lithium, a critical component of electric vehicle batteries, have plunged nearly 90% since their peak in late 2022, causing producers worldwide to slash workforces and pull back on plans.

SQM began laying off 5% of its Chilean workforce last month.

Moody's said SQM, the world's second-largest lithium miner, maintains a strong market position in lithium and iodine but still faces risks from depending on debt financing for capital projects, as well as global trade tensions.

SQM's debt surged from $2.9 billion at the end of 2023 to $4.7 billion by March 2025, accompanied by a more than 50% drop in EBITDA, according to Moody's.

The ratings agency warned that SQM's ratings could be downgraded if the company fails to reduce its debt-to-EBITDA ratio to below 2.5x within 12–18 months, or improve its diversification and stable cash flow generation.

Moody's also noted the importance of lithium prices.

"These market conditions are critical, as they affect SQM's ability to deleverage and return debt to EBITDA levels," it said.