Core Viewpoint - Chilean Mining and Chemical Company (SQM.US) reported poor performance in Q2 due to weak lithium prices, but maintains a strong balance sheet and competitive production cost advantage, allowing it to absorb market weakness without significant credit deterioration [1] Financial Performance - Q2 revenue decreased by 19% year-on-year to 1 billion Reais [1] - EBITDA fell by 25% year-on-year to 308 million USD, with profit margin declining to 29.5%, a decrease of 2.4 percentage points year-on-year [1] - Lithium segment faced pressure, with stable sales of 53,100 tons (up 1% year-on-year), but revenue dropped by 33% year-on-year to 445 million USD [1] Market Dynamics - China may play a key role in stabilizing lithium prices in the short term, with plans to orderly clear 100,000 tons of lithium mica capacity this year [1] - If fully implemented, this could theoretically re-anchor marginal cost pricing at 20,000 USD/ton [1] - Despite execution pace depending on local factors, policy signals have made market shorts more cautious [1] Cost Structure - SQM has the lowest cash cost globally at approximately 4,000 USD/ton [1] - Even if prices rebound to the range of 12,000 to 14,000 USD/ton, the gross margin per ton can still maintain above 70%, indicating significant profit elasticity compared to higher-cost mines [1] Bond Ratings - The company received an "overweight" rating for its 34-year bonds, reflecting attractive valuation relative to peers and other Chilean assets [2] - The 29-year and 33-year bonds were rated "market weight" due to reasonable relative valuation [2] - The 50-year and 51-year bonds received a "underweight" rating as they do not provide sufficient spread to compensate for the additional term risk compared to mid-term bonds [2]