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Sociedad Química y Minera de Chile S.A. (SQM) Q2 2019 Earnings Call Transcript

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Sociedad Química y Minera de Chile S.A. (NYSE: SQM)
Q2 2019 Earnings Call
Aug 22, 2019, 12:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the SQM Second Quarter 2019 Earnings Conference Call. [Operator Instructions]. After today's presentation their will be an opportunity to ask questions. [Operator Instructions].

I would like to turn the conference over to Gerardo Illanes, CFO. Please go ahead.

Gerardo G. Illanes -- Chief Financial Officer

Thank you. Good morning, everyone, and welcome to SQM's Second Quarter 2019 Earnings Conference Call. For your information, this conference call will be recorded and is being webcast live. You may access the webcast later on at our website, www.sqm.com. Our presentation with a summary of the results have been uploaded at our website and is also available on our webcast. Joining me today, our speaker is Ricardo Ramos, Chief Executive Officer.

Before we begin, let me remind you that statements in this conference concerning the company's business outlook, future economic performance, anticipated profitabilities, revenues, expenses or other financial items, anticipated cost synergies and product or service growth together with other statements that are not historical facts, are forward-looking statements as that term is defined under federal securities law. Any forward-looking statements are estimates reflecting the best judgment of SQM based on currently available information and involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those stated in such statements. Risks, uncertainties and other factors that could affect accuracy of such forward-looking statements are identified in the public filings made with the Securities and Exchange Commission and forward-looking statements should be considered in light of those factors.

I now leave you with our Chief Executive Officer, Ricardo Ramos for brief comments before we move to Q&A.

Ricardo Ramos Rodriguez -- Chief Executive Officer

Thank you and good morning for joining us today in the Second Quarter 2019 Earnings Conference Call. I will begin with some brief comments on our second quarter results, before opening the line up for questions. You can follow along with the webcast presentation.

Turning to page three of the webcast presentation, you will see a brief overview of our second quarter results. Our revenue for the six-months ended June 30, 2018 reach almost US$500 million and our net income reach just over US$70 million, lower than the US$134 million reported during the same period last year. We saw a lower adjusted EBITDA margin this quarter when compared to the previous quarter, but it's still above 33%.

Turning to the next page, you can see that the main driver of these lower results was primarily lower contribution to gross profit from lithium because of lower average prices. Although partially offset by higher sales volumes. Our results were also impacted by lower potassium chloride volumes and the lack of solar salts sales during the second quarter. Higher unit prices were strong during the second quarter and we did see a positive change in the contribution to the company's gross profit from these business line. SPN saw dynamic and diverse company which is subject to cycles. We have some lithium, potassium, iodine and SPN leading the companies gross profit.

In the lithium business line. The realized average prices were reported in the second quarter were lower than they once reported in the first quarter mainly because we had been selling under short term contracts which exports us more to the ups and downs of the market. Over the past few months changes in timing and amount of the subsidies given by the Chinese government to the electric vehicle industry had an impact on the behavior of the demand for electric vehicles in the most important market and consequently on the demand for leasing products.

These changes may have a total impact on this year demand of 3,000 to 4,000 metric tons, but should not have a lasting effect on the demand for electric vehicles market as we continue to see a strong commitment from the Chinese government, another relevant players in China and abroad. To the electrification of the vehicle industry. This can be seen in the fact that demand for electric vehicles in China could grow about 33% this year when we compared to last year.

Slight changes in the demand have had direct impact in our realized prices and we continue to have an impact, positive or negative, despite its covering [Phonetic] nice, we're seeing in the market, our commitment to the lithium industry is stronger than ever. We are increasing our production in the second half of this year as we prepared to increase our sales volumes to 65,000 metric tons next year. We keep working on our expansion to plan to reach 120,000 metric tons capacity by the second half of 2021.

Beyond, that our plan is to continue to expand capacity every two years in incremental models of 40,000 metric tons each expansion. Therefore, our next step will be a total capacity of 160,000 metric tons by the end of the year 2023. Since, we are already working on the engineering of this project. All these will led us first recuperate the market share will lost over the past few years and maintain a strong market share in the growing market. It is too early to forecast what may happen in 2020, but there are few things that I think are relevant to discuss at this stage. We have seen higher goods prices in the iodine business line and believe this positive trend could continue in coming months and quarter. The iodine market is a developed market with a steady growth rate Atacama [Phonetic] has access to one of the best iodine resources in the world.

The SPN market is expected to continue with it's healthy growth. The implemental restrictions that we had on the brand extraction in this Salar de Atacama is being released. As a result of higher [Phonetic] sales volumes, of potassium chloride are expected to close to 600,000 metric tons this year that are approximately 20% more than previously anticipated, and we expect to be close to 1 million tons next year 2020.

We believe in the future of the solar salt market and we will be planning a very large concentrated solar power plant project in the Middle East with delivery starting in 2020, which would require over 400,000 metric tons, as you could see as game continues to take advantage of opportunities across all business lines.

I will close my review in the CapEx plans that we have announced as of today. On Page 6, of the presentation, the Board has approved a CapEx plan of 360,000 million ton -- US$360 billion for 2019. As you can see, is related to our lithium expansion plant in Chile both carbonate and hydroxide. We continue to work with Kidman and Wesfarmers on the Mt. Holland project in Western Australia and we look forward to completing the feasibility study due to the beginning of 2020.

At that point, we will have more details surrounding the CapEx cost and timing of the project. Furthermore, we have previously announced that we are working on the environmental carbonate necessary to increase, high rank capacity in the near future and we're increasing nitrates to meet the growing demand in the industrial and fertilizing nitrates state.

I will now open the lines up for questions.

Questions and Answers:

Operator

We will now begin the question-and-answer session. [Operator Instructions ] The first question will come from Alex Falcao with HSBC.

Alexandre Falcao -- HSBC -- Analyst

Hi, good afternoon. Thanks for taking my question. My question is regarding prices for lithium. Specifically, on the regional breakdowns. We should go into Chile and data. Basically, it says, that you sold a lot more to China than you have previously done in previous quarters, but the price is extremely lower taking about between US$6,000 and US$7,000. Can you comment on why are you selling this in so cheap and if that's a trend that you should continue to see in other quarters? Thank you.

Ricardo Ramos Rodriguez -- Chief Executive Officer

Hello, Alex. Ricardo speaking here. You know that we are significant global layering in the lithium industry. Therefore, we need to sell in all markets, including China, which is a key market in the electric vehicle battery. We sell it to different customers in China with different grades, different industries, different volumes and SQM lithium production and as specification, of course, are aligned with these market requirements. China is going to be a part of our business for sure, in the future, we don't expect to get out of the market. Keep in mind, that we expect to be at 65,000 metric tons next year and continue the growth with the market, it means that very strong growth when moving to the 120,000 metric tons of expansion to the 160,000 that is being under engineering today means we need to sell everywhere.

China and I will not comment about pricing now, but I do not agree with you about the pricing in China in the US$6,000 per metric tons we're selling on market conditions in China today and we're selling in China according the needs of the different industries in China.

Alexandre Falcao -- HSBC -- Analyst

Perfect. Thank you.

Operator

The next question will come from Chris Terry of Deutsche Bank.

Chris Terry -- Deutsche Bank -- Analyst

Hi, and thanks, for taking my questions. The first one just relates to the pricing strategy. Just wondered whether you could remind us how far in advance? How many months forward you have cover over what you're selling the materials at? And whether you can talk a little bit about the fourth quarter previously you had spoken about the second half thing at 11,000 to 12,000. You obviously talked about 3Q specifically. I just wondered whether there's any comments on the rest of the year beyond 3Q? Thanks.

Ricardo Ramos Rodriguez -- Chief Executive Officer

I explained before for the third quarter. We are almost closing all the pricing today, the third quarter. That's why we have an outlook about third quarter. But that's why we have a very good idea about third quarter, but we are -- now, as we speak, currently discussing prices for the fourth quarter. And as, you know, prices are extremely sensitive to slight changes in the short term demand growth. We think that in the next two months we will have a better understanding about a very good outlook over the fourth quarter. Now, we're seeing that it's reasonable to have the outlook over the third quarter out there that is US$10,000 per metric tons that already shared with you -- close too.

Chris Terry -- Deutsche Bank -- Analyst

Okay. Thank you. And just in terms of the China sales. I know, you don't want to comment against those -- that previous the numbers before, but can you talk about the mechanism to which you sell into China? Is it linked at all to the China spot prices at a separate price that's more similar to outside China pricing? Just wanted whether you could talk through how the discussions work within that region? Thank you.

Ricardo Ramos Rodriguez -- Chief Executive Officer

Hi -- Chris, let me comment that China is a market like every single market where you have different customers. And as I explained you before, different customers, we have different industry, different grade. And we sell to every single important customer in China and if this same kind of discussion we -- you have with different customers in Korea or Japan and everywhere. It means it's not a really unique market out there in China. It's a big market. It's an important market because as you may know, an important growth in the electric vehicles is coming from China. That's why the China producer, budget producer, alto producers are very important and will be very important in the future.

We would not see -- we don't see big difference in the negotiation process in relation with these big customers that we have in China as compared to other countries.

Chris Terry -- Deutsche Bank -- Analyst

Okay. Thank you. And just a last one from me. Just on the positive developments in solar salts. Can you talk about -- how that extra 400,000 tons? Should we think about that split evenly over 2020, 2021 and 2022? And what sort of margins should we think about just in terms of the profitability of that division? Is it similar to other tons you sale in that division or is it a separate way of thinking about the profitability? Thank you.

Gerardo G. Illanes -- Chief Financial Officer

Hi Chris, this is Gerardo Illanes answering your question. Of course, the final deliveries schedule will depend on production and the final discussions with the customer when they actually need the product. But it is reasonable to expect something in the neighbourhood of 150 next year, 250 a year after next one and 50,000 [Phonetic] the year 2022. That's more or less how these contracts should be delivered. Regarding prices on margins. It's should be similar than what we have had in previous contract, so there should not be a change or significant change there.

Chris Terry -- Deutsche Bank -- Analyst

Okay, great. Thank you very much. That's all for me.

Operator

The next question will come from Andrew McCarthy of Citi.

Andrew McCarthy -- Citi Banchile -- Analyst

Hi. Good -- good afternoon, everyone. Thanks very much for taking my questions. My first one was just following up on a comment on the impact of 3,000 to 4,000 tons in lithium this year. I just wanted to try and understand. There you're referring to your expected sales for 2019, -- are you therefore saying rather than sort of 45 to 50 for this year, you may be seeing sort of 3,000 to 4,000 less than that now?

And then my other question was regarding the iodine business. You mentioned tight market conditions, but at the same time, you talked about in the press release that you are seeing similar to slightly lower levels of sales volumes this year. Just wanted to try and understand why that was the case, given the prices seem to be moving higher, but you're saying you're going to sell -- sell less this year, if could provide some color to help us understand. That'll be great. Thanks very much.

Ricardo Ramos Rodriguez -- Chief Executive Officer

Okay. Thank you, Andrew. I want to be very clear about 3,000, 4,000 metric tons. Its our estimate about the reduction in the total demand of lithium in equivalent carbonate equivalent in China, its not ASP [Phonetic] itself. We maintain on probably -- on a slight increase in our forecast volumes start for this year. From the beginning we said between 45,000 to 50,000 metric tons this year. I think it's going to be higher than 47. That's what I expect today for this year, as [Indecipherable] sales. But these reduction in China is not affecting us in volumes. Our total global volumes we think, but with each affecting the price environment.

The main reason to mention this 3,000 to 4,000 metric tons is that we think it's affecting the conditions and equilibrium between supply and demand and of course, affecting the price environment worldwide. These regarding the lithium question. Regarding the iodine, if you review our sales last year our sales volumes grew 5% means in 2018 as compared to 2017, reaching a record year in volume sales. If you compare 2017 and 2018, it is very important that it is aligned, we expect that if you consider both the year growth, we expect different here and growth we expect we had last year will be higher than 2.5% average. That is at the same level of the market condition meaning two years we're growing according to the market.

Andrew McCarthy -- Citi Banchile -- Analyst

Thanks very much.

Operator

The next question will come from Ben Isaacson of Scotia Bank.

Ben Isaacson -- Scotia Bank -- Analyst

Hi. Thank you for taking my questions. Three of them. First one is on the SPN business, potash prices looks like they're going to be a little bit weaker over the next few quarters. Can you talk about how that will impact SPN pricing and margins?

Ricardo Ramos Rodriguez -- Chief Executive Officer

Hello, Ben.

Ben Isaacson -- Scotia Bank -- Analyst

Hi Ricardo.

Ricardo Ramos Rodriguez -- Chief Executive Officer

Hi, we'll take you throughout [Indecipherable] when are you going to visit? I hope so.

Ben Isaacson -- Scotia Bank -- Analyst

It'll be done in a few months.

Ricardo Ramos Rodriguez -- Chief Executive Officer

It's going to be great. About this -- of course, both are conservative for raw material. The production of potassium nitrate with our competitors. That's what for sure. Different pricing in both are affecting our cost position and, of course, is affecting some way the potassium nitrate. If you reviewing the past because we have add a lot of up and down in the potassium develop around 10 years, of course, in some way it affects, but it's not in the same effect of the potash price effect. It means when the potash price increase 50%, we don't expect increase our potassium nitrate 50% to be the same example, when their price goes down 50% [Phonetic], we don't expect to decrease our pricing 50%, well, the market price decrease 50% . It means our potassium nitrate pricing is more stable than for potash pricing. But, of course, they are having high potash price is better for us. That's for sure.

Because not only affect the potassium nitrate. It affects our potash industry. As you know, we're selling today. We expect to sell 600,000 metric tonnes this year and I expect sell close to 1 million tonnes next year, we just remind you that [Indecipherable] we sold like 1.3 million tonnes and 1.5 million tonnes of potash. That's why I expect to be 1 million tonnes, probably 2020, and come back to the 1.3 million tonnes and its a very important market for me, even though I'm very small in the potash industry. But for me, it's important. For us it is important, and potassium nitrate is important too. It's that good news having the potash going on. Yes. Is it a terrible news in terms of the potassium nitrate? No. But its affect.

Ben Isaacson -- Scotia Bank -- Analyst

Perfect. Thank you. My second question on lithium costs. If we take out royalties, it looks like you got your costs down quite nicely in Q2, over Q1. My estimate is roughly $4000 a tonne, excluding the royalties. Can you talk about whether that's as low as you expect them to go? Or is there more room for improvement?

Ricardo Ramos Rodriguez -- Chief Executive Officer

I think that -- some mistake in the numbers. If you subtract their royalty to portfolio that demand that with portable royalty number in our webpage, if you want to review it in one press release in the past, is available for everyone. I think that our cost in some way similar to the costs of the first quarter maybe it's slightly high enough cost without consequence royalties and the reasons that we are selling because the average cost eventually were selling products from the first quarter and during that first quarter, within the first quarter our cost was slightly higher because cost was the start tab of new facility we have some additional [Indecipherable].

In the future, now we have a very good news from the lithium plant and I'm more than happy today to inform you that the plant is producing 200 tonnes per day means close to the 70,000 metric tonnes. The only reason why this year we expect to produce this is close to 60,000 metric tonnes it's because we're changing some agreements, improving some areas of the plant. That's why we have to maintain [Indecipherable] in order to do it, but as a total production capacity, we already reached 70,000 and more than sure that next year we would produce something more than 70,000 and the most important thing is that all of the production will be according commercial requirements in 10 of the specs.

That's why the technical spec will be according the commercial need and we would produce more than 70,000 and the other good news is that of course, the total course I except would be low than today because we would be producing more lithium in the same facility producing every single day, that's going to be good.

Anyway, I remember -- let me remind you that the tape there -- the feel with the -- Gerardo, you can explain were we can find.

Gerardo G. Illanes -- Chief Financial Officer

I think, based on -- they remember that the table that we used to calculate the lease payments to CORFO for lithium carbonate it's different at the table of lithium hydroxide and unfortunately, we don't disclose the breakdown between lithium carbonate and lithium hydroxide so for you it's it's somewhat different -- difficult to get to the precise number. But Ricardo was mentioning the trend that we're seeing in the cost and what we expect going forward.

Ben Isaacson -- Scotia Bank -- Analyst

Very helpful. A very last question. I'm not sure if you want to answer it. You talked about $10,000 roughly in guidance for Q3. Can you talk about how -- and you talked also that you're already focused on Q4. So, for July and August, how did those dollar values or those prices trend? And maybe you probably have insight into September as well? Really, it's breaking at -- down on a monthly basis?

Gerardo G. Illanes -- Chief Financial Officer

Yeah, I understand [Indecipherable] breaks it, we don't give the numbers per month and I think the best reasonable way to do it is as an average per quarter -- there is different customer in different months, different industry and so on? I think the average per quarter is better number, we don't disclosure per month and I repeat, we expect as an average pricing for the quarter close to US$10,000 per ton.

Ben Isaacson -- Scotia Bank -- Analyst

That's very helpful. Thanks so much guys.

Operator

The next question will come from Cesar Perez-Novoa with BTG Pactual.

Cesar Perez-Novoa -- BTG Pactual -- Analyst

Good morning, gentlemen. Lithium tonnage in 2020 is expected to grow between 30% and 40% of what demand growth is embedded in that guidance. And is that figure based on hard contracts on -- or how your business on your view -- on how your business should roll in 2020? And if I may, I have a second question as well and relates to China. Can you please state as a proportion of sales. How much was sold to that specific country in the second quarter, in whatever form, you may want to express that in volume or revenue? Thank you.

Ricardo Ramos Rodriguez -- Chief Executive Officer

[Indecipherable] the third question was sorry --

Gerardo G. Illanes -- Chief Financial Officer

How to get to 65. Okay.

Cesar Perez-Novoa -- BTG Pactual -- Analyst

[Speech Overlap]

Ricardo Ramos Rodriguez -- Chief Executive Officer

You're right. Initially, right various bank growth for next year, higher than the market, that's for sure. The reason behind that, is that if we review review our volume sales in the last four years, including 2019, SQM volume sales was quite stable at 47,000 -- 48,000 per metric tons, it means of course, with the market growing in SQM volumes sort of stable. The reason behind that was the production restriction. And what we're doing next year is to, in some way recover our market share participation. And in order to do so, we moved to the 65,000 metric tonnes in order to have these market share participation that I think it's a reasonable market a strong and reasonable market share for SQM. And we expect after that the growth, maybe just a little bit higher than the market, maybe in the 2021, 2022, that's why we are moving to 120, 160 and I'm probably next stage -- next step would be 200,000 metric tons.

We are working now as we speak in the program, and a commercial clear program to allocate the 65,000 metric tonnes and we know how to do it. We have a clear plan in order to do it, and we will execute the plan next year. And the main reason to do it now, next year is because there going to have all the production. We are going to produce more than 70,000 metric tonnes. That's very important. All of then are according market technical aspects specification that would allow us to have the first inventory, increase our sales and to have the logistics and inventory increase the sales to the 65,000 metric tons next year. This is the first question and your second question is the breakdown of our total volume sales potentially? We don't do that now -- we don't have the numbers in front of me any way of the breakdown.

Let me check it internally. So, starting we're going release this information and if we do so, we will publish this information publicly. Okay.

Gerardo G. Illanes -- Chief Financial Officer

In the 6-K.

Ricardo Ramos Rodriguez -- Chief Executive Officer

In the 6-K.

Cesar Perez-Novoa -- BTG Pactual -- Analyst

All right. Thank you.

Ricardo Ramos Rodriguez -- Chief Executive Officer

And as we review it internally with [Technical Issues] we're going to do so. But anyway, I don't have any in front of me.

Cesar Perez-Novoa -- BTG Pactual -- Analyst

All right, all right. Fair enough. Thank you, Ricardo.

Operator

The next question will come from Joel Jackson of BMO.

Joel Jackson -- BMO Capital Markets -- Analyst

Hi, good morning everyone. I have three questions, I'll ask one at a time, please. On the brine extraction. So I think you're, you have -- you've had the right to extract as high as 1,500 liters a second because of a couple reasons in the last year or two that's gone down to I think a 1,000 or 1,100. You're now suggesting that you're getting more relief on that. So what would you expect your brine extraction to be next year to get to 1 million tonnes and for a merchant potash sales volume? And then what do you expect that to increase beyond that? Thank you.

Gerardo G. Illanes -- Chief Financial Officer

Hi Joel. As I explained during the conference at the beginning. We are now moving in the right direction. It means that total volumes would be 600,000 metric tonnes this year. That's more than a originally anticipated. We're working up with speaking the technical plan for next year. It's not so easy because we pass solutions. We book the solutions on departments and we need to wait until we have a final result.

But my estimate today that could change is that we can reach 70,000 [Phonetic] close to the 1 million tonnes next year. And in terms of potash and probably resulting more in 2021. I expect during the next conference call to have a very accurate number about that. And I will would release these numbers. What we are having now is going back to the original approved extraction than we had the approval before these immediate reductions that we haven't seen in a couple of years. That's exciting what we are doing. It didn't affect the possibilities to produce lithium but it affected our possibilities to produce potash and now we are recovering the potash production.

Joel Jackson -- BMO Capital Markets -- Analyst

Okay. Back on lithium. I know that the China lithium question has been asked several times. I like to ask a little bit different angle which is, it does seem like prices have come in very low in China. Some of the pricing you've sold is this because you're having issue meeting specs for some of your products and so you have to sell it. Some of these lower quality opportunities or is your specs fine, your production fine, you're making good quality product, but this is where the incremental demand is at these lower price customers in China?

Gerardo G. Illanes -- Chief Financial Officer

Joe, as I explained before we sell to different customers, different specifications, different industry and all of them they have different requirements. But anyway, when I said that during our third quarter, I want to be very clear about that. When we say that during third quarter are where expected prices average would be US$10,000 per tonne. We expect that all of the products we sell during the quarter would be according to customers specification. We're not selling out of the spec product. We're selling different products to different needs of different markets all around the world.

Joel Jackson -- BMO Capital Markets -- Analyst

Okay. And finally, on hydroxide, you're looking to more than double hydroxide expansion again here by 2021. You know, right now, if I calculate rightly, I mean hydroxide premiums. You're not really making any margin, really top grade from carbon hydroxide. You're not going to have the Australian JV for some years. Is this something you have to do right now to meet customer needs? Because I think ideally, maybe you'd want to have your hydroxide production coming out of Australia down the road?

Gerardo G. Illanes -- Chief Financial Officer

You're right in terms that the equilibrium from the hydroxide side and carbonate is changing depending the type of batteries they are going to produce in the near future, plus its changing because most of the new production from Australia is trying to target the hydroxide-hydroxide market. We have this capacity to produce lithium carbonate and some production of hydroxide and we maintain and we will maintain this capacity in order to have full flexibility because seeing that we are going to be a full player without the strong market share and we expect to supply all the needs of our customers. That's why having this capacity for us is very important as strategy, but of course, we have the stability and the flexibility to sell more lithium hydroxide or to translate from lithium hydroxide to lithium carbonate depending what is the real situation of our main customers.

Joel Jackson -- BMO Capital Markets -- Analyst

Thank you.

Operator

The next question will come from Isabella Simonato of Bank of America.

Isabella K. Simonato -- Bank of America Merrill Lynch -- Analyst

Thank you. Good afternoon, Gerardo, Ricardo. My questions are lithium as well, first of all, looking more to short term prices. We saw already three big decline in July prices versus what happened in Q3. And considering your guidance of $10,000, it might seem a little bit optimistic considering where we're seeing market price. So is it possible for you to give us a little bit more color, how prices should evolve throughout Q3 and Q4? And if possible, also, what do we expect in terms of mix between carbonate and hydroxide? That would be my first question.

And the second one. Longer term considering that most of the growth of lithium demand should come from China and the grades and as we saw this quarter, right. It make sense to be a little bit worse. It's fair to assume that looking at prices in China should be in the medium term to benchmark to your prices? Thank you.

Ricardo Ramos Rodriguez -- Chief Executive Officer

First, as I mentioned you before, we are not disclosing today because we don't have a clear understanding or estimate of the [Indecipherable] pricing whereas starting the negotiation prices with some of the customers, some of them. And about third quarter, already mentioned to you that is the average pricing. The average ramp up, you have many publications of pricing or people publishing in the Internet, different pricing in China. I don't know where they get it. They say prices for example, some publications say pricing in China is US$6,000 per metric ton and as we are not selling a US$6000 per metric tonne today in China.

I don't know where the numbers are coming from. When I said 10,000 is the average, is the average. And of course, we expect for this quarter. And you are right the Chinese is important in the lithium industry in the future is important today and will be important in the future, but its not the only market, keep in mind, an electric vehicle roll-over is something very important Europe, in India, in Southeast Asia, in the United States is going to be very important in next two years. That's why China even though is -- if I'm not wrong is close to 20%, 25% of the market of the electric car, of the cars today, the logo [Phonetic] cars is very important.

It's not the only market and that's why you need to consider that full global average in the market. And that's why China is not the benchmark despite of the average of the roll. And I don't foresee that China quality would be lower or China production would be different -- quality production than Nordic countries in the world, that's why I don't foresee in the long term. Pricing in China different than pricing all around the world, that means every single customers in the world will produce high quality products and then will require high quality lithium and they will produce high quality lithium and they will produce high quality cars and it means that they will buy at the same price everywhere. It means that price would be quite stable around the [Indecipherable] in the long term. And China is going to be part of the game. But again, we expect and repeat our outlook of the third quarter and we want to have better information to have an outlook over the fourth quarter next year both lithium pricing.

Isabella K. Simonato -- Bank of America Merrill Lynch -- Analyst

That's clear. Just one follow-up. I mean, despite the sell off in prices, they're still quite profitable on lithium, is there any price level you would stop expanding capacity?

Ricardo Ramos Rodriguez -- Chief Executive Officer

Definitely not. We -- I want to be very clear that we have the lowest cost producing in the world. We will continue to be the lowest cost producer in the world. I will expand and my capacity we'll be ready 100% according commercial meet at the end of 2021; 120,000 metric tonnes and we are moving as fast as we can in order to have the 160,000 metric tonnes at the end of the year 2023. That's for sure. We'll be there and we will have a lot of profits doing so because it's a very good business for us and we're very low cost.

Isabella K. Simonato -- Bank of America Merrill Lynch -- Analyst

That's very clear. Thank you.

Operator

This concludes our question-and-answer session. I would now like to turn the conference back over to Gerardo Illanes for any closing remarks.

Gerardo G. Illanes -- Chief Financial Officer

Thank you. Before finishing the call today, let me remind you that we are hosting our Investor Day in New York on September 10th. Details are on our website. In case you want to register. You can go there and follow the instructions there. Thank you all very much for joining us today. And we hope to see you on September 10th or on our next conference call. Goodbye.

Operator

[Operator Closing Remarks]

Duration: 38 minutes

Call participants:

Gerardo G. Illanes -- Chief Financial Officer

Ricardo Ramos Rodriguez -- Chief Executive Officer

Alexandre Falcao -- HSBC -- Analyst

Chris Terry -- Deutsche Bank -- Analyst

Andrew McCarthy -- Citi Banchile -- Analyst

Ben Isaacson -- Scotia Bank -- Analyst

Cesar Perez-Novoa -- BTG Pactual -- Analyst

Joel Jackson -- BMO Capital Markets -- Analyst

Isabella K. Simonato -- Bank of America Merrill Lynch -- Analyst

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