By Dave Sherwood

SANTIAGO (Reuters) – Chilean miner SQM, the world’s No. 2 producer of lithium, said late on Tuesday profits plunged by nearly half in the first quarter of 2020 as prices for the battery metal continued to freefall amid the spread of the novel coronavirus.

Supply swamped demand earlier this year and the earnings of top lithium producers continue to be hammered by sliding automobile sales and the economic malaise caused by the pandemic.

SQM posted a 44% drop in first-quarter net income to $45 million. The grim results prompted the company to slash its 2020 capex plan by nearly a quarter to $350 million, from $450 million previously, though it said its expansion plans remain on track.

“Average lithium prices were almost 50% lower than average prices seen during the same period last year,” Chief Executive Ricardo Ramos said in the earnings statement. The tumble in prices dragged lithium revenue down 58%, the company said.

Gross profits from its high-profile lithium business, half of SQM´s business during the first quarter of 2019, now account for just 12% of its total, the company said.

SQM, which operates in Chile´s far-flung Atacama salt flat, said safety measures implemented early during the country´s coronavirus outbreak had spared it the worst.

“We have been able to continue to operate at normal levels over the past months,” the company said.

Chile, a South American mining powerhouse and the top global producer of copper, has seen cases of COVID-19 spike in the past week as its health care system teeters on collapse.

SQM acknowledged difficulties selling in Asian markets early in 2020, but nonetheless expected to increase its market share and boost sales volume this year.

“Our strong balance sheet and firm commitment to the lithium market allows us to continue moving forward with our capacity expansion plans in lithium carbonate and lithium hydroxide,” the company said.

“To date, we expect to finalize both projects by the end of 2021.”

SQM´s tough first quarter is likely to weigh heavily on Tianqi Lithium Corp, a top shareholder and another of the world’s biggest lithium producers.

The Chengdu, China-based lithium giant has been struggling to repay loans to finance its high-profile $4.1 billion acquisition of nearly a quarter of SQM – agreed in 2018 when prices for lithium were much higher.

(Reporting by Dave Sherwood; editing by Jason Neely and Bernadette Baum)