Goldman Sachs warned that Sociedad Quimica y Minera de Chile, or SQM, is worth falling because it is directly affected by lithium prices. Analyst Marcio Farid initiated a sell rating on the lithium producer’s stock. His $60.60 price target implies shares could fall 16.7% from Thursday’s close. “We recognize SQM’s unique, large and low-cost asset base, and the company’s unique ability to operate saltwater pools, but believe this is already priced in,” he said in a note to clients on Friday. “We also think the market consensus on their lithium price forecasts is too optimistic, which could lead to a short-to-medium-term earnings downgrade.” Farid noted that his sell rating exceeded Wall Street’s standards. Nearly two-thirds of analysts have a buy or equivalent rating on the stock, according to Refinitiv data. Lithium prices have fluctuated wildly in recent months. Farid said the sell rating was driven in part by the firm’s expectations of a multi-year lithium oversupply and continued price pressure. He noted that Goldman Sachs sees strong demand growth for the chemical, best known for its use in electric vehicle batteries, being overshadowed by a larger increase in supply. The price movement comes at a time when a company’s performance is increasingly correlated with price, with Farid noting that the chemical’s correlation will increase from 40% of EBITDA in 2019 to 80% in 2022. Farid also noted that there is uncertainty about the renewal of the company’s franchise and whether there will be any new terms or fees. The concession for the company’s main asset and lithium source, the Salar de Atacama, expires in 2030, but a renewal is not expected in Goldman’s base case, he said. Adding to those uncertainties is Chile’s plan to nationalize the country’s lithium resources, he said. After 2024, the company’s production growth may also be limited compared to its peers. Relatively modest growth expectations, combined with forecasts of oversupply, could signal a possible decline in free cash flow, Farid said. Lower prices should be partially offset by higher production volumes, strength in other businesses and lower costs related to royalties and taxes, he said. Despite these reasons for optimism, Farid said both EBITDA and free cash flow will struggle in the coming years due to pricing and supply challenges. The stock has fallen about 8.8% so far this year. — CNBC’s Michael Bloom contributed to this report.