SQM, the world's second-largest lithium producer, said on Thursday it is building its lithium inventories as it continues to produce at maximum capacity, even as falling prices more than halved its quarterly profit.

"The idea is to be prepared when inventories return to the normal level and customer purchases are reactivated," said SQM's lithium vice-president Carlos Diaz.

Prices for lithium, an ultralight metal used for electric vehicle (EV) batteries, have dropped more than 60% on fears of softening global demand for EVs. They hit a two-year low this month.

SQM's Santiago-listed shares tumbled around 8% in early afternoon trading on Thursday, wiping some $1.14 billion off the company's market value.

SQM executives said they expect EV demand to stay resilient in the long-term.

SQM's senior commercial vice-president for lithium Felipe Smith said lower prices were a result of softer EV demand outside China coupled with high component supplies causing excess inventories to accumulate across the whole battery supply chain.

Smith said SQM would, while building inventories, contract sales volumes in line with market indices, adding that SQM had also entered into several new long-term index-linked supply deals.

(Reporting by Sarah Morland; Editing by Valentine Hilaire and Jane Merriman)