UPDATE 2-Shares of Chilean miner SQM fall on lithium pricing fears

(Rewrites with outlook, company and analyst comments, details on results, updates share price)

SANTIAGO, March 1 (Reuters) - SQM shares fell on Thursday after the Chilean miner warned lithium prices could weaken in the second half of the year, scaring investors concerned about demand for the major ingredient in electric car batteries.

The company, one of the world's largest producers of lithium and fertilizers, added it still expected average industry prices for the full year to be higher. Last year, industry lithium prices rose 25 percent on average.

"We believe that the market price will remain strong in the first half of the year with the potential to stabilize or decrease slightly in the second half of the year," SQM said of lithium prices in a statement to announce its quarterly results.

But shares of SQM, officially called Sociedad Química y Minera de Chile S.A., fell 6.2 percent in Chile and 5.5 percent on the New York Stock Exchange as the company's outlook underlined fears raised on Monday by Morgan Stanley, which forecast lithium prices nearly halving by 2021.

"SQM talked about flat to lower pricing in the second half of 2018," Scotiabank analyst Ben Isaacson said. "That coupled with a big broker report that came out on Monday calling for the same warning has really spooked investors."

Other executives in the lithium industry disagree with Morgan Stanley's pessimistic forecast.

SQM said lithium demand remained strong and it announced plans to triple its investments this year to $517 million, with most of the spending focused in Chile.

Chief Executive Patricio de Solminihac said on a conference call that global lithium demand will grow an estimated 80 percent annually in the next five years. He added global markets will need at least 50,000 tonnes of lithium per year of additional supplies in coming years.

SQM, which in January ended a dispute with the Chilean government over mining royalties, is diversifying its lithium production sources with the Caucharí-Olaroz project in Argentina and Mt Holland in Australia.

Net income in the fourth quarter of last year rose to $110.5 million, or 42 cents per ADR, from $80.9 million, or 31 cents per ADR, the previous year. Analysts had expected $111.5 million, according to a Reuters poll of four analysts.

The company included a one-time settlement payment of $20 million to Corfo in its fourth-quarter results.

Revenue in the quarter rose 3.8 percent to $574.8 million. (Reporting by Antonio De La Jara; Writing by Cassandra Garrison; editing by Caroline Stauffer, Jason Neely and Ben Klayman)