• Albemarle boss sees tight lithium market as EV demand ramps up
  • US giant is focusing on early stage targets, saying Liontown board has not ‘meaningfully engaged’ after rejecting $5.5b bid in March
  • Azure leads miners as materials goes green on Friday

 

Chinese lithium prices have returned to bearish territory after stabilising over May and June from the massive drop in Chinese market prices across the first four months of 2023.

No one thought prices of US$80,000/t for hydroxide and carbonate and US$8000/t and above for spodumene were sustainable long term.

But the speed and ferocity of the drop caught out many in the market, amid fears there could be unknown supply levels, especially in China, that could be used to hurt prices for the key battery metal.

However, the biggest players in the market remain confident demand will stay strong and keep pace with any increase in supply.

Speaking on Albemarle’s second quarter earnings call, the US giant’s boss J.Kent Masters said customers were hitting the spot market for tonnes in a sign inventories were sliding.

Global EV sales are up 41% this year, with China’s rising 45% YoY through June, he said.

“Despite mixed macroeconomic conditions, the outlook for global full-year EV demand remains resilient, driven by the introduction of new models, new incentives, and the expansion of charging infrastructure,” he said.

“Since May, we have seen a rebound in lithium market pricing driven by downstream restocking and strong EV and battery production.

“Customers are returning to the spot market after destocking to unsustainably low levels of inventory against the backdrop of growing demand, with lithium inventories decreasing in the supply chain over the last few months.

“Global lithium supply-demand remains relatively balanced, driven by increased EV demand as well as challenges in bringing on new projects. As we continue to expand our lithium capacity, our scale, global footprint, and vertical integration positions Albemarle to sustainably meet growing customer demand.

“While we’re pleased that the lithium market remains strong, we continue to focus on managing the things that are within our control for long-term value creation.”

 

Albemarle happy to operate in China, ignore Liontown

Albemarle’s JV partner at the Wodgina mine in the Pilbara, Mineral Resources (ASX:MIN), recently pulled out of a deal to take a half stake in two lithium processing plants in China.

It will see Albemarle now pay MinRes US$380-400m to take the 15% it didn’t own in the first two trains of the Kemerton plant in WA off Chris Ellison and Co.’s hands, with Ellison signalling his intention to change strategies from refining to producing a mid-stream product from its share of the Wodgina mine.

One issue Ellison raised on a recent call was the prospect of having cash trapped in China and losing income to its stringent tax regime.

Masters said Albemarle remained comfortable with its business dealings in the Communist stage.

“They’re an Australian company, we’re a U.S. company, and we — the lithium business is a significant business in China, and we’ve got significant footprint there and our customers all operate there for the most part,” he said.

“And then … we’ve been public about our pivot to the West, so we plan to serve the Chinese market but also pivot and invest West so we can localise the supply chain in the West for both.

“And we’ll continue to look for resource where we can find it. Australia is … a stable economy. Geopolitical risk is minimal, and it’s a mining district.”

Meanwhile, ALB CFO Scott Tozier said the Liontown Resources (ASX:LTR) board has “not meaningfully engaged in progressing” a transaction after rejecting its $5.5 billion cash bid for the Kathleen Valley mine owner earlier this year.

It has since take a 4.9% stake in Patriot Battery Metals (ASX:PMT) and its Corvette discovery in Quebec, with Masters saying Albemarle was focusing on early stage transactions which cost less to pursue.

“We’ve been talking about pivoting toward resources from an M&A strategy for a while and then also going a little early stage so we get it on these opportunities earlier when they’re not as expensive,” he said.

“Now there’s more risk in that.

“But we’re taking smaller stakes to getting our foot in the door, so to speak. And then it allows us to get information to analyse the opportunity as it develops, and then we will have an opportunity later whether we participate in a bigger way or not.”

Albemarle raked in US$1.032b in adjusted EBITDA in the June quarter, up 69.2% YoY, and expects to make US$3.8-4.4b in EBITDA in 2023, spitting out US$1.2-1.8b in net cash.

 

Miners up in minor win

The materials sector lifted slightly today, up around 0.2%, despite iron ore prices rolling down towards US$100/t overnight.

Rio Tinto (ASX:RIO) and Fortescue (ASX:FMG) were among the big gainers, along with a host of coal companies and Pilbara Minerals (ASX:PLS).

But all eyes were on Azure Minerals (ASX:AZS) and the massive spodumene intercept it pulled at the Andover project in WA.

60-40 owned with prospector extraordinaire Mark Creasy, the a 209m long intercept grading 1.42% Li2O had the roughly $1 billion capped company up over 20% this morning. It’s up 1100% YTD. Just wild.

 

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