Ground Breakers: Lithium prices may be turning a corner as Albemarle plans to TRIPLE production by 2027
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If there were concerns the heat has come out of the lithium market they are not being felt by the industry’s biggest players, who have maintained their bullish stance on the battery metal and the electric vehicle narrative even as spot prices have collapsed from last year’s record highs in China.
Albemarle was the latest major to roll out its quarterly results this week, a date pre-empted by the announcement that it would spend over US$1 billion to build the third and fourth trains at its Kemerton plant in WA’s South West, a facility which will eventually produce 100,000tpa of lithium hydroxide and represent the largest processor of lithium chemicals outside China.
It is a major investment, with Albemarle CFO telling analysts on a call this week the final bill for trains one and two will come in at around US$1.5-1.7b, with a similar level of investment expected for the additions.
The Charlotte-based chemicals giant saw EBITDA up 270% to US$1.6 billion in the March quarter as lagging contract prices caught up to last year’s booming lithium spot market.
Indices are down between 50-60% in 2023. But Albemarle boss J. Kent Masters and lithium president Eric Norris remain confident in the state of the market.
Norris says destocking in China played a big role in the falling spot market, with some battery and cathode inventories now at under a week of consumption.
“Clearly not in the long run, a level that’s sustainable for sustained operation,” he told analysts on a conference call.
Reinforcing the feeling the issues are not a fundamental supply-demand issue and are centred around quirks of the Chinese market, the international to Chinese price spread is between US$15-20/kg, the widest on record.
In the bigger picture, Albemarle sees EV sales lifting 30% in China this year and close to 40% for the wider market.
“What we’ve seen in the past couple of weeks, we’ve seen spot buyers return,” Norris said.
“We’ve seen — and we believe that’s partially what’s affecting the price that is popped — is leveled and then started to rise within China.
“And we … see no change in what our projected sales for the year in EVs of about 30% growth anticipated in China, closer to 40% for the overall market.
“I think the spot orders, it would be premature for me to say how large they are, but they are beginning as these cathode producers now start to restock and prepare for a more stable operation for the balance of the year.”
Albemarle head honcho J. Kent Masters said EV sales were up 26% year over year in March, with Chinese sales on track for their 30% growth projection based on seasonal norms and US sales up a massive 53%, with Europe a disappointment at 7% growth due to supply bottlenecks and the phasing out of hybrids.
With major expansions planned in Australia and China, Albemarle is eyeing a 20-30% CAGR in sale volumes in the coming years, tripling production to 300,000t of lithium chemicals by 2027.
To put that number into context, it is roughly the size of the entire lithium carbonate equivalent market in 2020.
Will there be contenders to lithium’s throne as the EV revolution continues to accelerate?
One mooted technology is sodium-ion. But Norris says it is unlikely to service the majority of the EV market.
“Sodium-ion batteries are just less energy dense and heavier on weight for this comparable energy density,” he said.
“So while it may fulfil maybe a city, low-range vehicle, and that could help ease some of the ability of the industry to meet electric vehicle demand given the shortness of lithium we see in our forecast, it cannot replace it in whole in any significant way.
“However, it could be a viable technology in grid storage.”
With that in mind, lithium miners are running hot.
Speculation a rival bidder to the aforementioned Albemarle will come in for WA lithium developer Liontown Resources (ASX:LTR) has stoked the Tim Goyder-chaired company’s share price ever higher.
Gold stocks were also sitting pretty after prices rose to US$2050/oz overnight on hopes the US Fed will end its rate hiking cycle with a pause next month.
Bullion bulls can only dream, or maybe live their dreams. The all time record has been threatened so often in this rally we’ll hold our breath.
A reminder, it’s gunning for somewhere in the vicinity of US$2075/oz, a price briefly hurdled in August 2020.
As Roy and HG would say, Go You Good Thing.
Iron ore? The less we know the better. It’s down almost 5% in Singapore today to ~US$95/t, not jagging with the optimism of Rio boss Jakob Stausholm on Chinese demand as yesterday’s AGM.