Lithium Metrics Finally Grab Hold of Albemarle

By Glenn Dyer | More Articles by Glenn Dyer

The long slide in lithium prices since last November has finally caught up with global giant Albemarle, which has cut its annual profit forecast despite posting better-than-expected earnings for the three months to March.

Albemarle blamed softening prices for the EV battery metal from last November to the end of April when prices seemingly stopped falling and steadied.

It became the first major producer to acknowledge the monetary impact of the slide in lithium prices. Australian producers such as IGO and Mineral resources had all but ignored the slide  and its potential impact in their released last week.

Only Pilbara Minerals had recognised the impact with a warning of soft conditions over the remaining part of 2023, but even it saw the drop as a small problem.

Pilbara didn’t give any estimate of the financial damage but may do so soon after it starts talks this month with customers on new pricing and offtake deals that Pilbara says will recognise the changed market conditions – that’s code for the lower prices.

Albemarle posted first-quarter net income of $US1.24 billion up sharply (which was not unexpected) from the $US253.4 million for the March, 2022 quarter.

For the year, Albemarle cut its sales forecast to a range of $US9.8 billion to $US11.5 billion, from a February forecast of $US11.3 billion to $US12.9 billion.

The adjusted earnings forecast was trimmed to a range of $US3.3 billion to $US4 billion, from a prior $US4.2 billion to $US5.1 billion.

“Compared to last year, first quarter net sales more than doubled, adjusted diluted earnings per share more than quadrupled providing a robust start to the year,” Albemarle CEO Kent Masters said in the statement.

“We see strong sales volume growth for the rest of the year but have modified our guidance to reflect softening lithium market pricing. We remain confident in the underlying market strength of our world-class asset base and our long-term growth strategy.”

The company’s core business is energy storage and there Albemarle is looking for sales of higher priced spodumene stocks to net sales this year are estimated to range between $US6.9 to $US8.4 billion.

“Energy Storage volumes are projected to be up 30% to 40% in 2023 compared to 2022. Full year realised pricing is expected to be up 20% to 30% vs. the prior year, assuming flat lithium market pricing as of mid-April 2023.”

Albemarle didn’t give any update as to its thinking about its $A5 billion plus bid for Australian explorer and would be producer, Liontown which rejected Albemarle’s takeover bid in late March.

Albemarle has yet to announce a revised offer.

Nor was there any comment on the move by Chile’s government to gradually nationalise its huge lithium industry and move to renegotiate contracts for Albemarle’s access to the country’s Atacama salt flats when they expire in 2043.

Albemarle did confirm in its release that it had decided to spend $US1 billion ($A1.3 billion) to expand its lithium refinery in the southwest of WA by two processing trains which would double output to 100,000 tonnes of lithium hydroxide a year.

Explaining the outlook, Albemarle’s chief financial officer, Scott Tozier told a briefing:

“…importantly, we saw year-over-year price increases more than offsetting inflation in the quarter. We are adjusting our 2023 guidance to reflect current lithium market pricing.

“On average, lithium indices are down about 50% to 60% since the start of the year, based on our established guidance methodology, we’re taking lithium market price indices as of mid-April, and holding them flat for the balance of the year. To be clear, we are not predicting lithium market pricing, we’re simply taking the current price, holding it flat, and running it through our contract structure.

“This is the same way we provided guidance last year. As a result, we now expect 2023 total company net sales to be in the range of $9.8 billion to $11.5 billion. This is up 45% over the prior year at the midpoint.

“We expect to see sales for the second quarter to be in line with Q1 and then see a sequential increase in sales in both the third and fourth quarters as ramping Energy Storage volumes more than offset sequential price declines.”

For Australian investors, that’s the most update view on lithium pricing at the moment – there is more price weakness coming.


That’s not the case at Livent, another smaller US producer. Its quarterly report this week showed it has been able to weather the lithium price slide due, helped by a reliance on long-term contracts.

Livent reported a jump in second-quarter profit and raised its annual forecast this week, citing rising prices and sales – a more positive outlook than Albemarle’s.

The company, which has deals to supply the battery metal to General Motors Co, Tesla and BMW, posted net income of $US114.8 million for the first quarter, compared to $US53.2 million in the same quarter of 2022.

Roughly 70% of the lithium that Livent plans to sell this year is at fixed contract prices, Paul Graves, Livent’s CEO, told investors on a Tuesday conference call.

That has enabled it to avoid the impact of the slide in Chinese prices (but also means it missed most of the surge in mid to late 2022).

“The spot market in China is not reflective of the entire market,” he said. “We have not reduced our lithium demand expectations for 2023.”

Livent said it is seeing strong appetite for its lithium outside of China, especially in Japan and South Korea, two of the world’s largest cathode producers

Additionally, Graves said he expects “broad expansion delays and disruptions” across the lithium industry to keep the market undersupplied, although he added Livent’s expansions in Quebec are on track.

“We are absolutely not demand constrained, but we are absolutely supply constrained,” Graves said.

For the year, Livent boosted its revenue forecast to a range of $US1.03 billion to $US1.13 billion, from a previous range of $US1 billion to $US1.1 billion.

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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