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Albemarle sees strong global lithium demand given electric vehicle market

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Albemarle sees strong global lithium demand given electric vehicle market

Though Albemarle Corp.'s lithium volumes were hurt in the first quarter due to rain in Chile and delayed customer qualifications, CEO Luke Kissam said the company sees signs of strong global demand and subsequent growth for its businesses.

During the first three months of 2019, global sales of electric vehicles increased almost 60% year over year and global sales of full-battery electric vehicles increased 75% year over year, despite global automotive sales declining 6.5% during the period, Kissam said on a May 9 earnings call.

"Overall, these demand signals are in line with what we see from our customers under our long-term agreements, which support the continued secular growth in electric mobility and electric storage and the underlying strength of our businesses," Kissam said.

Lithium pricing rose 3% from the year before, though the company expects overall pricing for 2019 to be flat compared with 2018, the CEO said. Albemarle's catalysts and bromine specialties businesses' adjusted EBITDA grew 5% and 12%, respectively, excluding divested businesses, with both segments benefiting from volume and price increases.

The company continues to make progress on its lithium hydroxide joint venture, with regulatory filings completed, Kissam said. He expects the transaction to close in the second half. Albemarle's new 20,000-tonne Xinyu II lithium hydroxide facility is also ramping up production, and the company is shipping to customers that have completed their qualification process and are working on additional qualifications. The facility is on track for full qualification by the end of the third quarter, and nameplate capacity is expected to be achieved by year-end.

Albemarle expects to produce close to 40,000 tonnes of lithium carbonate in Chile this year, despite the rain in the first quarter. Because of equipment delays, the company now expects to commission the 40,000-tonne lithium carbonate plant late in the fourth quarter of 2020 or in the first quarter of 2021. It will take another four to six months for the customer qualification process, pushing the first meaningful sales volumes to mid-2021.

"In spite of this slight delay, we are confident in being able to meet our volume commitments under our long-term agreements for lithium carbonate," Kissam said.

CFO Scott Tozier said global demand for lithium remains in line with company expectations, noting that Albemarle decided to forgo some opportunistic sales in China due to lower short-term carbonate pricing.

"Our strategic customers, in general, continue to reflect healthy demand based on their current order pattern and continue to meet volume and pricing commitments under the terms of our long-term agreements," Tozier said. "Adding all this together, we now expect year-over-year volume growth of 15,000 to 20,000 metric tons and an adjusted EBITDA growth rate in the high teens."

The company anticipates a notably stronger second half due to the Xinyu ramp-up and brine improvements in Chile.

In terms of research and development spending, Kissam said the company's current levels are adequate and it is not going to invent the next battery.

"What is important for us is to understand where our customers are going so that we can take [what] they are doing and be sure that we have either the lithium metal, the lithium carbonate, the lithium hydroxide or whatever other derivative lithium might be to apply to their situation," Kissam said.

Albemarle's first-quarter net profit increased 1.4% to US$133.6 million, or US$1.26 per share, from US$131.8 million, or US$1.18 per share, the year before.