trending Market Intelligence /marketintelligence/en/news-insights/trending/vRsroiy-TsQj5XeJlxD01Q2 content
Log in to other products

Login to Market Intelligence Platform

 /


Looking for more?

Contact Us

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

If your company has a current subscription with S&P Global Market Intelligence, you can register as a new user for access to the platform(s) covered by your license at Market Intelligence platform or S&P Capital IQ.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *
  • We generated a verification code for you

  • Enter verification Code here*

* Required

In This List

Lithium-miner Albemarle slashes US$1.5B capex from 5-year plan amid price slump

Mining Exploration Insights December

Mining Exploration Insights: Dip in gold drilling weighs on results

Mining Exploration Insights: Is the exploration sector back on recovery?

State of the Market: Mining Q2-2019


Lithium-miner Albemarle slashes US$1.5B capex from 5-year plan amid price slump

Amid a slump in lithium prices, Albemarle Corp. slashed capital expenditure plans by US$1.5 billion over the next five years, delaying construction of projects that would have brought about 125,000 tonnes more lithium carbonate equivalent to market.

Albemarle outlined its revised capex and production plans as it released second-quarter earnings, reporting 4% year-over-year growth in sales to US$885.1 million but falling net income.

On an Aug. 8 earnings call, Albemarle Chairman, President and CEO Luke Kissam said the company, a leading lithium producer, is focused on becoming free cash flow positive in 2021 and will not build capacity when it is difficult to pin down pricing in the longer term.

"We don't think it makes a whole lot of sense for us to build a lot of capacity if we're not going to have contracts that we can place against [the added volume]," Kissam said. The CEO said Albemarle could still expand production in the medium term if customers give it greater certainty about price and demand through contracts.

The lithium market is well supplied but also on a growth trajectory with expectations that electric vehicles, which largely depend on lithium-ion batteries, will grab market share in the coming decades, analysts said.

Albemarle's move comes on the back of a slump in lithium prices. Benchmark Mineral Intelligence's lithium price index has dropped 35.7% year over year, recently hitting 181.0, according to a July report.

"Concerns over H2 demand growth intensified throughout July 2019 with macroeconomic concerns impacting new orders from industrial markets and downstream pressures in China's EV market causing a backlog in upstream inventories," Benchmark Mineral analyst Andrew Miller said in the report.

Kissam pointed to similar market issues, including the impact of lithium carbonate oversupply. "All of this has put downward pressure on price," he said on the call.

The CEO noted that in making the decision to reduce capex, Albemarle was listening to shareholders concerned about the company's future free cash flows.

"When I talk to shareholders, the number one thing I hear is, 'When are you going to be free cash flow positive?'" Kissam said.

Over the next five years, Albemarle had planned to increase lithium output, on an LCE basis, to between 325,000 and 350,000 tonnes, according to a company presentation. The revised plan is to expand to about 225,000 tonnes over the same period.

Key to Albemarle's new production plan are deferrals of additional capacity at Wodgina related to a recently revised joint venture with Mineral Resources Ltd. and at Kemerton in Australia. The plans were central to what Albemarle called "Wave II" expansions.

BMO Capital Markets analyst Joel Jackson cast the decision to defer investment as positive given market worries that Albemarle might show contract weakness.

"With bears expecting lithium contract breaches and a guidance cut, [Albemarle] instead offered hope," Jackson said in an Aug. 7 note. The company held to EBITDA guidance, raised earnings per share guidance and meanwhile delayed expansions to lift free cash flow and crimp market overs-supply, Jackson said.