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Size seems to matter in the lithium universe

Contrasting quarterly reports this week from lithium producers Albemarle and Livent, with the former experiencing its biggest year ever while the latter is struggling a little.

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Pilbara Minerals and IGO have already given us a good idea of the surge in revenue and earnings now being enjoyed by lithium miners and processors, now the world’s biggest player in the sector, Albemarle, has confirmed it is on the way to its biggest and most profitable year ever.

Its lithium involvement powered Albemarle to its best quarter ever, echoing the performance of Pilbara Minerals.

Outside a weakening in its bromine business, which saw the company trim the top end of its sales and earnings guidance, Albemarle’s results were very strong.

Net sales of $US2.1 billion for the quarter were up $US1.3 billion, or 152% compared to the prior-year quarter primarily due to increased pricing driven by strong demand for lithium

Net income attributable to Albemarle of $US897.2 million increased $US1.3 billion from the prior-year quarter.

(The September 2021 net income attributable to Albemarle includes a $US657.4 million ($US504.5 million after tax) expense related to the settlement of a prior legal matter.)

Adjusted EBITDA of $US1.2 billion jumped by $US972.4 million from the prior-year quarter primarily due to higher net sales, partially offset by inflationary cost pressures including natural gas prices in Europe and raw materials.

Albemarle tightened its annual adjusted profit forecast but raised the lower end of its guidance range for earnings before items, flagging “ongoing strength in lithium pricing.”

The company is bringing on new facilities to process mined lithium into the chemicals needed for batteries, saying Wednesday that it’s on track to more than double conversion capacity from last year.

“We had an outstanding quarter driven by strong demand for lithium-ion batteries,” Albemarle CEO Kent Masters said in the earnings release.

“As one of the world’s largest producers of lithium, we are well positioned to enable the global energy transition. With our acquisition of the Qinzhou lithium conversion plant in China and mechanical completion of our Kemerton II expansion in Australia, we are on track to more than double our lithium conversion capacity compared to last year.

“Our new segment structure is designed to support our ability to deliver volumetric growth in the energy storage arena as well as enable long-term growth in the lithium and bromine specialties markets.”

For the 2022 year, the company said its outlook “remains strong, with net sales expected to be more than double and adjusted EBITDA expected to be nearly four times 2021 results.”

“Ongoing strength in lithium pricing and end markets offsets slightly lower expectations due to bromine-related weakness in key end markets, including consumer and industrial electronics and building and construction.

“Adjusted EBITDA guidance has been tightened towards the higher end of previous expectations, and the company continues to expect to be free cash flow positive in 2022, directors said.

The key business was its lithium operations and net sales of $US1.5 billion were up a massive 318% or $US1.1 billion (+318%) due to higher pricing net of currency impact (+298% after the FX impact) related to renegotiated contracts and increased market pricing.

“Volume was also higher (+20%) related to the La Negra III/IV expansion in Chile and higher tolling volumes to meet growing customer demand.

Adjusted lithium EBITDA of $US1.1 billion increased $US985.8 million as higher pricing and volumes more than offset higher costs.

Lithium also benefited from a spodumene shipment from Talison (Greenbushes) originally expected in the fourth quarter that occurred in the third quarter resulting in a $US100 million benefit in the company’s equity income.

Albemarle reaffirmed its full-year 2022 outlook for Lithium.

Adjusted EBITDA is expected to grow 500-550% year over year. Average realized pricing growth is expected to be 225-250% year over year resulting from previously renegotiated contracts and increased market pricing.

“Full-year 2022 volume growth is expected to be 20-30% year over year primarily due to new capacity coming online as well as higher tolling volumes.

“The current outlook ranges for Lithium reflect the potential upside for additional spot price improvements and the potential downside of volume shortfalls (e.g., delays in commissioning and production ramp up at expansion sites and qualifications for tolling) for the remainder of the year.”


Smaller lithium producer Livent Corp, though, had a different story to tell from its third quarter.

It has cut the top end of its 2022 earnings and sales forecast, blaming inflation and other macroeconomic pressures weighing on its output of lithium

“Lithium demand has remained robust despite some near-term supply chain disruptions and global macro concerns,” CEO Paul Graves said in a statement.

Livent now expects 2022 sales of $US815 million to $US845 million, compared with a previous estimate for annual sales between $US800 million to $US860 million.

The company also cut the top end of its adjusted profit forecast by $US5 million, to $US370 million.

But the lowered forecasts would still, if realised, be a jump from 2021 levels, as lithium demand rises from the expanding sales of electric vehicles and batteries generally.

Livent reported third-quarter net income of $US77.6 million, a big turnaround from the net loss of $US12.6 million a year earlier

Livent extracts lithium from brine formations in Argentina and processes the metal into a form usable for EV batteries in North Carolina, where the company said an expansion of a processing facility is nearly complete.

In August, Livent struck a six-year lithium supply deal worth nearly $US200 million with General Motors.

CEO Paul Graves said lithium remains a very strong market, and Livent has continued to achieve high realised prices, while also delivering increased volumes to customers in the third quarter.

“Livent continues to make considerable progress on its expansion projects and remains on track with all projected timelines and capital plans. Construction of our 5,000 metric ton lithium hydroxide expansion investment city was completed in the third quarter and we’re now in the early stages of producing and qualifying this product with customers.

“2023 will be a landmark year for Livent, as we expect to fully ramp up the Bessemer City hydroxide expansion. Complete two phases of lithium carbonate expansion in Argentina, totalling 20,000 metric tons in nameplate capacity and add a new 15,000 metric ton hydroxide facility in China all by year-end. Given the time required to ramp up the new Argentina expansions Livent expects to produce roughly 6,000 metric tons of incremental LCE volume in 2023, or roughly 25% annual increase starting in the second quarter, and we expect to further increase our production in 2024 and the years to follow.

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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