Albemarle reports 62% fall in adjusted EBITDA as falling lithium chemical prices bite
\nComes after Chinese majors Ganfeng Lithium and Tianqi Lithium reported big drops in profitability in September quarter
\nBenchmark says weak NCM cathode demand is weighing on lithium hydroxide prices<\/p>\n
Albemarle has become the latest integrated international lithium producer to cop a hit \u2014 more than halving net cash forecasts for 2023 \u2014 as falling lithium chemical prices place the pressure on downstream producers.<\/p>\n
The US giant said a mismatch between spodumene pricing and chemical pricing \u2014 part of its energy storage division \u2014 was partly to blame for a 61.9% year on year fall in adjusted EBITDA from US$1.19 billion to US$453.3m.<\/p>\n
Its net income tumbled 66.3% YoY to US$302.5m, despite higher volumes leading to a 10.5% rise in net sales to US$2.31 billion.<\/p>\n
That nexus saw adjusted earnings per share drop 63.5% to $2.74 a share, leading US$14.5bn capped Albemarle to a 3.01% fall yesterday.<\/p>\n
Lithium chemical prices have tumbled 65% in 2023, falling from over US$80,000\/t late last year to around US$23,500\/t today. <\/p>\n
Most of that has come as EV sales growth in China, while strong in nominal terms, has trailed lithium supply growth with rising production from WA\u2019s spodumene suppliers, new Chinese-linked lepidolite mines in Africa and domestic lepidolite mines in China itself, many now considered to be pushing at their margins.<\/p>\n
Albemarle\u2019s third quarter report hints at the rationale for a potential downgrade to FY24 production forecasts for the Greenbushes mine, indicated by 24.9% owner IGO (ASX:IGO)<\/a> this week.<\/p>\n ALB owns 49% of the operation, and IGO suggested its downstream processing JV partners would not necessarily take up their full allocation given weak refinery margins at current prices. Greenbushes, located near Bridgetown in WA\u2019s South West, is the largest lithium mine in the world and a bellwether for the lithium industry.<\/p>\n Greenbushes co-owner Tianqi Lithium last week revealed in Hong Kong Stock Exchange filings that its underlying net profit had fallen 72.12% in the third quarter against the prior year\u2019s corresponding period to 1.57 billion Hong Kong dollars, around US$201m.<\/p>\n Fellow Chinese lithium giant Ganfeng \u2014 half-owner of the Mt Marion mine near Kalgoorlie, offtaker for Finniss lithium mine owner Core Lithium (ASX:CXO)<\/a> and 55% owner of Leo Lithium\u2019s (ASX:LLL)<\/a> Goulamina mine in Mali \u2014 was even harder hit, with profits falling almost 96% to around US$30.5m.<\/p>\n Albemarle has dramatically slashed net cash forecasts for 2023 from US$1.2-1.8b to US$600-800m from previous estimates given in August, with net sales expected to fall from US$10.4-11.5b and adjusted EBITDA dropping from US$3.8-4.4b to US$3.2-3.4b.<\/p>\n \u00a0<\/p>\n What\u2019s in play here?<\/p>\n We\u2019ve got the help of the smartest folks in the room when it comes to this stuff, Benchmark Mineral Intelligence, to help us out.<\/p>\n They say their Benchmark Lithium Price Index fell 4% in the assessment period between October 18 and November 1, and is down 65% YTD.<\/p>\n Carbonate and hydroxide are off 62.9% and 68.1% respectively, the latter\u2019s larger fall down to weaker nickel-cobalt-manganese cathode battery demand.<\/p>\n That weakness has been seen in the China market, where prices have fallen as low as US$19,925\/t, and elsewhere, with Asian prices falling 2.2% to US$22,500\/t.<\/p>\n \u201cWeaker high nickel cathode chemistry demand was also observed in the seaborne Asia market. Contacts reported expectations of lacklustre spot demand for hydroxide for the remainder of 2023,\u201d Benchmark said. <\/p>\n \u201cThis is due to the fact that some cathode makers do not plan to increase high nickel NCM production in the near term, and have sufficient lithium chemicals volumes set to be delivered under contract to meet their demand.\u201d<\/p>\n NCM batteries are used in longer range, higher end EVs compared to cheaper but less energy dense lithium-iron-phosphate cathodes.<\/p>\n Lower Chinese prices are also prompting price discounting in premium markets in Korea, Japan and Europe.<\/p>\n Meanwhile, spodumene (6% Li2O concentrate) sold from WA saw spot prices fall 5.8% over the fortnight to US$2450\/t on Benchmark\u2019s reading. Buyers want to get pricing to shorter lags to the chemicals market to prevent the disconnect which has eaten into their margins.<\/p>\n Benchmark says there are indications prices could go lower.<\/p>\n \u201cDespite trades recorded at $2,100\/tonne at the low end of the range, Benchmark heard offers as low as $1,800\/tonne during the assessment period,\u201d its analysts say. <\/p>\n \u201cThis could serve as an early indicator of the direction of spodumene prices in the near term, aligning with the trend of declining lithium chemicals prices in the chemicals spot market in Asia.\u201d<\/p>\n Still, Albemarle remains keen on expanding its production capacity, predicting deficits later in the decade as lithium carbonate equivalent demand lifts five times on 2022 levels.<\/p>\n Its attempts to pick up more upstream supply were frustrated recently as an interjection from Gina Rinehart led the company to abandon a planned $6.6 billion acquisition of Kathleen Valley developer Liontown Resources (ASX:LTR)<\/a>.<\/p>\n But it is still doubling the capacity of its Kemerton plant in WA, and says the Meishan conversion facility in China is on track for completion in early 2024.<\/p>\n \u00a0<\/p>\n Despite the bearish picture painted by the international majors, Aussie lithium stocks were rising today.<\/p>\n IGO rose 1.18% after it was heavily sold off earlier in the week, while Mineral Resources (ASX:MIN) <\/a>gained 0.94% and Pilbara Minerals (ASX:PLS) <\/a>rose 0.14%.<\/p>\n Allkem (ASX:AKE)<\/a> was up 0.93%, with Core Lithium (ASX:CXO)<\/a> 4.35% higher and Canadian miner Sayona Mining (ASX:SYA) <\/a>lifting 5.56% after hitting new high grade lithia zones in a drill program at its North American Lithium mine in Quebec.<\/p>\n A second straight green day for iron ore producers led the materials sector to a 0.83% morning gain, while Nickel Industries (ASX:NIC)<\/a> and Emerald Resources (ASX:EMR)<\/a>, the latter to be admitted next week into the ASX 200 for the first time, were up big among the mid-caps.<\/p>\n \u00a0<\/p>\n <\/span>\u00a0 The post Ground Breakers: International majors downgrade earnings as lithium pullback hits refiners<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"What is behind that weakness in lithium chemicals?<\/h2>\n
No impact on Aussie stocks<\/h2>\n
Ground Breakers share prices today<\/h2>\n\n
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