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Albemarle seems as perplexed as anyone that lithium prices have fallen so far, but it says there\u2019s not much slack left in the supply chain<\/strong><\/em> \u00a0<\/p>\n North Asian lithium prices \u2014 the agglomeration of spot sales across China, Japan and Korea \u2014 continue their malaise, trading at US$22,000\/t yesterday according to Fastmarkets, with one deal reported at $23.37 a kilo.<\/p>\n That\u2019s being dragged down by China, where lithium hydroxide and carbonate prices are trading slightly down at around US$20,800\/t and US$22,000\/t respectively.<\/p>\n There are plenty of physical and conspiratorial reasons for this happening.<\/p>\n Prices are currently at breakeven or below for converters at the upper end of the cost curve. Prices in excess of US$20,000\/t would have been very strong a few years ago, weak as they appear in context with the extraordinary US$80,000\/t and above some cathode producers were forking out last year.<\/p>\n But they are a sticky wicket for producers now because spodumene prices are significantly higher and the proliferation of merchant converters in China who need to pay high prices for spodumene or high cost lepidolite mean many are losing money right now.<\/p>\n Yet at the same time demand for EVs is lifting in the order 35% and capacity utilisation even at these prices is in the mid-90s.<\/p>\n Speaking to analysts yesterday after a negative set of financial results, Albemarle\u2019s president of energy storage Eric Norris said the fall in pricing had been confusing even the world\u2019s biggest producer.<\/p>\n \u201cWe do a lot of work to model supply and demand and if you look last year, this year, next year, remove for a moment what we know has happened this year, which has been an inventory correction in the supply chain, the industry by our reckoning is operating at demand over supply about a mid-90s capacity utilisation rate,\u201d he said.<\/p>\n \u201cThat\u2019s the part that\u2019s perplexing and any other market at those levels, you wouldn\u2019t see pricing fall like it has. Now we have had an inventory correction this year, it\u2019s largely run its course at least at the cathode level in the largest market in the world.<\/p>\n \u201cAny inventory correction further in the supply chain we would expect on balance to occur or be behind us or certainly be behind us in the balance of this year.\u201d<\/p>\n If prices fell further, Norris said there would be a concern about hitting EV demand targets by the end of the decade, when Albemarle projects lithium demand will be five times higher than it was in 2022.<\/p>\n \u201cThey\u2019re below reinvestment economics. As we\u2019ve said many times our concern would be towards the end of the decade that there needs to be sufficient amount of capacity to serve the EV market,\u201d Norris said.<\/p>\n \u201cHere we are operating at a relatively healthy supply-demand utilisation with prices where they are so it\u2019s very difficult to explain \u2026 but obviously we\u2019re well positioned with our with our cost position and our go to market strategy to weather that storm.<\/p>\n \u201cIt\u2019s just it\u2019s going to be challenging for the industry at these levels.\u201d<\/p>\n READ: High Voltage: Battery metal bears are out in force but \u2018lithium demand is absolutely there\u2019, says PLS boss<\/a><\/p>\n \u00a0<\/p>\n The impact of the recent dive in lithium prices on Albemarle\u2019s business has been significant.<\/p>\n From forecasts just three months ago of US$1.2-1.8 billion in net cash for 2023, it now projects its operations will rake in US$600-800m.<\/p>\n While net sales rose 10.5% year on year to US$2.31 billion in the September quarter, net income fell 66.3% YoY to US$302.5m.<\/p>\n Projections for 2024 will only come in February. The volatility of lithium prices has made earnings hard to project.<\/p>\n Amid that all, it may be relieved it was not left chasing debt to fund its proposed $6.6 billion acquisition of Liontown Resources (ASX:LTR)<\/a>, which also meant funding a sizeable chunk of the 500,000tpa WA spodumene mine, due to open mid next year at a cost of $951 million.<\/p>\n The purchase was abandoned after Gina Rinehart\u2019s Hancock Prospecting spent $1.3 billion building a blocking stake in the order of 19.9%.<\/p>\n J. Kent Masters, Albemarle\u2019s head honcho, now says M&A will be more modest in nature.<\/p>\n The company also announced in the quarter it would spent C$109 million on a roughly 5% stake in Patriot Battery Metals (ASX:PMT)<\/a>, owner of the Corvette discovery in Canada\u2019s James Bay region.<\/p>\n \u201cWe want to preserve our organic growth plan that we have, because we\u2019ve got resources for that, our acquisitions have been focused in a couple of different areas,\u201d he said. \u201cWe\u2019ll still look at M&A, but it\u2019s not going to be in the same scale that we were frankly looking at six months ago.\u201d<\/p>\n Despite falling prices, Albemarle is maintaining its capital build program, including doubling the capacity of its Kemerton lithium hydroxide plant near Bunbury, the Qinzhou plant in China and the Meishan conversion plant also in Middle Kingdom, due to open next year.<\/p>\n Both were subject to a potential JV with Wodgina JV partner Mineral Resources (ASX:MIN)<\/a>, which pulled out of the $1 billion deal in favour of studying options to process midstream lithium products in Australia.<\/p>\n The US major\u2019s lithium sales growth plan remains double digits for next year, with another rise in EV penetration anticipated and floors in sales contracts giving the firm \u201cprotection\u201d against lower price scenarios.<\/p>\n Albemarle has been impacted by lags which has seen it generate strong revenues from its equity shares in the Greenbushes and Wodgina mines while paying yesterday\u2019s higher concentrate prices while receiving today\u2019s lower chemical prices from its plants in China.<\/p>\n That dynamic has seen Greenbushes partners IGO (ASX:IGO) <\/a>and Tianqi flag plans not to take up their full entitlement of offtake from the 1.5Mtpa mine, the world\u2019s largest, which could result in lower production guidance for FY24.<\/p>\n \u00a0<\/p>\n The big lithium players on the ASX were all, perhaps counterintuitively, leading the ASX large caps this morning with big gains as the materials sector rose 0.85%.<\/p>\n Allkem (ASX:AKE) <\/a>inked a 4.68% gain, with IGO up 4.06%, MinRes 3.13% higher and Pilbara Minerals (ASX:PLS)<\/a> a 3.98% grower.<\/p>\n More curious was a 7.8% run in Azure Minerals (ASX:AZS)<\/a>, a massive punt on a higher price coming after the company\u2019s board supported a $3.52 per share bid from Chilean lithium giant SQM.<\/p>\n That came ahead of a major share buy up by Rinehart, who now holds almost 19% of the company, with MinRes also rumoured to be stalking the register with a stake below 5%.<\/p>\n Regardless of how it all plays out, the Andover lithium discovery has been staggeringly lucrative for the company\u2019s directors.<\/p>\n A swag of 60c options approved as incentives for MD Tony Rovira, Brian Thomas and Hansjoerg Plaggemars at a general meeting in June were exercised by the trio yesterday.<\/p>\n Rovira\u2019s stake has roughly doubled with the option exercise, taking the value of his shares to around $26 million at the current Azure share price.<\/p>\n Company secretary Brett Dickson also got in on the action, with 10.5 million options all up exercised and converted into 8,546,717 fully paid ordinary shares at an issue price of $3.50.<\/p>\n Fellow lithium miners and developers were heavily supported along with graphite producers, with Core Lithium (ASX:CXO) <\/a>up 6.2% and Syrah Resources (ASX:SYR)<\/a> 5.84% higher despite negativity around EV forecasts, with UBS cutting its 2030 EV penetration estimate from 54% to 47% this week.<\/p>\n \u00a0<\/p>\n <\/span>\u00a0 The post Ground Breakers: Even Albemarle, the world\u2019s biggest producer, is scratching its head over the lithium price<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"
\nThe US giant has muted expectations it could go hard on M&A again after pulling out of $6.6 billion Liontown bid<\/strong><\/em>
\nBattery metals stocks charge up ASX, with item of intrigue, Azure, now almost 50c above SQM takeover price<\/strong><\/em><\/p>\nM&A on the backburner<\/h2>\n
Who\u2019s making waves today?<\/h2>\n
Battery metals share prices today<\/h2>\n\n
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