Albemarle’s Lithium Strategy Makeover: Shifting Gears Amid Market Softening

"Albemarle Corp. Adjusts Investment Strategy in Response to Shifting Lithium Market Dynamics"

Albemarle Corp., a major player in the lithium market, has made changes to its investment strategy in response to shifting market dynamics. The company has decided to postpone spending on its ambitious lithium conversion facility project in South Carolina and instead focus on permitting activities for the Kings Mountain lithium-spodumene mine resource in North Carolina.

This strategic shift comes as a result of the softer conditions in the lithium market, prompting Albemarle to optimize its cost structure and re-evaluate its growth investments. The company, which is the world’s largest provider of lithium for electric vehicle batteries, expects its capital expenditures for 2024 to range from $1.6 billion to $1.8 billion, down from approximately $2.1 billion in 2023.

The proposed lithium production facility in South Carolina, which was initially scheduled for construction starting in late 2024, was designed to process both spodumene concentrate and recycled batteries. It had the potential for capacity expansion to 100,000 metric tons per year in a subsequent phase. However, funds will now be redirected towards the development of spodumene concentrate production at the Kings Mountain mine, which has a potential production capacity of 350,000 metric tons per year.

The Kings Mountain project has received grants of nearly $150 million from the U.S. Department of Energy in 2022 and $90 million from the U.S. Defense Department in 2023. It could eventually supply the proposed lithium conversion facility in South Carolina. Albemarle has not disclosed whether the spending cuts will affect the capacity expansion project at its Nevada Silver Peak lithium operations, which aims to increase lithium carbonate production from 5,000 to 10,000 metric tons per year by 2025.

This decision is part of Albemarle’s proactive measures to adjust its organic growth investments and optimize its cost structure in response to changing market conditions. The lithium value chain is experiencing remarkable changes, and Albemarle remains committed to advancing its Meishan lithium conversion facility in China and the Kemerton lithium conversion facility in Australia in 2024. The company also plans to reduce costs related to sales, general, and administrative expenses.

The stalling of spending on the lithium conversion facility project in South Carolina is largely due to a softer market in 2024. The global lithium market experienced a correction in 2023, with a significant price decline from the record levels seen in 2022. According to S&P’s Platts data, lithium carbonate CIF North Asia assessment stands at $15,000 per metric ton as of the beginning of 2024, approaching its historical range after surpassing $70,000 per metric ton for most of 2022. S&P Global has revised its price projection for lithium carbonate, expecting it to stay below $20,000 per metric ton from 2024 to 2026. This decrease in expected prices is mainly attributed to weakened near-term demand for electric vehicles and a surplus of lithium globally.

Despite weaker demand, Mercedes-Benz reported a new record for both volume and share of its all-electric cars in 2023. The German luxury carmaker is directly sourcing lithium to scale up its fully electric vehicle production. It saw a 73% year-over-year growth rate in its all-electric car brand in 2023, selling over 240,000 units, which accounted for about 11% of its total sales volume. Mercedes-Benz also sold around 22,700 all-electric vans, accounting for over 5% of its total sales, representing a 51% increase compared to the previous year. In the U.S., the automaker’s battery electric vehicle sales totaled over 13,000 units, a 139% increase. Electric vehicles in the country are receiving stronger policy support, as evidenced by the recent $623 million grant from the U.S. government to drive the growth of EVs and make EV chargers more accessible and convenient for EV drivers.

The global electric vehicle market, including both battery electric vehicles and plug-in hybrids, is expected to reach $623 billion in sales, with global EV units sold projected to reach 17 million by 2028. This growth potential has intensified the race to secure lithium, often referred to as the “white gold” that fuels the EV revolution. One company well-positioned to take advantage of this opportunity is Li-FT Power (LIFT; LIFFF), a rapidly developing North American lithium junior that owns five different projects in Canada.

The electrification of transportation and the pursuit of sustainable energy solutions are set to reshape the global resource landscape. The future is full of potential, driven by the dual forces of electric and lithium-powered advancements. Albemarle’s decision to prioritize cost and efficiency improvements aligns with market conditions and aims to navigate the challenges posed by the evolving lithium industry.

Matt Lyons

Matt Lyons

Matt Lyons is the founder of Forestry & Carbon. Matt has over 25 years as a forestry consultant and is invoilved in numerous carbon credit offset projects.

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