Lithium long-term agreements benefit Albemarle in Q1

The world’s largest lithium producer, Albemarle Corp, said during its first-quarter results investor call that it increased its lithium prices by 3% year on year, as a result of long-term contracts with their customers.

The lithium producer did not provide details about prices reached with its customers, but this strategy might have sheltered the company from the global fall in lithium prices over the course of the past year.

The Chinese domestic spot battery-grade lithium carbonate price (min 99.5% Li2CO3) has dropped by 46.18% to 70,000-78,000 yuan ($10,270-11,444) per tonne on Thursday May 9, from 135,000-140,000 yuan per tonne on May 10, 2018, according to Fastmarkets historical data.

Meanwhile, the battery-grade lithium hydroxide monohydrate (min 56.5% LiOH.H2O) ex-works China spot price has fallen by 41.2% over the same period to 85,000-90,000 yuan per tonne on May 9, from 148,000,000-150,000 yuan per tonne previously.

Due to the significant volume of material produced and processed in China - over half of the world’s production in lithium carbonate equivalent (LCE) terms - China’s domestic spot price is used today as a price reference by producers and consumers across the globe.

Although Albemarle achieved slightly higher prices, sales earnings were down by 2.1% due to rainfall in Atacama which affected production, the company said. Albemarle made $291.9 million in net lithium sales over the first quarter of 2019, compared with $298 million in the first quarter of 2018.

The company's total net sales including from its bromine and the catalyst businesses grew by 1.27% to $832.1 million in the first quarter 2019 from $821.6 million a year ago.

"Lithium pricing was up year over year, while catalysts and bromine specialties performed well, with both benefiting from increases in volume and price. We remain confident in our expectations for the full year, and committed to our long-term strategy that positions us for continued growth," Albermarle chief executive officer Luke Kissam said during the results call.

Rainfall is set to affect Albemarle’s total production in the Salar of Atacama in Chile across 2019.

"South America production is going to be nearly flat year on year, once you consider the broad impacts of rains," Eric Norris, the president of Albemarle’s lithium global business unit, said.

Albemarle expects to produce close to 40,000 tonnes of lithium carbonate from the existing operations in La Negra at the Salar of Atacama, in Chile. Meanwhile, it will ramp up production in China, producing 30,000 tonnes of lithium hydroxide from existing operations including Xinyu II.

This means the company will reach total production of 70,000 tonnes of lithium compound across 2019, up from roughly 60,000 tonnes produced in 2018, according to Fastmarkets research data.

Albemarle’s production expansions
Albemarle said it is on track to commission in the second half of 2021 a project to improve lithium yields by as much as 30% at the Salar of Atacama, enabling the company to produce more lithium without increasing the extraction of brine from the Salar.

At the same time, the commission of La Negra III and IV with anticipated production of 40,000 tonnes of lithium carbonate is set to start in the fourth quarter of 2020 or in the first quarter of 2021 due to delays in the delivery of equipment. It will take four to six months for the material produced at this plant to receive customer qualification, the company said.

In Australia, the Talison expansion at Greenbushes mine, a spodumene joint venture with Tianqi Lithium, remains on track to start in June 2019. This expansion will increase Greenbushes production to up to 160,000 tonnes per year of LCE, of which 80,000 tonnes is owned by Albemarle and will be used to feed the company's conversion plants in China and Australia.

Albemarle’s Kemerton lithium hydroxide conversion plant in Western Australia is also on schedule for commissioning the first phase in the second half of 2021.

This conversion plant aims to have an initial capacity for 60,000 tpy of lithium hydroxide but with a planned expansion to 100,000 tpy later.

Martim Facada

martim.facada@fastmarkets.com

Published

Martim Facada

May 13, 2019

13:37 GMT

London