Jan 24 (Reuters) -
Albemarle Corp on Tuesday called for lithium prices
to remain high indefinitely in order to help the mining industry
develop new sources of the electric vehicle (EV) battery metal
and fuel the green energy transition.
The push for higher prices by the world's largest
lithium producer is likely to exacerbate the growing tension
between EV manufacturers and mining companies that supply the
materials crucial for the all-electric shift, with high metals
prices threatening EV profitability.
Lithium prices have more than doubled in the past year and
are up nearly ninefold in the past three years, according to an
index tracked by Benchmark Mineral Intelligence. For 2023,
Albemarle expects the price it receives for its lithium to jump
40% over 2022 levels.
Albemarle supplies many of the world's automakers,
including Tesla Inc, which raised its prices last year
due to the rising cost of lithium only to cut them in early 2023
on concerns that demand was eroding.
The Charlotte, North Carolina-based mining company has
been building new lithium facilities in Chile, Australia, China
, and is considering a major European lithium processing
plant, projects for which it is planning to more than double its
capital budget by 2027.
"(Lithium) pricing needs to remain elevated in order to
support the incentives required to take on those investment
risks," Eric Norris, head of Albemarle's Energy Storage
division, said during the company's 2023 Strategic Update
presentation. "The (lithium) market is tighter than it was last
year. There's significant supply coming on, but the demand
growth is more significant."
Global lithium demand should hit 3.7 million tonnes by 2030,
with Albemarle alone expecting to supply about 600,000 tonnes by
that time. Without expansions, though, executives warned of the
"potential for significant deficits" by the end of the decade
without new mines and processing plants.
Rival lithium miner Livent Corp also has
repeatedly called for the auto industry to pay more for the
"Incentivizing industry to fill this gap requires strong
long-term pricing," Norris said. "The tight supply-demand
situation means we have had to become more selective in
partnering with our customers."
Lithium, however, remains wildly profitable for Albemarle,
with margins of roughly 65% in 2022. That should dip this year,
due to rising costs for lithium chloride and spodumene ore -
both key feedstocks - though the company expects lithium margins
to eventually stabilize around 45%.
Albemarle, which last fall received $149.7 million from the
White House to build a lithium processing facility in North
Carolina, posted preliminary fourth-quarter earnings last night
above Wall Street's expectations and said it expects 2023 profit
and sales to jump.
Norris, a longtime lithium industry executive, repeatedly
stressed during a nearly two-hour presentation that Albemarle
will produce lithium when its customers need the metal. Several
smaller rivals have struggled in recent years to open new
lithium mines. "When we say that we're going to bring it on,
we're going to bring it on," Norris said.
Albemarle's stock was flat in midday trading after
jumping more than 5% on Monday.
(Reporting by Ernest Scheyder; Editing by Paul Simao)