Column: Electric dreams turn into a nightmare for battery metals
A sector that was once racing to build new supply has been closing mines and deferring projects as low prices bite into the cost curve.
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 the United States, 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 white metal.
“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.
(By Ernest Scheyder; Editing by Paul Simao)
Comments
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Eric Norris of Albermarle is, only, now, regurgitating, what Ken Brinsden, then CEO of Pilbara Minerals very clearly, told the Chinese Lithium buyers almost 12 months ago, that unless, they were willing to pay more for Pilbara’s Lithium, then he wasn’t going to use Pilbara’s money, to pay for funding, the huge, and ongoing mines expansions that would be required to meet, Chinese EV makers demands for access to Lithium, to power their, own EV manufacturing efforts. The Chinese very quickly, ..got the message…! ?