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Albemarle Corp. is planning to do more lithium auctions — including some outside China — as the world’s largest producer of the battery metal aims to shed more light on pricing in the opaque market.
Albemarle held four auctions for spodumene concentrate and lithium carbonate in China in March and April because of a build-up in inventories, chief executive officer Kent Masters said Thursday in an earnings call. The US producer aims to hold more auctions in China as well as other geographies such as Australia while adding lithium hydroxide to its offerings.
“We’ve had very good participation,” Eric Norris, Albemarle’s president of energy storage, said during the call, adding that the auctions have been helpful for pricing. “It’s giving us better intelligence to better understand what’s happening in the market and allow the same for our customers in the contracts.”
The auctions marked the first time Albemarle has had to do so to sell its lithium products and came as prices for the battery metal tumbled more than 80% from record highs in late 2022. The market has gone from fears of shortages to a glut in inventories, bringing a collapse in prices that has caused havoc among producers, leaving a wake of stalled projects, scrapped deals and cuts to output.
Until a few years ago, the lithium sector negotiated long-term supply contracts at fixed prices. That changed as large price swings created cost headaches for battery firms and automakers. The volatility prompted a shift to annual agreements struck in a similar way to other metals like copper during a “mating season,” with deals inked at premiums or discounts to a measure of spot prices.
About two-thirds of Albemarle’s lithium volumes this year are sold on index-referenced, variable-priced contracts with an average of two to five years duration, according to a company presentation. The contracts typically have a three-month lag, and some with pricing floors and ceilings. A third of the volumes are sold on short-term purchase agreements.
Albemarle said last week that it planned to host three auctions in May.
(By Yvonne Yue Li)
Comments
Scott Alan Joseph, MD
Demand is still going up. Demystifying costs is a great idea for the company, its customers, and shareholders. Full disclosure: long Albemarle.