Albemarle Corp., a major player in the lithium market, has altered its investment strategy due to evolving market dynamics. The company has deferred spending on its ambitious lithium conversion facility project in South Carolina. Instead, it redirected efforts towards permitting activities for the Kings Mountain lithium-spodumene mine resource in North Carolina.
This strategic shift responds to the softer conditions in the lithium market, prompting Albemarle to optimize its cost structure and re-evaluate growth investments.
Navigating Market Challenges and Reallocation of Funds
The world’s largest provider of lithium for electric vehicle batteries expects its 2024 capital expenditures to range from $1.6 billion to $1.8 billion, down from about $2.1 billion in 2023.
The proposed lithium production facility in South Carolina, with an initial capacity of 50,000 metric tons per year, was originally scheduled for construction starting in late 2024. It was designed to process both spodumene concentrate and recycled batteries. It has a potential capacity expansion to 100,000 t/y in a subsequent phase.
Funds reallocation will now prioritize the development of spodumene concentrate production at the Kings Mountain mine. The mine has a potential production capacity of 350,000 t/y of spodumene concentrate.
Kings Mountain is supported by grants of nearly $150 million from the U.S. Department of Energy in 2022 and $90 million from the US Defense Department in 2023. It could eventually supply the proposed lithium conversion facility in South Carolina.
Albemarle didn’t disclose whether the spending cuts would affect the capacity expansion project at its Nevada Silver Peak lithium operations. The company aims to increase its lithium carbonate production from 5,000 t/y – 10,000 t/y by 2025.
This decision is part of Albemarle’s proactive measures to re-phase organic growth investments and optimize its cost structure in response to changing market conditions. Remarkable changes are particularly happening in the lithium value chain.
Despite the deferral, the company remains committed to advancing its Meishan lithium conversion facility in China and the Kemerton lithium conversion facility in Australia in 2024. Albemarle also plans to reduce costs related to sales, general, and administrative expenses.
Market Dynamics Impacting Lithium Prices
Stalling spending on its 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, witnessing a significant price decline from the record levels 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. This level approaches its historical range after surpassing $70,000 t/y for most of 2022.
S&P Global revised price projection for lithium carbonate stands below $20,000 t/y from 2024 to 2026. This decrease in expected prices is largely attributed to weakened near-term demand for EVs and a surplus of lithium globally.
Interestingly, despite weaker demand, Mercedes-Benz reported a new record for both volume and share of its all-electric cars in 2023. The company is directly sourcing lithium to scale up its fully EV production.
The German luxury car saw a 73% year-over-year growth rate in its all-electric car brand in 2023, selling over 240,000 units. This accounted for about 11% of the carmaker’s total sales volume.
For the same period, Mercedes-Benz also sold around 22,700 all-electric vans, accounting for over 5% of its total sales. The figure is up 51% year-over-year.
In the U.S., the automaker’s battery electric vehicle (BEV) sales totalled to over 13,000 units, representing a 139% increase. Electric vehicles in the country are getting a stronger policy support.
The Electric Vehicle Boom and the Lithium Race
Just recently, the U.S. government revealed a $623 million grant to drive the growth of EVs. The financial support aims to make EV chargers more accessible and convenient for EV drivers.
Globally, the EV market, including both BEV and plug-in hybrid, would reach a whopping $623 billion in sales. This huge growth potential would lead to a global EV units sold at 17 million by 2028.
What all these mean is the more intense race for securing lithium, the white gold that fuels the EV revolution. One of the companies positioned to take advantage of this lithium opportunity is Li-FT Power (LIFT; LIFFF). It is the fastest developing North American lithium junior, owning five various projects in Canada.
The electrification of transportation and the quest for sustainable energy solutions are poised to reshape the global resource landscape. The path forward is brimming with potential, driven by the dual forces of electric and lithium-powered advancements.
Albemarle’s move to prioritize cost and efficiency improvements aligns with market conditions and aims to navigate the challenges posed by the evolving lithium industry.
Disclosure: Owners, members, directors and employees of carboncredits.com have/may have stock or option position in any of the companies mentioned: LIFT
Carboncredits.com receives compensation for this publication and has a business relationship with any company whose stock(s) is/are mentioned in this article
Additional disclosure: This communication serves the sole purpose of adding value to the research process and is for information only. Please do your own due diligence. Every investment in securities mentioned in publications of carboncredits.com involve risks which could lead to a total loss of the invested capital.