Lithium Prices Are Too Low, “Unsustainable” For Long-Term Demand Growth Says Albemarle

Albemarle Corp. (NYSE: ALB), the leading lithium producer globally, has called for higher lithium prices, saying current valuations are “unsustainable” for the future landscape of supply and demand. 

This statement comes in light of the recent downturn in lithium prices, which have plummeted over 80% from their peak in late 2022, amid a market shift from scarcity to excess due to a slowdown in demand for electric vehicle batteries and the initiation of new mining operations.

Albemarle’s CEO, Kent Masters, expressed concern during a discussion on the company’s fourth-quarter earnings, highlighting the financial strain on existing operations and the unfeasibility of initiating new projects, especially in Western regions. 

The company anticipates that reducing supply will lead to a tighter market. Core Lithium Ltd. (ASX: CXO) in Australia has halted mining activities, and production adjustments are expected at the Greenbushes mine, partly owned by Albemarle, in response to falling sales and increasing inventories.

Despite the current downturn, Albemarle remains optimistic about the long-term prospects for lithium, driven by the global shift towards renewable energy.

Lithium prices have seen a slight uptick in recent days. Source: Trading Economics

The company is continuing with projects in strategic locations such as Chile, Australia, and China, while adopting a cautious approach towards new investments and acquisitions. A significant supply agreement with BMW, set to commence in 2025, underscores Albemarle’s advantageous position to benefit from future demand surges.

Albemarle predicts robust growth in EV demand, projecting a 30% increase this year, with lithium supply and demand expected to be relatively balanced in the short term. The company forecasts a 2.5-fold increase by the decade’s end. This long-term demand growth, coupled with disciplined growth strategies, positions Albemarle to navigate the current market challenges effectively, despite experiencing a share value decline and reporting a loss in the recent quarter. 

“While the pricing environment has softened for the moment, we should not lose sight of the fact that we continue to see significant long-term growth in demand for limited supply,” Masters said.

Information for this story was found via Bloomberg, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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