Financial Times
Albemarle warns of losing lithium market share to China as prices fall
World’s biggest producer has scaled back its growth plans at a time when Chinese rivals pursue development
Albemarle, the world’s largest lithium company, has warned it could lose market share to Chinese producers after a $4.2bn deal to buy an Australian rival foundered and a collapse in prices prompted a pullback on expansion plans.
The US company last week revealed a review — entailing a reduction and reordering — of its capital expenditure plans in response to investor concerns over spending heavily during a market downturn.
Last month Gina Rinehart, Australia’s richest woman, wrecked Albemarle’s bid to take over Liontown Resources, a crucial acquisition for the company to grow its pool of resources after she built up a strategic stake.
Kent Masters, chief executive of Albemarle, acknowledged the group would be likely to lose market share to Chinese rivals as plummeting prices for the metal vital to batteries in electric cars have led it to pursue a more conservative approach.
“We’re being a little more cautious and investing behind the market, so there’s a risk we lose that share,” he said. “This will probably be helpful for Chinese suppliers.”
Albemarle is on course to hold a 13 per cent share of the global market this year versus 63 per cent for Chinese companies, according to Fastmarkets, while it is the biggest lithium group by market capitalisation.
The scaling back of growth plans by Albemarle highlights a strategic dilemma facing western metals groups as they struggle to invest while commodity prices fall. In contrast, Chinese companies are pushing ahead with development plans, despite the weak market.
Metals analysts say the inability of western companies to invest when cash flows drop is creating a problem for the US and Europe in the race against Beijing for critical minerals in the EV supply chain.
Despite the bumper profits over the previous two years, lithium producers have huge outlays of spending to meet forecasts of a big jump in demand. Albemarle predicts the market will increase fourfold by 2030.
Lithium prices have dropped more than 70 per cent this year to just over $22,000 a tonne, according to Benchmark Mineral Intelligence, on weak EV demand in China and the battery supply chain using up stockpiled material rather than buying fresh material.
As a result of weaker prices, net income for Albemarle tumbled 65 per cent to $320mn in the third quarter and cut its annual sales growth forecast from 40-55 per cent three months ago to 30-35 per cent.
Executives at Albemarle said they were puzzled as to why lithium prices have fallen so low, given that they believe EV demand remains strong.
Despite the likes of LG Energy Solution, Tesla and General Motors warning that high interest rates would hit EV expansion plans, Albemarle believes global sales in 2023 are still on track to hit almost 15mn units, growth of more than 40 per cent year-on-year.
“What we would have thought and believed was that they wouldn’t have gone below $25 per kilogramme. They have. I think all that says is we are in for more volatility,” said Eric Norris, president of Albemarle’s lithium business unit.
“When you have prices that low, inventories that low and the market is still growing, you’re going to see a pretty hard bounce at some point,” he added.
Rinehart also threw a spanner in the works for another Australian deal for the battery metal after building a strategic stake in Azure Minerals that Chilean lithium powerhouse SQM agreed to buy.
Despite the risk of her intervening in deals, Masters insisted Albemarle still had appetite to consider acquisitions of Australian producers and said they have yet to give serious consideration to partnering with Rinehart.