A general view shows the brine pools of Albemarle Chile lithium plant placed on the Atacama salt flat, Chile, May 4, 2023.
Ivan Alvarado | Reuters
Lithium mining giant Albemarle will halt the expansion of a manufacturing plant in Australia, as the company reviews costs due to headwinds from weak lithium prices.
The impacted facility, the Kemerton plant in Australia, is where the company produces battery-grade lithium hydroxide for electric vehicles and other products. It will also idle a lithium processing line at the plant and focus production on a single line.
The workforce at Kemerton will be reduced by 40%, Albemarle CEO Kent Masters told CNBC in an interview Wednesday. The plant’s production capacity will fall to 25,000 tons from 50,000 tons currently as the line is idled, Masters said.
The decision comes as the company reported a second-quarter net loss of $188 million, or $1.96 per share, compared with a profit of $650 million, or $5.52 per share, in the year-ago period.
Excluding a $215 million after-tax charge due to capital project asset write-offs related primarily to a planned fourth processing line at Kemerton that Albemarle previously canceled, the company earned 4 cents per share.
Sales fell 39% to $1.4 billion from $2.37 billion in the same period a year ago.
Shares were down about 1% in extended trading after the results.
‘Down for a little bit longer’
The CEO said Albemarle has been executing against a cost-savings plan laid out in January as lithium prices weakened.
“We realized that the market is not moving in our direction, that prices are down,” Masters said in the interview. “We think they’re going to be down for a little bit longer, and we have to position ourselves to compete at this price level.”
Lithium prices have declined since May and are currently under $12,000 per metric ton, according to a Tuesday note from Berenberg. Demand in Europe has been largely flat and remains poor in the U.S. with a 10% gain this year, according to the bank. Prices likely will not recover until 2026, the firm said.
Prices have fallen as lithium capacity has come online as electric vehicle growth has slowed, Masters explained.
Berenberg downgraded Albemarle to hold ahead of the earnings report and slashed its price target by nearly half to $83 per share, implying 11% downside from Tuesday’s close of $93.67.
Albemarle shares year to date.
Albemarle has been caught on the “wrong foot” as the company has pushed ahead with a large capital expenditure program even as lithium prices fall, wrote Berenberg analyst Andres Castanos-Mollor. He said he fears Albemarle may be forced to raise equity capital.
However, Masters disputed this.
“One of the reasons we’re taking these actions is we don’t plan to go to the market for additional equity,” Masters said. “And we definitely don’t plan to have any covenant issues around our current debt.”
Albemarle said it expects capital expenditures to come in at the high end of its $1.7 billion to $1.8 billion guidance for 2024.
Some 54% of Wall Street analysts have put a hold on the stock, while 39% rate Albemarle as buy with an average price target of $124.94 per share, according to FactSet data. Seven percent of analysts 7% are telling investors to sell. Albemarle shares have declined nearly 36% since the start of the year.