A worker walks through a pile of lithium ore at the site of Talison Lithium Ltd., a joint venture between Tianqi Lithium Corp. and Albemarle Corp., in Greenbushes, Australia.
Carla Gottgens Bloomberg Getty Images
lithium mining giant Albemarle will stop the expansion of the manufacturing plant in Australia, as the company reviews the cost due to the headwinds of lithium prices too.
The affected 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 the lithium processing line in the factory 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 drop to 25,000 tons from the current 50,000 tons because the line is inactive, Masters said.
Albemarle originally planned to develop Kemerton into four processing lines with a capacity of 100,000 tons. The company stopped construction on the third line, after canceling plans for the fourth line.
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 an after-tax charge of $215 million due to the write-off of capital project assets primarily related to the canceled fourth processing line in Kemerton, 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 a little bit more’
The CEO said Albemarle has implemented the cost-saving 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 an interview. “We think it’s going to go down a lot longer, and we need to position ourselves to compete at this price level.”
Lithium prices have fallen since May and are now below $12,000 per metric ton, according to a Tuesday note from Berenberg. Demand in Europe was largely flat and remained poor in the US with a 10% gain this year, according to the bank. Prices likely won’t recover until 2026, the company said.
Prices have fallen as lithium capacity has come online while the growth of electric vehicles has slowed, Master explained.
Berenberg downgraded Albemarle to continue ahead of the earnings report and slashed the price target by nearly half to $83 per share, implying 11% downside from Tuesday’s close of $93.67.
Albemarle shows all year round.
Albemarle has been caught in the “wrong way” as the company has pushed ahead with a large capital expenditure program despite falling lithium prices, wrote analyst Berenberg Andres Castanos-Mollor. He said he fears Albemarle could be forced to raise venture capital.
However, the Master denied this.
“One of the reasons we’re taking this action is that we’re not planning to go to the market to get additional equity,” Masters said. “And we certainly don’t plan to have a covenant problem with the debt right now.”
Albemarle said it expects capital expenditures to reach $1.7 billion to $1.8 billion by 2024.
Some 54% of Wall Street analysts have held the stock, while 39% have given Albemarle a 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 are down nearly 36% since the start of the year.