Lithium: Albemarle expects permanently high prices
06.02.2023The growth of the electric car industry has led to a steep rise in lithium prices. Many analysts expect the situation to calm down this year. But not Albemarle. The world's largest lithium supplier by market capitalization expects sustained high prices and is becoming more selective in choosing its customers.
Albemarle expects to exceed 130 000 t of lithium equivalent this year
© CleanTech Lithum
If a company can choose its customers, it probably lives in the best of all worlds. Albemarle seems to be in this situation. With production expected to exceed 130 000 metric tonnes of lithium equivalent this year, the specialty chemicals group is one of the top three producers of the coveted material, along with SQM of Chile and China's Ganfeng Lithium. And now the US company is changing its strategy. In the future, the company will be more selective in choosing its customers, it said a few days ago in its outlook for this year. In addition, the company is aiming for longer-term contracts with customers. However, these contracts will include variable prices, according to CEO Eric Norris.
In principle, Albemarle is thus going against the prevailing market opinion. Albemarle assumes that prices on the lithium market will remain high. Last year, prices had risen to as high as 80 000 US$/t and currently remain just below that level. Analysts were therefore less optimistic for this year. Some expect slight declines, such as Macquarie and Morgan Stanley. The investment bank Goldman Sachs, on the other hand, was very pessimistic. The question is whether these movements are cyclical, as with many commodities, and thus supply and demand breathe with the business cycle. Or whether there is a structural break in the industry due to the battery industry's steep growth.
At the Laguna Verde project in Chile, CleanTech Lithium assumes an annual production of 20 000 t over at least 30 years
© CleanTech Lithum
CEO Norris answered that question unequivocally: "The reality is that the EV revolution is here to stay." The fact is that Albemarle, as one of the largest suppliers, has a deep insight into the market and, through its numerous customer relationships, a head start in knowledge of what is actually needed. Accordingly, the largest supplier by market capitalization has also adjusted its long-term forecasts for the market. The company expects demand to reach 3.7 million t of lithium carbonate equivalent by 2030 – significantly raising its estimates. Incidentally, Albemarle has identified the U.S. government's "Inflation Reduction Act," which subsidizes the purchase of an electric car in the States with up to US$ 7500 per vehicle, as an additional driver.
CleanTech Lithium is currently building a pilot plant at Laguna Verde
© CleanTech Lithum
The International Energy Agency (IEA) had forecast that, due to the dynamic market development, 50 new lithium mines will be needed by 2030 alone to meet the demand. Accordingly, the prospects for advanced lithium developers such as CleanTech Lithium are good. The company recently submitted a scoping study for its Laguna Verde project in Chile. According to the study, the planned operation on its first project has a net present value of US$ 1.83 billion. This requires capital expenditures of US$ 383.6 million. The company assumes an annual production of 20 000 t over at least 30 years and the investment is expected to pay for itself after only 1.8 years. In addition, CleanTech Lithium expects operating production costs of less than 4000 US$/t of lithium carbonate. This assumes a lithium price that is only one third of the current market price. In the best-case scenario, the company will go into production as early as the end of 2025, as CEO Aldo Boitano recently said.
A scoping study is also planned for CleanTech Lithium's second project, Fransisco Basin
© CleanTech Lithum
This year, the company is focusing on further steps towards construction of the operation. For example, it is now to work on a preliminary feasibility study for Laguna Verde, which will look at possible production in even greater detail. A scoping study is also to be prepared for the second Fransisco Basin project. Last but not least, CleanTech Lithium is currently building a pilot plant at Laguna Verde. Here, one tonne of lithium carbonate per month will be produced for the time being to demonstrate to potential customers that the material meets the criteria for batteries.
CleanTechLithium's stock is traded on the London and Frankfurt stock exchanges. Analysts are optimistic about the company. For example, Canaccord Genuity has issued a price target of 290 British pence (GBp) for the shares. However, only the Laguna Verde project was taken into account. If both projects are taken into account, the price target even rises to 545 GBp. Currently, the share is quoted at only 56 GBp on the AIM in London. Thus, according to the analysts, there is the potential for a multiplier here.
