Tumbling Lithium Prices Force Albemarle to Implement New Cost-Cutting Measures, Reports Reuters

By Ernest Scheyder

Albemarle, the largest lithium producer in the world, announced on Wednesday that it would implement a second round of cost reductions this year, indicating that nearly every expense aside from its dividend could be reconsidered.

This decisive action comes in light of falling prices for lithium, a key component in electric vehicle batteries, following the company’s reported loss in the second quarter.

In after-hours trading, Albemarle’s shares dropped 2.9% to $91. The firm and its industry peers faced significant challenges over the past year as increased lithium supply from China, coupled with a slowdown in electric vehicle adoption rates, led to declining prices for the lightweight metal and pushed back forecasts regarding the energy transition timeline.

General Motors, for instance, recently shifted away from its goal of producing 1 million electric vehicles annually by 2025 in North America.

Albemarle, which operates globally, had already reduced its workforce in January, but lithium prices have continued their downward trend, plummeting from an average of $20 per kilogram at the close of last year to the current range of approximately $12 to $15 per kg. "The market is not improving; in fact, it could be getting worse," stated Albemarle CEO Kent Masters. "We’re adopting a ‘lower for longer’ strategy regarding pricing, and we must navigate through this downturn."

To manage costs, the company is initiating a comprehensive review of its cost structure, anticipated to be completed by October. Albemarle also intends to halt construction on an Australian processing unit and temporarily suspend operations at another facility in the region.

"We will examine all avenues to achieve a leaner operational model," Masters remarked, implying that further layoffs and the sale of assets may be considered.

Although the company’s dividend, which has seen annual increases for three decades, is not expected to be impacted, Masters emphasized its importance to shareholders.

Global demand for electric vehicles has not reached the optimistic projections set at the beginning of the year, causing concern among lithium market investors. Analysts from major financial institutions predict that global lithium demand may not surpass supply until 2030.

In terms of financial performance, Albemarle reported a net loss of $188.2 million, or $1.96 per share, in contrast to a net profit of $650 million, or $5.52 per share, in the same quarter last year. After excluding one-time items, the company earned 4 cents per share, falling short of analyst expectations of 41 cents per share.

Despite the downturn in prices, Albemarle has managed to maintain its full-year profit outlook, bolstered by performance in its catalyst division and cost-saving measures that have already yielded more than $150 million in savings this year.

Although prices have decreased, Albemarle and other industry players maintain optimism for a surge in lithium demand as electric vehicles continue to enter the mainstream market. The company plans to further discuss its quarterly results in an upcoming investor call.