Barely two months ago, Albemarle told investors that demand for lithium carbonate equivalent would be 1.5 million tonnes in 2025 and 3.2 million tonnes in 2030.
EV demand fastest growth sector
While lithium goes into a range of sectors, Albemarle predicted that electric vehicles powered by lithium-ion batteries would be easily the biggest and fastest growing source of demand.
The company predicts 15.7 million electric vehicles will roll out of auto-manufacturing plants this year; up from 11.2 million in 2022.
In 2030, Albemarle reckons 46.9 million electric vehicles will be produced; the company had previously expected 40.6 million electric vehicles in 2030.
Albemarle said on Wednesday it had about 200,000 tonnes of lithium production capacity at the end of 2022, but wanted that to rise to between 400,000 and 650,000 tonnes by 2030.
It flagged two waves of expansion at Wodgina and Greenbushes that would help achieve that volume growth; the first wave was expected before 2024 when third processing “trains” are added to both mines.
The second wave of expansion was flagged for the period between 2025 and 2030 and was not detailed.
The comments are bullish for Albemarle’s partners in those Australian mines; Greenbushes is shared with IGO Group and Tianqi, while Wodgina is shared with Mineral Resources.
Wodgina has two processing “trains” that turn raw ore into spodumene concentrate with about 6 per cent lithium.
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Those two trains have a combined capacity of 500,000 tonnes and the companies wants to install a third train to take volumes up to 750,000 tonnes.
Albemarle flagged growth on a similar scale for the “conversion” part of its business, which refers to the industrial plants like Kemerton that turn spodumene concentrate from the mines into battery grade lithium hydroxide.
Albemarle flagged two further lithium hydroxide trains were likely at Kemerton between 2025 and 2027; those additions would take Kemerton to four processing trains.
Albemarle’s partner in the Kemerton and Wodgina assets, Mineral Resources, wants to build a lithium hydroxide processing plant at Wodgina, which is located in the Pilbara region 1700 kilometres away from Kemerton.
Albemarle has been cool on the idea of a lithium hydroxide plant at Wodgina, and did not list Wodgina as a future site for a lithium hydroxide plant in Wednesday’s update.
But Albemarle did say it envisaged building a plant somewhere in the Asia-Pacific region between 2025 and 2027, and the two companies will jointly fund a new vehicle that will study and invest in facilities that can turn Wodgina’s spodumene into lithium hydroxide.
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Albemarle made clear that the cost of building a lithium hydroxide processing plant in Australia was high by global standards, saying it was between 25 per cent and 50 per cent more expensive than South America and double to three times the cost of building in China, where it also owns conversion facilities.
The investment community views Albemarle as one of the best defensive stocks in the lithium sector, because of its size and scale but also because it has traditionally sold a portion of its lithium on long-term contracts that ensure viability when prices are low but reduce exposure to the extremely high lithium prices witnessed in the past year.
On the contrary, pure play Australian miners like Pilbara Minerals have offered investors much clearer exposure to spikes in lithium prices.
Albemarle signalled on Wednesday that it would seek more exposure to lithium prices, saying it would move away from multi-year contracts in favour of selling lithium on three month contracts or daily “spot” markets.
Albemarle and Mineral Resources altered the terms of their partnership last year, with the Australian company now owning 50 per cent of the Wodgina mine near Port Hedland.
Mineral Resources now owns just 15 per cent of the Kemerton lithium hydroxide processing facilities near Bunbury in WA.
Mineral Resources also mines lithium at Mt Marion in WA under a 50:50 partnership with Chinese company Ganfeng.
