The world’s largest lithium producer, Albemarle Corporation (NYSE: ALB), reported losing over a billion dollars in Q3 due to the ongoing lithium oversupply problem that’s been plaguing the industry for the better part of this year.
The company said on Thursday that it would cut its capital budget after the 71 per cent price decline for the battery metal.
Albemarle, headquartered in Charlotte, North Carolina, is making business decisions based on an assumption that lithium prices will remain around USD$12 to USD$15 per kilogram for the foreseeable future, said CEO Kent Masters.
“We do think the price is going to be lower for longer,” Masters said. “We’re positioning the company to compete at that level.”
Albemarle advanced its comprehensive review of cost and operating structures in Q3, building on measures announced with the previous quarter’s earnings release.
These included a new operating structure in which the company transitioned to an integrated functional model designed to increase agility, achieve substantial cost savings, and enhance long-term competitiveness. Also, the company announced a global workforce reduction. Additionally, Albemarle expects this to impact 6 to 7 per cent of total headcount to drive significant cost reductions and productivity gains.
The annual run-rate cost savings from these actions are expected to reach between USD$300 million and USD$400 million. This is driven by the elimination of redundancies, fewer management layers, productivity improvements, and optimized manufacturing costs.
These savings add to the over USD$100 million in cost reductions already announced and implemented this year. During Q4 of 2024, the company anticipates recording a charge primarily related to severance and associated benefit costs.
Read more: Australian lithium company gets US government nod to develop Nevada project
Read more: Ganfeng Lithium invests over half a billion into Türkiye battery production
Albemarle trims budget for a more cost effective 2025
Looking ahead to 2025, the company expects capital expenditures to range from USD$800 million to USD$900 million. Albemarle intends to devote the majority of this CAPEX to sustaining existing assets and resources. Furthermore, the remaining funds will support select growth projects and high-return, quick-payback improvements.
Masters said that Albemarle will use the budget to maintain facilities that operate “at the lower end of the cost curve.” The company has also made two rounds of cost cuts this year. However, Albemarle still reported a net loss of USD$1.11 billion, which translated to USD$9.45 per share, in contrast to a net profit of USD$302.5 million, or USD$2.57 per share, in the same quarter last year.
Revenue also dropped by over USD$1 billion, although lithium sales volumes increased from the previous year’s quarter. The sales decline was partly offset by long-term supply agreements with customers, including Tesla.
Also, Washington has provided some financial support to Albemarle, including a recent USD$67 million grant from the Energy Department. But funds Albemarle has received under President Joe Biden’s administration are expected to partially or fully dry up when President-elect Donald Trump takes office in January—a concern that pulled down shares of Albemarle and its peers on Wednesday.
“We work on both sides of the aisle,” Masters said when asked about the US election results. “The energy transition is happening. It’s a global dynamic. We’ll have to see what Trump does.”
.
