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Wednesday, Nov 6, 2024
Mugglehead Magazine
Alternative investment news based in Vancouver, B.C.

Lithium

Albemarle lays off 300 employees as lithium prices tank

Lithium has seen a more than 80 per cent drop from its late-2022 record high

Albemarle lays off 300 employees as lithium prices tank
The Albermarle lithium processing facility in Kings Mountain, North Carolina. Image from Logan Cyrus via Getty Images

Albemarle Corporation (NYSE: ALB) laid off over 300 employees, or 4 per cent of its total workforce, across its US and global operations.

The company originally announced cuts earlier this month and implemented them on Monday in response to falling lithium prices for electric vehicle batteries.

Lithium has seen a more than 80 per cent drop from its late-2022 record high. Additionally, experts predict that lithium carbonate prices in top consumer and producer China could experience a decrease of over 30 per cent this year from December 2023 levels.

The company is reducing headcount in its legal, mergers and acquisitions, marketing, materials sciences, research and development, and recycling departments.

Data from market analyst Benchmark Mineral Intelligence shows that the price of lithium has fallen to USD$13,200 per tonne, marking its lowest level since 2020.

Goldman Sachs recently stated that it estimated a surplus of 200,000 tonnes of lithium carbonate equivalent, which accounts for 17 per cent of global demand, for this year. It anticipated that this situation would compel producers, especially Australians, to “substantially” reduce their output in order to balance the market.

Despite this setback, BMI expects lithium to continue as Albemarle’s primary revenue source. Also, the company anticipates prioritizing low-cost lithium projects in the longer term, which will enable it to capitalize on an increase in lithium demand and higher prices.

BMI Research expects that poor supply-demand dynamics in the near term will continue to exert downward pressure on prices, potentially impacting Albemarle’s profit margins.

BMI also highlighted that accelerated EV production through 2030 and higher lithium prices will contribute to supporting Albemarle’s revenue in the long run.

Read more: Lithium South near completion of production well and economic assessment at flagship operation

Read more: Lithium South and POSCO Holdings ink mutual development agreement

Declining lithium could mean changes for other producers

Albemarle produces lithium in Chile, Australia, and the United States, while operating processing facilities in China. Some of its biggest customers include Tesla Inc. (NASDAQ: TSLA) and other automakers.

Declining lithium prices could have significant repercussions for other companies in the industry like Lithium South Development Corporation (TSXV: LIS) (OTCQB: LISMF) (Frankfurt: OGPQ) in Argentina or Argentina Lithium & Energy Corp. (TSXV: LIT) (OTCQX: LILIF) which recently graduated to the OTCQX markets.

Lower prices may squeeze profit margins, particularly for producers with higher production costs or those heavily reliant on lithium as a primary revenue source. This could lead to cost-cutting measures, potentially including layoffs or reduced investments in new projects.

 

Lithium South Development Corporation is a sponsor of Mugglehead news coverage

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