Albemarle Climbs After Raising Outlook on Higher Lithium Prices

Top lithium producer Albemarle (NYSE:ALB) surged more than 10 percent after the miner raised its 2022 outlook on the back of higher lithium prices.

The company is now forecasting that its net sales will rise 60 to 70 percent year-on-year, while its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) will be up 100 to 140 percent year-on-year.

Shares of the leading lithium miner were trading at US$242 when markets opened on Thursday (May 5), compared to a closing price of US$214.96 the previous trading day.

Demand for lithium has been on the rise as sales of electric vehicles remain firm, with prices up more than 129 percent year-to-date. Albemarle’s rival Livent (NYSE:LTHM) also raised its 2022 guidance on the back of a stronger price environment, with both companies beating analysts' expectations this week.

In the first quarter of 2022, Albemarle's lithium net sales increased 97 percent year-on-year, reaching US$550.3 million. Meanwhile, its adjusted EBITDA was up 190 percent, hitting US$308.6 million on the back of higher pricing from renegotiated variable price contracts, as well as the sale of lower-cost inventory.

“Average realized pricing is now expected to be up approximately 100 percent year-over-year resulting from the renegotiated index-referenced variable price contracts and increased market pricing,” the company said.

Albemarle did note that downside is possible if there is a material correction in lithium market pricing, or if there are shortfalls in volume, potentially through delays in acquisitions or expansion projects.

Albemarle owns lithium brine operations in Clayton Valley near Silver Peak in the US, as well as in the Salar de Atacama in Chile. It also owns a 49 percent stake in Talison Lithium, which runs the massive hard-rock Greenbushes mine, as well as a 60 percent stake in the Wodgina hard-rock lithium mine in Western Australia.

The Charlotte-based company continues to move ahead with the expansion of projects, including Australia’s Kemerton I conversion plant, which is expected to achieve initial production in May. First production of spodumene concentrate from the first train at the MARBL Wodgina lithium mine is also expected in May.

"Many of the end markets we serve are critical for transitioning to greener energy and advancing electrification and digitalization,” CEO Kent Masters said. “Our ongoing investments capitalize on the rapid growth and strong pricing trends in these markets. We continue to explore sustainable options to expand our conversion capacity and resources, including opportunities in North America and Europe."

The North Carolina company posted net income of US$253.38 million in Q1 of this year, compared to US$95.68 million in the same quarter a year ago. Albemarle pointed to higher net sales, which were partially offset by inflationary cost pressures, including natural gas prices in Europe, as the main factor impacting profits.

As of 12:00 p.m. EDT on Thursday, shares of Albemarle were trading at US$223.06.

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Securities Disclosure: I, Priscila Barrera, currently hold no direct investment interest in any company mentioned in this article.