Albemarle, the world's largest lithium producer, announced on Wednesday it would reduce jobs and delay spending on a U.S. refinery project as part of a comprehensive cost-cutting plan amid declining metal prices used in making electric vehicle batteries.
Shares of the Charlotte, North Carolina-based company dropped by 2.8% to $122.44 in the New York Stock Exchange's morning trading, losing nearly half of its value over the past 52 weeks. Oppenheimer & Co. analysts also cut their Albemarle price target to $191 from $308.
The Exceeding Demand for the Battery Market Impacted Prices
The global supply of the ultralight metal has exceeded demand from the battery market in the past year, leading to an oversupply that has negatively impacted pricing. While Lithium prices can vary by region and type, an index of prices tracked by Benchmark Mineral Intelligence has fallen by 81% in the past year and nearly 11% in the past month alone.
Albemarle, Tesla, and other automakers' suppliers sell lithium through long-term contracts tied to market prices. In November, the company indicated that the decrease in lithium prices would impact 2023 sales. However, executives described the market volatility as a temporary challenge, expressing confidence in the long-term expectation of robust demand.
2024 Budget-Cutting Plans and Plant's Suspension
Albemarle plans 2024 capital spending to a range of $1.6 billion to $1.8 billion, down from approximately $2.1 billion in 2023, and intends to postpone spending on a massive U.S. lithium refining project in South Carolina, originally planned to be one of the world's largest processors of the battery metal.
Albemarle mentioned that it will complete the commissioning of lithium refineries in China and Australia, where construction is almost complete, and prioritize permitting efforts to reopen a lithium mine in North Carolina. It was unclear whether the budget cuts would impact Albemarle's plans to introduce direct lithium extraction technology (DLE) in Arkansas, near competitors like Exxon Mobil, Tetra Technologies, and others who are also working on deploying innovative filtration processes.
Job-Cutting Plans and Company's Projected Savings
The company did not disclose how many employees would be affected by the job cuts. Still, projected results of $95 million in annual savings, with $50 million anticipated in 2024, would record a charge in the first quarter related to severance and related benefit costs, exit and disposal activities, and asset write-downs.
Stake Divestment to Australia's Liontown Resources (LTR)
On Wednesday, Albemarle announced it would sell its stake in Australia's Liontown Resources (LTR) after Gina Rinehart, Australia's richest person, blocked Albemarle's $4.3 billion bid for the lithium developer last year.
The budget announcement follows a protest in Chile's Atacama salt flats last week, where Albemarle and rival SQM produced lithium, blocking access to key production facilities. Albemarle assured that its operations continued as usual, focusing on employee safety, and intends to reveal its fourth-quarter results and discuss its 2024 outlook on February 15.
