Albemarle puts brakes on growing plans amid lithium market weakness

The US-based lithium giant said the move would reduce its capital expenditure by about $1.5 billion over the next five years, adding it expected to become cash flow positive in 2021.

Albemarle’s decision comes as lithium prices are expected to remain subdued this year after changes to Beijing’s EV subsidy regime have injected noticeable short-term unpredictability, while undermining demand from Chinese consumers.

THE DECISION COMES AS LITHIUM PRICES ARE EXPECTED TO REMAIN SUBDUED THIS YEAR AFTER CHINA’S CUTS TO EV SUBSIDIES AND INCREASING SUPPLY

Supply, meanwhile, has been surging in response to the 2016-2017 price spike.

According to Fastmarkets estimates, the global lithium market glut will grow from 28,000 tonnes in 2018 to 68,000 tonnes this year and 146,000 tonnes in 2021.

Albemarle’s announcement comes only a week after the Charlotte, North Carolina-based company revised a deal to buy into Australia’s Mineral Resources’(ASX: MIN) Wodgina mine.

It also follows the company’s second quarter results, which showed lithium sales were not affected by global trade tensions and China’s cuts to EV subsidies in June.

The lithium giant also expects to delay building 75,000 tonnes of processing capacity at Kemerton, in Australia. The plant processes hard rock from the Greenbushes mine to produce lithium hydroxide.

In November, the miner put plans on the back burner to increase output capacity at its operations in Chile beyond 2021. That project would have produced lithium carbonate. 

“The recently announced amendments to our transaction with Mineral Resources Limited and our decision to delay indefinitely certain lithium expansion projects will allow us to reduce capital expenditures significantly,” Chief executive officer Luke Kissam said on Wednesday.

Albemarle operates two world-class raw material resources based on brine. One is located in Clayton Valley near Silver Peak, Nevada (US) and the other in Salar de Atacama (Chile), which hosts the miner’s main operations.