American lithium producer Albemarle Corp has warned that the challenging market conditions for the commodity could last another 18 months.
The company last week announced it would suspend the Wodgina lithium joint venture with Mineral Resources in Western Australia until market conditions support production.
Western Australia is also home to Talison Lithium’s Greenbushes mine, which Albemarle holds 49 per cent of.
Albemarle’s president, chairperson and chief executive officer Luke Kissam, in a third quarter conference call, said lithium prices would remain under pressure in the short term, but that he had confidence for long-term growth.
Since July, the company has announced several strategic actions to position its lithium business for the long term, including delaying construction of 125,000 metric tonnes of lithium processing capacity, freeing up $1.5 billion of its $5 billion five-year investment plan.
“This will enable us to generate free cash in 2021 and is the right path to take based on current supply demand dynamics,” Kissam said.
“We are, and we will be dealing with the challenging market conditions for the next 12 to 18 months.”
Much of the pressure on the lithium market comes from a pause in demand from the Chinese market, where lithium carbonate prices have stabilised at around $7 per kilogram.
“We expect that this price level is at or near the marginal cost of production and do not expect China carbonate prices to drop further in any material way,” Kissam said.
“However, China carbonate at $7 a kilo puts pressure on pricing across the global lithium portfolio, including the fixed and variable pieces under our long-term agreements.”
Despite the struggles against market conditions, Albemarle has assured its customers the decision to defer processing does not affect its commitments to current customers.
“We are in the position to deliver on all committed contracts and we have the ability to add capacity if current market dynamics improve,” Kissam said.