Albemarle Corp has delayed construction of 125,000 tonnes of additional lithium conversion capacity due to a slump in prices.
Lithium prices have dropped by 12.3 per cent this year, owing to an oversupply in the short-term and lagging industry growth relative to targets, according to Benchmark Mineral Intelligence.
Albemarle chief executive officer Luke Kissam, in a post-earnings call, said: “the potential impact of EV subsidy changes in China, possible shifts in cathode chemistry, excess inventory held in spots along the supply chain, and the current oversupply of lithium carbonate in the market has caused some caution in the energy storage value chain.”
These changes will reduce capital expenditure by approximately $1.5 billion over the next five years. Albemarle predicts it will become free cash flow positive in 2021.
Albemarle has also altered a deal with Mineral Resources (MinRes) at the Wodgina lithium project. The revised deal will give Albemarle and MinRes a 60 per cent and 40 per cent stake in Wodgina respectively.
As part of the deal, MinRes will receive $820 million in cash and a 40 per cent stake in the lithium hydroxide plants in Kemerton, Western Australia. The revised deal is valued at US$1.3 billion ($1.9 billion).
“This transaction still unites the mining expertise of MRL (MinRes) with the lithium expertise of Albemarle and the modification accelerates the joint venture’s ability to bring lithium hydroxide to the market,” Kissam said.
Originally, the Kemerton plant was designed to be a 75,000 tonnes lithium hydroxide facility, but this has been scaled back to 50,000 tonnes. The Wodgina mine has capacity of at least 100,000 tonnes.
“Any additional conversion capacity expansions in this joint venture will be based on market dynamics,” Kissam said.
The Kemerton facility is still on track to be commissioned in the first half of 2021.
“We are adjusting our capital expansion plans to respond to market conditions. We will still be able to meet all of our commitments to our contracted customers but reduce capital expenditures significantly in the medium-term,” Kissam said.