Albemarle: Lithium leader faces market and sustainability challenges

Located in Charlotte, North Carolina, Albemarle Corporation is an American manufacturer of specialty chemicals. Lithium accounts for 68.4% of its 2022 revenues, followed by bromine specialties for 19.3% and catalysts for 12.3%.

As of 2020, Albemarle was the world’s largest supplier of lithium for EV batteries. China produces just under half of the world’s lithium and lithium storage products, with Albemarle, Sociedad Química y Minera, and FMC Corporation producing just over half.

Albemarle stands out as a global leader in the development of flame retardant chemical technologies. With production facilities across the US, China, and Europe, it ensures a strong international presence.

Additionally, it offers a range of blends and antioxidants that focus on extending the stability and storage life of fuel and other lubricant products.

Albemarle manufactures a diverse range of products. These include ammonium polyphosphate, polyurethane foams, pigments for paper, aluminum oxides for polishing, and specialty ceramics. Also produces magnesium hydroxide, a key flame retardant.

It is one of the largest manufacturers of fluid catalytic cracking (FCC) catalysts. It also produces hydro processing (HPC) catalysts used in the petroleum refining sector.

With the exception of joint ventures in Brazil and Japan, production takes place in Bayport, Texas, and Amsterdam, the Netherlands. Additionally, Albemarle manufactures fine chemicals and chemical services for the life sciences and pharmaceutical sectors.

The Alternative Fuel Technologies division focuses on the coal liquefaction, gas to liquids, and biofuels markets. Based on its fiscal 2021 revenues, the company ranks 780th on the Fortune 1000.

Albemarle’s Evolution: From Specialty Chemicals to Lithium Leader

Since its founding as a specialty chemicals company in 1994, Albemarle Corporation has experienced significant expansion and change. It was first founded with the goal of offering high-performance materials and services.

Its first significant product was a chemical based on lithium that was used to make batteries.Through significant acquisitions, including the 2005 purchase of the American Chemical Society’s Lithium division, Albemarle strengthened its position in lithium. This also broadened its geographic reach and portfolio.

Through its commitment to research and innovation, Albemarle has created advanced products. That serve key industries, including electronics, energy, and automotive.

Albemarle has been committed to sustainable growth throughout its history. This is evident in its early emphasis on environmental stewardship and safety.

As the market for electric vehicles (EVs) and battery materials grew in the 2010s. The company turned its attention to expanding its footprint in the lithium and clean energy industries.

Albemarle persisted in bolstering its leadership in these rapidly expanding markets through strategic acquisitions and investments. A significant turning point occurred in 2014 when Albemarle acquired Rockwood Holdings’ lithium division, which made it the biggest manufacturer of lithium chemicals globally.

With an emphasis on sustainable technologies and solutions for a future with greater energy efficiency. Albemarle continues to lead the lithium industry and other advanced materials sectors today.

Albemarle’s lithium expansion & challenges

As Western economies struggle to lessen their reliance on China for lithium processing, Albemarle Corporation faces difficulties. Experts note that Albemarle’s plans to grow its U.S. operations, with large investments in North Carolina and Kings Mountain, may not fully eliminate its dependence on Chinese refining capabilities.For the manufacture of batteries and electric vehicles (EVs), this dependence is still crucial.

Global economic factors, like inflation and supply-chain dynamics, influence lithium price volatility and slower EV demand. These have affected Albemarle’s performance despite its expansion initiatives.

Albemarle’s future plans

Albemarle Corporation is one of the leading companies in the global lithium market. It is therefore heavily exposed to the manufacturing of batteries and the electric vehicle sector. Due to overcapacity in the lithium industry, Albemarle Corporation (NYSE:ALB) has not fared well in 2024.

In addition to the slowing demand for electric vehicles in an inflationary and high-rate environment, a weak Chinese economy has also reduced demand for lithium because many battery manufacturers are based there.

Given that Albemarle Corporation (NYSE:ALB) reported a $1.1 billion net loss in its fiscal quarter three. It is therefore not surprising that the company’s shares are down 26.3% year to date.

The narrative for the lithium company has also changed as a result of the pessimism surrounding lithium. Albemarle Corporation (NYSE:ALB) has set a new goal to reduce its capital expenditures by 50% and save up to $400 million in operating expenses by 2025. Albemarle Corporation’s (NYSE:ALB) efforts, along with new initiatives like its plans to sell spodumene in its raw form, should drive its hypothesis.

The London Company’s Q2 2024 investor letter made reference to Albemarle Corporation (NYSE:ALB). The fund stated as follows:

“Sold our remaining position in ALB after the stock triggered our soft stop loss review. We are concerned that weaker demand in the US for electric vehicles coupled with greater than expected supply of lithium reaching the market may lead to declining lithium prices. This will likely lead to lower cash flow generation in the years ahead, which weakens the downside protection case for the stock.”

ALB comes in at number sixteen on Goldman Sachs’ top growth investors list. Although many recognize that ALB has investment potential, some believe that AI stocks offer a better chance of producing larger returns in a shorter amount of time.

Albemarle announces $0.405 dividend amid sustainability concerns

A $0.405 dividend per share has been announced by Albemarle Corporation and will be paid on January 2, 2025. This amounts to a 1.6% dividend yield, which is less than the industry average. The company still pays dividends even though it isn’t making any money right now, which raises questions about how long this payout will last.

With dividend payments increasing from $1.10 per year in 2014 to $1.62 per year in the most recent year—a growth rate of roughly 3.9% per year—Albemarle has a track record of reliable dividend payments. However, given the company’s profitability issues, it is uncertain if it will be able to sustain or increase the dividend in the long run. Although analysts anticipate a substantial increase in earnings per share, the company’s ability to turn a profit will determine the sustainability of the dividend.

Disclaimer: This information is not considered as investment advice or an investment recommendation, but instead a marketing communication. IronFX is not responsible for any data or information provided by third parties referenced, or hyperlinked, in this communication.

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