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Miner Albemarle cites Joe Biden’s green subsidy package as providing guidance

by SuperiorInvest

U.S. miner Albemarle, the world’s biggest lithium producer, raised its profit guidance and sales targets as it said a U.S. deflationary law boosted the outlook for electric cars.

“We have raised our demand forecast again, primarily due to higher electric vehicle production,” said Eric Norris, Albemarle’s president of lithium. “We now expect 2030 lithium demand of 3.7 million tonnes, up 15 percent from our previous outlook,” he added, referring to Inflation Reduction Actthe US Clean Power Act, which was passed in August, as a major factor.

Lithium is a key ingredient electric car battery and material prices have risen more than 10-fold since 2020 to record highs of nearly $80,000 per ton.

Norris believes prices may continue to rise due to tight supply, and said the realized price of Albemarle lithium could be as much as 40 percent higher this year than in 2022 as it moves to more contracts tied to current prices.

New York-listed Albemarle, the world’s largest lithium producer by market capitalization, said it was well-positioned to benefit from the law’s lower inflation because of its geographic spread. It produces lithium in the US and in US free trade partners in Australia and Chile.

Its shares rose 5 percent in early trading on Tuesday.

But analysts warned that meeting the new targets would be a challenge.

“They’re obviously very encouraged by macroeconomic conditions and they want to expand all resource capacity,” said David Deckelbaum, an analyst at Cowen. “The way to get there. . . it must surely be paved with flawless execution.’

The broader industry is divided over whether lithium — which experienced a glut before the pandemic — will remain at current price levels. Lithium prices fell between 2018 and 2020 due to oversupply and reduced demand, causing prices to fall from $25,000 per tonne to below $6,000.

Lithium prices are currently around $76,000 per ton of battery-grade lithium carbonate, according to Benchmark Mineral Intelligence.

However, Goldman Sachs predicts a sharp price correction to $11,000 per tonne of lithium carbonate equivalent by 2024 as high lithium prices spur the development of new sources that will leave the market crowded.

Albermarle expects a market deficit of 800,000 tonnes per year by the end of this decade due to the growth of electric cars and the long time it takes to develop new sources of lithium.

Albemarle said in its update that it expects its annual earnings before interest, taxes, depreciation and amortization to nearly double to $7.2 billion to $8.4 billion by 2027, compared with a preliminary EBITDA of 3.4 to 3 .5 billion dollars in 2022. results of the year on February 15.

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