Albemarle pops after Livent breathed new life into lithium rally

Published Thu, May 5 20229:17 AM EDTUpdated Thu, May 5 20229:41 AM EDT

Shares of lithium producer Albemarle surged 13% Thursday after the company's first-quarter earnings got a big boost from surging lithium prices. Albemarle also raised its forward guidance, with lithium prices expected to remain elevated amid heightened demand for electric vehicles. First quarter revenue surged 36% year over year to $1.13 billion. Net sales of lithium alone climbed 97% during the quarter to $550.3 million. The near doubling of lithium sales coincided with a rapid appreciation in the metal's price. The climb began last year and has continued into 2022 as automakers scramble to secure lithium for newly announced electric vehicle fleets. As demand has jumped, supply has remained constrained. Lithium is found all over the world, but mining it is expensive, and includes a lot of upfront capital investment. New mines can take years to become operational, and required permits are often delayed or blocked by local opposition and environmental regulation. The rally in spot lithium prices doesn't necessarily translate into gains for producers since business is typically conducted via forward contracts. But Albemarle said it's now starting to capture some of the upside in spot prices. Higher spot prices also give producer more leverage when it comes to re-negotiating contracts. "We also note that Albemarle continues to evolve its contract structure and that the current environment is clearly advantageous for them in contract discussions," Morgan Stanley wrote in a note to clients. Albemarle also saw strength in its bromine chemical business. Looking ahead, the Charlotte, NC-based company expects sales of between $5.2 billion and $5.6 billion this year, up from the prior guidance of $4.2 billion to $4.5 billion. "Many of the end markets we serve are critical for transitioning to greener energy and advancing electrification and digitalization," CEO Kent Masters said in a statement. "Our ongoing investments capitalize on the rapid growth and strong pricing trends in these markets," he added. Albemarle operates a lithium mine in Silver Peak, Nevada, the only lithium mine in the U.S. Lithium Americas and Piedmont Lithium are racing to begin operations on U.S. soil, but neither has produced any lithium to date. Other companies in the space inc