Albemarle and FMC predict that lithium prices will follow the rise in the first quarter

Top lithium producers FMC (NYSE: FMC) and Albemarle (NYSE: ABM) recorded positive first-quarter results in the past week, optimistic about the price and overall lithium market outlook.

Despite concerns about oversupply in the first three months of this year, the key factor in electric vehicle batteries continues to rise, driving the quarterly results of US companies.

As more and more automakers hope to reach long-term supply agreements to meet the growing demand expected in the coming decades, many investors are now considering what will happen to top producers.

The following is an overview of each company's performance for the first three months of the year, their forecasts for the market and forecasts for the remainder of 2018.

Albemarle: Lithium expansion plan "on the right track"

Top lithium producer Albemarle announced net sales of $821.6 million in the first quarter, up 13.8% year-on-year, and earnings of $113.8 million, up 162% from the previous year on Wednesday (May 9).

Compared to the first quarter of 2017, Albemarle's interest, tax, depreciation and amortization (EBITDA) adjusted earnings increased by 18% and diluted earnings per share (EPS) by 24%.

The company's lithium battery division sales climbed to $298 million, an increase of 37.8% from the first quarter of 2017. Throughout the year, Albemarle expects its partially adjusted EBITDA for lithium batteries to increase by more than 20% from 2017.

“Net sales increased by $81.8 million compared to the previous year, mainly due to limited pricing impact, increased sales and a favorable exchange rate of US$10.8 million,” the company said in a statement.

In the first three months of this year, Albemarle was approved by the development agency Corfo to increase its Chilean lithium production quota to 2043 per year to 145,000 metric tons of lithium carbonate equivalent.

“Our lithium capital projects are on schedule, and with the exception of some raw material costs, the overall market dynamics of our business are still positive,” said Lube Kissam, chairman, CEO and CEO of Albemarle.

In a conference call to discuss quarterly results, Kissam said that the company's expansion plan is not about market share growth, but to meet its long-term commitment to customers.

When talking about lithium trading, President John Mitchell said that almost 100% of the company's 2018 trading volume is a long-term contract. In fact, he added, most battery/cathode customers are pushing for longer agreements, from 3 to 5 to 10 years.

In terms of price, Albemarle expects prices to rise by a percentage point overall in 2018 compared to last year.

On Thursday (May 10), Albemarle's stock closed down 3.30% in New York at $98.39. The company's share price has been on a downward trend since the beginning of the year and has fallen by 25.20% so far this year.

FMC: Expected to be listed in October

In the first three months of the year, FMC increased its revenue by US$1.2 billion, up from 103% in the previous year, while net profit reached a net loss of $267.2 million against US$124 million in the same period last year.

FMC's lithium battery division reported revenue of $103 million, a 57% increase from the same period last year. EBITDA for this segment almost doubled this quarter to $50 million.

"Our expansion of lithium hydroxide in China and lithium hydroxide prices rose by about 30%, resulting in nearly double the EBITDA in the lithium battery sector," said Pierre Brondeau, president and CEO of FMC.

Looking ahead, FMC confirmed that it is still expected to sell some of its lithium business in its initial public offering (IPO) in October. After the listing, the company plans to split the remaining shares into existing shareholders within six months.

In addition, by 2025, FMC's demand for lithium continues to increase fivefold. In addition, the company expects that by the end of 2020, 80% of its 2020 lithium hydroxide capacity will bear long-term contracts.

In a conference call to discuss the results of Q1, CFO Paul Graves said that as demand grows, lithium hydroxide customers are more concerned about supply security than price.

In terms of price, Graves added that he is “very positive” about the rise in lithium prices in 2018 and 2019, which is reflected in the annual price increase in contracts and industry supply and demand prospects.

FMC expects its lithium unit revenue in 2018 to be between $430 million and $460 million.

On Thursday (May 10), FMC shares rose 1.09% to $87.43 in New York. The company's share price has been on a downward trend since the beginning of the year and has fallen 8.67 so far this year.

The page contains the contents of the machine translation.