ALB - Earnings call transcript Q1 2019

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Operator

Good day ladies and gentlemen and welcome to Albemarle's first quarter 2019 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions].

As a reminder, today's conference is being recorded. to call like to now would turn over the Mr. I Strategy Vice Relations. President Ryan, and of Dave Corporate Investor Sir, you may begin.

Dave Ryan

Thank you conference earnings quarter first and welcome call. to Albemarle's XXXX

of you Our market non-GAAP section reconciliations website release, the at released our earnings and close on the were earnings presentation yesterday find will under and posted our www.albemarle.com. press after the Investors

Eric Crawford, Joining Norris, Bromine Tozier, Chief Scott Chief Executive me Officer, President, on the Lithium. Johnson, Officer, President, call President, Raphael today Specialties Netha are and Luke Kissam, Catalysts, Financial

Please a some of the performance, forward-looking press about language As call note the and joint made including expansion in applies of within contained release release. of company measures today measures found earnings to and financial comments on to presentation, That that statements same with statements in hydroxide our meaning our both volumes, appendix Please posted can statements this in the expected A venture federal conference earnings our not our accordance call. which cautionary reminder, some GAAP forward-looking laws. our of of of our financial during refer may proposed lithium language measures in to about are GAAP. this are website. also our production that be note constitute projects outlook, securities the prepared these reconciliation

Luke. to Now, over turn I call the will

Luke Kissam

diluted EPS impacted Lithium rain Dave everybody. negatively quarter, and in the delayed $X.XX. morning In delivered good of Hi. event customer adjusted and in first quarter by Thanks the the volume primarily was first qualifications. Chile Albemarle

X% XX%, Both year. Catalyst quarter was adjusted respectively, the excluding from X% and EBITDA in businesses pricing and increases benefited prior grew businesses. lithium volume price. versus however, in Importantly, divested bromine specialties and by up

Turning to our projects. strategic

venture Resources with We make joint lithium progress on Limited. Mineral continue hydroxide to our

expect continue the have made current on of second half XXXX. regulatory to to the filings necessary in based transaction the feedback, and the We close

allows joint of that site any concentrate with an closing market spodumene at signed interim we Albemarle April, that the to is venture. agreement MRL the During the to produced market prior

II to facility continues new met production Xinyu to ton Our original XX,XXX according lithium schedule. our hydroxide ramp

from underway. shifting completed and have who qualifications have process are this to additional their We expansion customers qualification

lithium spite track qualification end for is are our existing rain yields the Atacama, of which project, meet a in capital we and material, being lithium quarter. in this of our de Salar sales commission third of rate brine by followed In all commenced that In amount Due commitments has by Chile, of to increasing to to typical XXXX. as by Salar delays of late of III four lithium delay, Western midyear to flexibility produce will La should to We been and achieve to two fourth on project Kemerton, has much improve six equipment the our increase In capacity commence we Salar full have month further around started Xinyu allow accounts the XXXX. meaningful first the Atacama first of for XX,XXX volume volume Australia, being agreements long lead as project able slight process of the metric project. yields of certain during targeted in engineering carbonate as And XXXX. a run the management II our de confident of from are the quarter equipment ensuring year increasing complex. the on expect qualification Negra expect of in quarter we XXXX In the the under tons plant, the ordered. to the year-end. impact our put to the nameplate by well now the the our event and for which second carbonate. This long IV, hydroxide operations. we Earthworks us expected time operating Salar. in and are sustainability quarter. lithium La the in lithium used, Atacama, to the occurred would on and of in in construction Negra the awarded the work are major half the de XX,XXX will track the well from Earthwork close we procurement production carbonate and equipment, Major customer this be in as expect in been contracts term without XX% or lithium investment despite units our on quarter XXXX the ton for underway have the for metric commission first second delivery This

first The XX,XXX stages commissioned be in three and XXXX. continuing encompass to XX,XXX second of a will tons of half capacity phase and XXXX trains to expected into metric piece the during

spodumene year run material tons XX,XXX will two up our start our operations the Talison, meet Greenbushes, plants. schedule LCE full spodumene the this with partners. be of conversion to of China about to and Australia, basis in an metric in tons. rate of on demands expansion tailor This will result raw Talison on being Albemarle's metric Australia annual share its remains up will June This to produce expansion XXX,XXX year. venture in the joint capability Finally,

Turning minute. lithium for to demand a for

outsized sales XXXX. of first XX% year-over-year. to the battery electric contributed vehicles global Full vehicles quarter, were up almost growth compared increasing electric During XX%

the in with sales is this same automotive XX% full record March from coming U.S. were sales of up that All most backdrop Regionally, a declined global quarter. X.X% the where growth by ending prior EV the Europe set segment. XX%. the up during year, year-on-year quarter against of electric versus for sales

were in of EV sales more than quarter First period same China double what they were XXXX. during the

year. strong. the electric the signals and storage increased these Overall, secular month continued prior than Year-on-year, the alone. will with that our the of Chinese our reported and lithium-ion I quarter XXXX what respectively, March National year XX% The production X%, cathode compared turn In Scott. up during the addition, XX% was which production of to XXXX of battery of the call Bureau more over battery to NMC term we remained in full growth from first that, Statistics production and line see strength our underlying and demand electric mobility support With agreements, businesses. customers in under long were batteries

Scott Tozier

adjusted the count primarily of to U.S. $XXX Thanks businesses, share for in Luke results in to quarter, The segments Corporate continue. by which $X.XX. X% by mostly by do exchange dollar. GAAP about was the net EPS morning services. bromine rate which not contributed $X.XX strength compared In $X.XX about about quarter lithium, currency gains $X.XX excluding about currency is expect foreign U.S. Net Earnings $X.XX XXXX. diluted grew the earnings the income quarter, up $X.XX unfavorable unfavorable, and and were first We driven and was spending the offset and quarter generated which sales growth first costs lower planned good million. were exchange, driven and first the divested $XX a everyone. in in increases catalysts and foreign million, negative professional share Albemarle X%, part a unadjusted expense was by impact. to compared pro the forma contributed and Adjusted diluted including per XXXX of

quarter sales, track of the segment Xinyu million. rest of the range to first are cash $XXX of in were costs of for from the year, now from increased an XXXX with second Given XX% increase expected million corporate costs inventory and down due the for of from quarter to catalysts China first on million, first lower preparation half ramp of view payments working preparation joint year. million, the our in ended the year to and fourth Capital operations and Operating capital quarter $XXX increased expectations. taxes lithium impacted from in the compared dividend II XXXX, by primarily Net the our $XX $XXX higher under EBITDA, updated quarter expenditures in last about just spodumene quarter. the inventory the from lower expansion cash was the in ventures in during orders to on

continued CapEx spending range the $XXX stages continue million La on we ramp million. Negra $XXX of and With the the of buildout to improvement of project, between to year Kemerton, full Salar yield early and expect

margin prices. X% down move was was slightly up fluids was impact EBITDA sales and driven The pricing from rain sales for million resins. the first wells polymer electronics. carbonate prior a EBITDA XX% certain business XX% almost up of brominate million, $XXX particularly quarter by quarter toll the the of to $XX sales $XXX and for from of XX% production adjusted on year-over-year at to of of The used benefiting brine sales The generated year-on-year increased to derivatives compared EBITDA as of ended mix Bromine a with and about sales and increased used the clear me long of basis, prices the Adjusted rates, XX%, adjusted flame of by solid improved in performance. events versus first higher primarily was XXXX. volume the Volume, On offshore of X%, solid, year, let oil term however of completion market retardants to in and remained million Lithium raw the offset material of and reflects partially respectively, specialties margin higher operating structure. result in EBITDA the Now adjusted sourced manufacturers. our primarily $XXX Salar. million. agreement due

First in Adjusted and by X% low a was FCC of quarter offset hydroprocessing by decline catalyst refining excluding sales million up partially by cracking FCC. EBITDA was fluid Growth to single-digit increases catalysts, of due products, in $XX price businesses. driven increased or slight compared X% XXXX, $XXX volume XXXX. catalyst about catalytic catalysts order million, divested to timing from our

rest remains the with Lithium in of line Looking demand remains expectations. forward year. Global volume to story. our the a

China we have pricing As in we pulling in improves. from carbonate lithium is quarter, starting short carbonate until sales excess carbonate total the term see And pricing for spodumene decided discussed opportunistic we This to China now, of last coming converters. lithium down. are some some to forgo nonintegrated

improving percentage of mid be digits healthy. bromine Bromine to order a our under than meet ramp on to reflect year the had term on notably start brine single second continue now to all of half, EBITDA and second in improvements growth terms the current together, customers we the this continue teens. expect that the adjusted EBITDA and expect we of Adding agreements. pricing an rate growth to strategic metric in pattern general tons volume high Our growth orders With strong the year our and full we the to basis. adjusted XX,XXX is to now half expect outlook year-over-year Note in their commitments volume to demand and in for long production healthy based the and current a the the first the Xinyu high XX,XXX stronger backlog due Chile.

full on half catalysts business, flat Our continue commentary of be is outlook signs beginning We on the unchanged. rounding In the be with third segment, expected businesses, recovery. to second to fine is cautious. the reported Shipments chemistry the other our remain our year the year. to strongest is under services weighted of which show to quarter

this EBITDA has However, of business million. around to $XX we adjusted now full-year potential deliver believe the

For guidance. year the total company, we are reaffirming full the

net range growth forma pro X% of expect XX%. We to the in sales

We of corporate midpoint. rate and And share adjusted XX% forma $X.XX at XXXX EBITDA pro adjusted would expect in overall result per this growth XX%. $X.XX, the of diluted a over around of between earnings margins

to XXXX the to and quarter of quarter stronger second second than be equal be the to half XXXX expect We the first. second about the

which the for position those that normal efforts, the results. flow efforts These come. cash of am continue benefit strategy, in to fluctuations our to always, tremendous progress fund excited growth and the lithium our to with impact decades bromine to on lithium capacity generate could quarterly business and As are have earnings an from increasing in growth. our consistent about I in to and catalyst us growing market

Now I will to turn over back it to Dave. back

Dave Ryan

participants to to back have are please per would to free ensure to limit get before ask the to to like we time two in open follow-ups, proceed. so, Operator, if the a ready questions Please Then feel that allows. chance lines now for questions. everyone to doing person I remind for queue all But Q&A.

Operator

line the Instructions]. from from Sachs. Goldman Robert [Operator And question Koort our first comes of

may You begin.

Robert Koort

been around going China. I some if there guess in Thanks. in on has Luke, talk, you was angst wondering what's pricing could I

Thanks. of to sales alluded and opportunistic about and for tolling maybe then and some lithium? balance maybe again integrity your talk contracting guys less just us you Can China review You once China of and contract sales. approach doing that in in on the outside

Luke Kissam

has he level high specifically then will bit about a will seen contracts. talk I little a Eric about let little the a Yes. as bit what in talk China and I

Eric Norris

we Eric. high falling is this the converters. to we would pricing are nonintegrated seeing Bob, the what consider In spodumene cash China, cost of cost So

and price that a carbonate, economics which, is through take just we when the one sense. to make toller convert don't So Talison rock it

expectations we price contract we of have we future with was be a new the It so, developing we piece it a let's already of And price an existing Scott remarks, of was prepared either his account their are that Or was contract China That for say, either opportunistic would in that volume as volume. customer of, on alluded we two fixed kinds. that's pulling to to one where growth, several out anchoring that volume have and those. do variable a to price. have who prospective course a not in is

okay, So strength long if of a that shows has quarter think been it I term, term you our this long the look quarter agreements. at

pricing have that the fixed contracts. we volumes have in We minimum and had the the had

All those. They that And held of they have minimum to commitments. our have pricing had. customers for their we held that to taken have minimum

lithium was our of pricing X% when number down being year-over-year. talking other about As price year-over-year were up companies you can see, a

through So on get we to the the and we quality this and a is strategy return thought again, one that what shave to off lows highs invested.

contracts feel we that long the carbonate good and that they we of for The spoken these have contracts. end strategy bulk long enough So now under term our these about are through through carbonate through sorry away -- we spoken prices. bulk at spoken end I of bulk of all And of hydroxide, and Bob, the our of have the XXXX. XXXX apologize the

So feel the are these about respect good in and legal that and are very we we where our given ability significance contracts. the

Robert Koort

Eric you producer And Luke, I nonintegrated then mentioned thought that maybe at you is mentioned a breakeven. China if might you ask, in or

cost. out You of through the pulled market and tons using tollers that Talison far some away of is, lowest believe, your which own the I

to does they that is what And Or different companies production? see So to that you standpoint? should from quality are independent nonintegrated fungible? some expect selling mean start Thanks. is would back market in you of these see, we selling a it pulling than what are

Eric Norris

kind Let of me and the the answer last It's converter It track question all their over the on first. record. depends board.

we structure, are the obviously because But yes. you to in some your is the Talison converted around So is margin, work some is marketplace, remove be with higher earning profit, going point product quality toller carbonate, lower. Once right, cost no the a the product doubt. tollers to lowest cost

that's not though, producers. cost certainly, margin gets is constraint us It a toller could have and to that current this the on close why we out. have pulled With at what profitable being prices possible, cash high market

will to and see. We have wait

Luke Kissam

operate there Remember, And cash making we cash. at it our people, some are And to to in margins. Bob, China of tell out overall one and willing who committed, would thing. are was people I margins, you going what are plenty have there XX% there cost

have are of the to the be may are high market to we that with And people whatever low through us, going and committed we pricing, through pricing prices. consistent not. the the those worked We to committed that bring,

going are they well. are their commitments to meet our and We commitments meeting as

So we feel it. about good

Robert Koort

Perfect. Thank you.

Operator

Thank Roberts you. from question line from the next UBS. comes John And of our

begin. may You

Josh Spector

is This John. guys. on Josh for Hi Spector,

cathode delay the Xinyu quarter? in what first I that terms together timing term impacts? you to longer relative if some competitors information particularly trying of saw II, versus in impacted guess, the you and could and qualification question, provide additional producers guys to around a near mesh some Just of term of Just

Eric Norris

a expanding next times Eric to comment the December I it using Xinyu producers, Luke cathode Norris. has months We that qualification an Hi six to up Qualification brownfield refer process. with November, to in plant like ourselves track new for four am existing that's established record made. an a Josh. a is or II company timeframe. brought going This a has to

buying the And able now March up bucking get to qualified the certain customers always are product right. by and we that make out quarter of we get the that didn't. time So in we timeframe, and in against end to were

So it's at clock. the playing really just

Luke Kissam

the with long relationship we that speaks confidence think those the customers to them. I And have term have that also in

As a them least their, or of the of time some actually they that little cut at short. one cut quarter, did in two qualification first cut

So we of got for a that volume piece in but all for their of not it. work,

shorten continues just But do was it they the So we there the across and we a board. able it a thought It they schedule the what thinking be qualification than could we those issues. have on I aggressive to long more EV think to were willing get just that. batteries, no And do trying end, at higher quality weren't matter been. that we qualifications for qualification done, of, time the would have or to are tighter weren't traditional for could little

Josh Spector

like at seems from bit So what of a customers expect this, at we are full in timing? later in rates quality view, you you seeing order your be, hear are which of you to seeing for some indications It Xinyu, you higher product, what be different from the patterns? think, hydroxide any this Or others. seems different pushback what of to I any demand year, saw the terms

Luke Kissam

Yes.

expected what run toward we in will rate their pushing nobody So, customers. is said order a pattern year major had basis. back for capacity ramp for we what that our full on from this we on And

we difference II little there. XX,XXX in a will is rate year, ramp full bit of won't the metric by that operating a of the at this So tons year. end if Xinyu equal we be basis run we produce XX,XXX of out of other There but words, tons would the year,

am understand saying? So what you I

Josh Spector

Thanks Yes. Got guys. it. Makes sense.

Operator

from from Research. of Kevin comes question line McCarthy next our And the Vertical you. Thank

begin. may You

Kevin McCarthy

Luke, X% see morning. confidence what you to lithium Good to the that Can can And regard is you level what your pricing. talk seeing pricing positive throughout are to Yes. XXXX? course with of nice of on the the you positive mix? sustain

Eric Norris

this so again. is Kevin, Eric

are, contracts. you under volumes long know, as term Our

volumes almost with So the all the even floor and contracts hydroxide under vast carbonate fixed have volumes and with majority our them. of term associated a prices our long of

that going tons representative going It XX,XXX on to we mix the of hydroxide is production are carbonate talked tons mix the being a our putting seeing high market XX,XXX forward. we the at is confident is into So basis about. that to very to prices quarter. going that close are of current be and in to of we to roughly be sell are able rounded and first It

Luke Kissam

then the on the flat pricing thought And be are and hit price seeing first you at we quarter the some That's that remember, that to said in it three in for quarter will the some Kevin, you what that lithium full call, first expect. quarter. be, the we through for inflationary. XXXX the increases last the will What if we of year, quarter, still the way of in was It year. X% first is didn't all staggered

bit you little to for that a to XXXX. the inflationary quarter But in going expect the first of it seeing also flat So are be is still we year.

Kevin McCarthy

business, you of then or I on discussion longer wondering or was it And does anticipated. cathode are negative? any what impact move either has seeing technology. secondly, that? in than evolution on some been that positive little if taking There systems elaborate could a the of And observing is bit Great. you have you to Are the so, terms high discuss your if nickel appreciable

Luke Kissam

demand discussed falling We would what we folks' thought call our account demand. aren't mix were. conference can't forecasted months seeing we seeing for last about in predicted and Things anticipated Kevin, the projection So of as and are be nickel of other see. we XXXX we pullback that demand as largely we we ago are no couple a unfolding high where to from they

NCA a of is all has in the Now secondarily a know, largely which it's amount on But it. fair market, you side, hydroxide to hydroxide. an NCA, as partial say that NMC XXX that's market and

attractive few We bet it long processing to will put in think number XXX, of term improve have term. technologies But that never of anticipate is economics chemistry can manufacturing on XXX. there a is take to quite near put a place. you place a in big which years an the put on we We

Kevin McCarthy

very you Thank helpful. much. That's

Operator

the Thank you. our next of Jefferies. from from Laurence And comes line question Alexander

begin. may You

Adam Bubes

Bubes, Hi. for Adam here on Laurence.

the I stationary potential evolving? As the see less with rigorous specs And wondering how DO Are you differ? value was than chain, you electrical do talk in your partners storage any vehicles? commitments how volume

Eric Norris

you mean, storage, Eric so energy storage This Well, grid speaking. is for systems?

Adam Bubes

Yes.

to clarify. Just

Eric Norris

Yes.

term So, part sold to ton It is used a of market the our market the XX,XXX it we the going as Chinese do. maybe and and volumes two, and we couple first sold in products is that speak I although long is a we believe what there part ago this well, and not in months forward and directly is and contracts have today. that included more forecasted big a of can Koreans the see applications. The Japanese are of storage I grid of

an intriguing monitor it see be. the EV being don't market so, It's driver will carefully. And it market. But that we we

Adam Bubes

Okay. Asia, your was if my wondering on view stabilizes should question, expand? I Thanks. was? derivatives second margins And bromide in And demand what

Luke Kissam

turn will Netha. I that to Yes.

Netha Johnson

is flame half based our of an retardants the in brine market What demand Adam. year. and are opportunity offshore on the increasing. rig gas a the Netha. we fluids increased for Good morning second This through oil basically clear is really seeing stable is count for There

guidance forward we had basically is done have second risk our for year. the projected we mid going projected the the to in single the and full when forward removed half digit what we we that So in

Adam Bubes

helpful. Very Okay. Thanks.

Operator

from Markets. And our Joel line question Capital next from comes the of Jackson BMO

You may begin.

Robin Fiedler

questions. taking for is for This my on Thanks Hi. Robin, Joel.

so little Chile. weakness lithium bit how you of impact there from your that my price showing out about EBITDA you price price of supply It's specifically? data that carbonate talk QX and know the export export publicly is pressures. seen some I remarks the might past spodumene in months. sequential a dynamic carbonate But have Chilean can mentioned first available prepared couple in So we is, reductions

Eric Norris

Yes.

data But to would way price then are the what So to I sure entity U.S. entity from transfer I not am that a is, and turns looking at products. our out sells of to Chile that's the Chile, what say market, you Chile. from we a go

final you that customer to So that the Albemarle sell view as we not the at okay. product did the price, export data

seen that So then fact, if to or we they the we these in been term, due in that we will to on uses we long are chemistry is we pockets makers where to where lower is have right seeing at willing now to be in over spodumene have quarter, that a continue, couple going some a market remain excess as the because the undersupply. this But at oversupply, we carbonate have balanced some for sell look what what many the the have you of for but always the longer think convert has The where pocket, hydroxide pressure I price that years, there some will to pockets meet long than have demand have market particularly and will of term. the seeing carbonate term, over going are in carbonate enough XXXX, is excess the Asia, they time converters And through to is, first balance. non-EV here said, we market in there battery on are And what pricing largely have hydroxide dry able will relatively pressure over convert are capacity said last If will over you to carbonate. there. of to up. to downward not carbonate demand some

Robin Fiedler

lithium Are in able And you year-over-year on follow-up then guidance a quick provide basis? Thanks. QX helpful. That's a just that. to EBITDA

Eric Norris

Not than Scott remarks. what No. in his prepared more said

Robin Fiedler

one now and and the us Okay. timeline on update still now. that this might that's how Are you And commissioning is Wodgina? problem. LPs just expected It received Wodgina Can an for you on this me. And the on market the from No sometime third Thank last seems line agreement for and schedule line year? impact can second place construction volumes question elaborate summer? first like you. in is the at give

Luke Kissam

lot that's follow-up. Well, one of for questions

the of try marketing is to year. full says right agreements to address site the have spodumene that we What let So that that's agreement. produced me the out sell will during the market

are schedule MRL one. was getting We on train on

qualification get samples will out. We

of spodumene. a attractive And of certainly and We we that in But we sell prices. at sell will position the are spodumene it. that about that then thinking in not wide or middle marketing are open some operating

demand We going are to that's it. to it meet sell the and

Robin Fiedler

very Thanks much.

Operator

question And Aleksey line Instinet. from next Yefremov of Nomura comes from our the

begin. may You

Matt Skowronski

on morning. for Hi. This Good is Matt Skowronski, Aleksey.

see to would demand were you If in investment? a slowing down downturn your for hydroxide, you consider

Luke Kissam

Yes.

Matt Skowronski

good by flame pickup Is will anything that And it what the that you mentioned second occur? else? confidence in retardants? visibility Is outlook driven your your it this for you. Thank How bromine demand conditions. you is half are improving gives into orders? And kind of

Luke Kissam

Netha?

Netha Johnson

is This Hi. Netha.

the backlog good We orders. We we out. are visibility extensively. pretty our have And sold analyze essentially into

slight produce for was the in and orders. we we based and had a on improved the What second about have the are to that in good outlook removed risk a in our good economics we just our orders to half we So year. feel position there deliver ability those which

Matt Skowronski

Thank you.

Operator

And the our next line from Citi. question P.J. comes of from Juvekar

You may begin.

Dan Jester

Yes. Hi. for Dan P.J. Jester, on

outlook? mix another margin little bit as like sales How of we to is going bit that the progresses. Thanks. if little on affect sounds a could margin dive Just and does in year one the ht bromine, It deeper. a change

Netha Johnson

seeing. you se. risk to looking we going know the mix again. per Netha conditions is change, economic now. are Those a built don't if little I We had into second bit is This half were on better based

year. mix sales risk. fundamental our Margins should as that we throughout But forecasted. removed we So shouldn't change the be

Dan Jester

how you what's you. Thank on the XXXX last comment pressure just margin had you. you. driving bit you Got you over think and then Thank little of couple Can that a quarters. of evolves? And catalysts,

Raphael Crawford

Raphael. is this So

I So be to from year-to-year, chemicals is chemicals to mix business. the much macro trends occur There we the adjusted on basis. versus and effects are continues It the But depending looking at XXXX would how clean whole, of for are strong. year-over-year business fuel. say, on an need hydroprocessing certainly follow on that in essentially flat EBITDA FCC fuels

feel So future for business. outlook the the in confident we

Dan Jester

Thank much. you very

Operator

And our line you. from Thank next from question Bank. comes Begleiter of the Deutsche David

begin. may You

David Begleiter

Thank the just China. of do Is like on think Good long last? this in it something matter you excess will quarters or you. months that? Luke, carbonate a morning. or How

Luke Kissam

going It's because to so Yes. it much eye about But you third expect would people say, the are hard year. how to that it. I David, depends through see many it

it the are you toward what year-end. year. may say. that. are to picking see to pricing going be It many to going very, up is, to My upon they this think doing third and it's can't But and control parties all is through I you see difficult start depends you very going start, bet so

that's I will say. So what Eric?

Eric Norris

David, our supply Supply, on I add, that haven't compared to a ago we expectations Yes. supply. would just about are three months where as different. we talked were lot very

we impacts that production the be producers, impacted rains America South year-on-year is once going all you believe. consider broad nearly flat to of

for about including have talked year. this production and outlook Some ourselves probably it, SQM's

to capacity economic sufficient we longer to world turn of would time more some for side market. it's lot carbonate interest more a and the being in expect get to putting the then values converted market You achieved other not salt, look to the in that by spodumene it's taking and drive at the production, is to a

with going we impact contradict to to look I all. are last and balanced year supply more the not I it a multiyear going term And of need Luke's will long a being think demand. seeing. on at, comment year? the see lot this basis, on at what out But supply we we So beyond therefore am the

David Begleiter

Very relation to that be just as well at How in about in spodumene. additional thinking some marketed looking Wodgina good. China? your being And the should on marketed we Talison perhaps of being volumes

Luke Kissam

Yes.

So remember, Talison, for grade. in except Talison, market we that technical the do not rock

of and to things has that for glasses as converted markets And grade. so that But and would go within China China that. the we by and our into Tianqi outside And thing be grade partners. battery ceramics technical such like market

Tianqi either by converted spodumene be the a parties, sell rock Albemarle. of source is So into we raw anyone one simply the grade for material Talison in don't, does world. and to It battery not

David Begleiter

Thank you very much.

Luke Kissam

the market to demand we demand. If not is to going the Wodgina rock are we run meet And there, the won't plant. the

demand profit can and if we there, it. that get it on meet demand that to a will is we sell So run

David Begleiter

Very good. you. Thank

Operator

next the our line come from Baird. will from And Kallo Ben of question

You may begin.

Ben Kallo

Hi Thanks and good morning.

can about you carbonate talk And in want particularly allocation. then about first, capital to and new contracts? So looks just in how I maybe out that years conversations talk for

on what And then startups valuations am just new if your stand capital or market to I hate and from with of now. are out First But markets lithium the with need that Thanks. project implications the any market wondering perspective type does that right talk you are looks and on out the you are It of activity there your either what for demand? private what a where M&A supply the buyback private there maybe all, how second, there? public could about viewing private MRL, agreement like and thoughts you in market?

Luke Kissam

Okay.

out First our closed of is We Right, buyback that closed last year. out. Scott? all, standpoint, we that last a closed did. We one buyback from already

Scott Tozier

Yes. The end that we That's of correct. December buyback. finished

So are we complete.

Luke Kissam

for year I then his to am carbonate ask, And about talk if the you contract? Okay. and question the going to

Eric Norris

start-up? me look specific So How Ben, question? clarify, what was your does help carbonate versus

Ben Kallo

Yes.

As going? how pausing people are you do those discussions Are or pricing market the you look at are XXXX there they how and look how to And active to is? too? out look beyond,

Eric Norris

Okay.

imminently. will given have and through and don't that there XXXX be think We any not you not candid, year in have are I is current as expectation and supply past on size. we point our out of let play market are period or of target will to first a we hits And of contracts. this discussions out charts next lot we going XX% out, renew contracted any So me exactly. the of renew but relationship the time need demand pricing in are out material through a quarters, is contracts engaging to we which carbonate, where over discussions course, those ask, put got that that the which due few didn't we the are in given have result, about how

Luke Kissam

the I about are build from is some -- asset. look a the some some that as high there valuations say still steep of have better some a opportunities still you of you valuations, a apologize, resources, ask would better if the are I asked from at a side, resource, projects resource it's is, What Ben, valuations. I capital And got standpoint, may as, obviously buy. But pretty private in we your conversion have sorry, own versus even And be the where valuations resource the some standpoint, in am of the then pretty valuations. a

Ben Kallo

Got it. Thanks.

Operator

Kapsch next question from our the of line And Chris Capital Loop Markets. comes from

may You begin.

Chris Kapsch

Good morning. Yes.

premium if and you see been, wondering So that just there hydroxide if that pricing. but more lithium that recently, vis-à-vis do is out? not And does has think How you premium outlook? has you your am has a there historically, there? on for I playing could And compressing. the carbonate you at pricing where pricing, business endpoints been do comment affect maybe been look

Eric Norris

Okay.

is this Eric. So

So the you let me standpoint, for I completely, know question start nearly earlier, and indicated sold are largely with From our out hydroxide. we last first.

it years not believe. or for come, year this affect to we So our pricing is going to

higher contracts. time. in pricing as fixed prices contracts. to we of to these just there these an market balance for all if Our we might some opportunity of are the this first flat the a of be year. that but at last bit than the the us And quarter is largely in be And improves, floor witnessed increase expect year the have for

of applications Well, grease energy right. on sold of or to the as of in your even hydroxide, certain applications at lower quality kinds about broadly are LFP, market. The may there broader question different not for going for be hydroxide So that's including chemistries can only if these standard Albemarle. look nickel play that's nickel a you producers, high some quality people same few the large used battery and result, relationships the at the with a that where in in we see high chemistries dense is the what's as

a The from other has long we has back China hydroxide excess been back contracts. normal market. So tow-tier line. $X, there more about of between of there spread to driven in of term producers the largely which compression $X.XX hydroxide that's that carbonate That's and in though happened some what about aren't largely to spread, under is being consider

Chris Kapsch

change zero is, Okay. That will, the seems subsidy has EVs. then term. you the near the known be And And the of things change has been Chinese been follow-up obviously to was angst, could changing that wondering, color just going But on the how you so am the forth. given Thanks. influencing away tail and am just LFP for ever I a subsidies? that in is of some if inform one relatively helpful. magnitude my that's your longer some this I EV comment that But is that e-buses the sure for that to LFP. relevance unexpected see business? gives not subsidy There in from to contributed to Chinese going maybe patterns. effects that nonetheless, to discussion you

Eric Norris

Right.

chemistries again, high you chemistries. than nickel the other would might favor it with agree that I of So some longer

cost dense when subsidizing to batteries. in rapid movement less With longer range see of the LFP larger, some I more energy to range in getting with drop vehicles, more the

is finally, of buyers if case, nor have our first And that we a China. possibility. always as that's outside long mix inside that as noted that's us, good play quarter there. in the product mix, right, still there. In So carbonate business news, and the neither We you look illustrates the for bad growth growth at then is than hydroxide. is our more And our

So this globally we while tied electric our more in business, impact EVs certainly, growth vehicles. are does in happens to with what it China

Chris Kapsch

Thank you.

Operator

our from question from line next the Thank you. of comes Rusch And Colin Oppenheimer.

begin. may You

Colin Rusch

guys. so Thanks much

terms seeing spend are chemistries keep up incremental internal to efforts rapid for of with need evolution the at you the R&D look folks your of As for need? battery chemistries, that in what

Luke Kissam

This is Yes. Luke Kissam.

where in is be. our we where need we today are think spending about to I

can their carbonate, to battery. to that sure they for hydroxide where going, is other apply not What understand that we us lithium important lithium are lithium might be lithium going whatever are either the derivative to We is are invent the situation. we our doing, the be metal, customers have whatever so the next to or take

to see the levels in successfully our order further meet that the the of R&D a development up So built changing last evolving three of of it's don't kind of any and four we more we need I demands an application. less or markets. than have years that meet are increase able we to and the expertise demands. those so today it have, And And that over

Colin Rusch

take had point? the or then contracting. on And volumes and to put and off prices to tried anyone this come just Great. renegotiate back lower Has refused at to

Luke Kissam

We constantly customers. are our having conversations with

now. Certainly this small a back need not said and where customer major we not certainly sit customers know. anything and customer major am I that aware the aware I am down just on So the price know. a is, to customers have a discussion in of come quarter. has Maybe about right edge

Colin Rusch

much. Thanks so

Operator

Thank comes from Mike question line next of you. the And from our Sison KeyBanc.

may begin. You

Mike Sison

guys. Hi

to segments? the for be needs happen flat you that second to then think what XQ, think Can And terms In to earnings you better give noted of I feel year-over-year. directional you half? do us maybe get

Luke Kissam

Luke. Yes. This is

that Xinyu plants ramping take brine is second better enough It's better is and than to lithium it EV. have to little standpoint, Xinyu operating. continued the production second From the to brine, it's Chile feed it in better forecast? capacity. me bromine. at having we brine, event, Let the of operate full And And down operate the half having then it question a the we comes qualification through high Can strength that a The first. getting up. rain

that. you is you be quarter hydrotreating well bit. know a bromine. lumpy going really in big slight are we the look big business another business. And have catalyst little those And now, it if to then big third of bit believe right quarters a always coming But and orders got the we online a is to HPC hydrotreating Right for got now, very fourth little quarter have because orders, tendency third catalyst. We

the additional across really It's the the all order it's us It's price those. So qualifications what about catalysts. not half. in portfolio way half. volume, lot patterns the second are gives the big additional in confidence of But and built-in that's set the HPC our for second a

Mike Sison

Great. XQ, segment? on then And just by

Luke Kissam

Scott?

Scott Tozier

Scott. is this Mike, Yes.

you see all we chemistry growth is QX. to similar even be catalysts, sequentially at bromine QX, fine as coming are look So that really expecting that we will And lithium. the from sequentially

And And the on if be while it. QX, is going look year-over-year down catalyst on second basis big going driver you year-over-year to a how so there, big that's a kind this at you in basis, the have actually of quarter. look it's to

you got that will as you you So take well. dynamic to That's the account have growth. see into

Mike Sison

as Got follow-up. a just it. And then

You what give sales Can you the for some XXXX? growth year you for global XXXX what EV. for versus thoughts your global and early sales in strong rattled us pretty terms see full are maybe for for you or quarter outlook first off hearing of EV

Luke Kissam

direction. see from are expect going EV are seen or Yes. in to the that what the OEMs from evidence the our are being models XXXX order the have seeing trajectory automotive customers change from I any to and XXXX XXXX of out don't pattern I that by would big to we EV the would makers is you or to by say. rolled the what and We that that sales to XXXX XXXX on continue XXXX

But we I have going EV are continued think growth the in a number don't I is still know be. see sector in trend you XXXX. of the to seen that in past. to what continuing You see will going what

Mike Sison

you. Thank Great.

Operator

from from Thank next the Sheehan of question comes our line And Jim you. SunTrust.

begin. may You

Jim Sheehan

Thank you. Good morning.

XX, In you classes buckets us listed on that you of terms that. of announced, Could March the of give the each think three size the of earnings please? shortfall buckets I you for

Scott Tozier

Yes. is This Jim. Scott,

them look at, put to two going into as I am buckets. So

first The XX% rain from qualifications. XX% about shortfall the the coming it's delays. is the and in was that's and from qualification The that event of Chile coming one

can about those had about delays talked you the Xinyu on you qualification as If XX-XX we remember, split we actually as well toll that on and as well. carbonate II

Xinyu kind carbonate from from that's XX% carbonate So XX% XX% of Chile. toll delays, out of from II, the

Jim Sheehan

expect Great. talked to What XXXX? do CapEx and for in year. look expectations this XXXX your like And you you on about CapEx,

Luke Kissam

the going It's be roughly Yes. same. to

got that that don't I that was are roughly customers, We will certainly the assuming return demand us on customers seeing investments it our we If if the But from investments customers, as the on issues that would give would if the are have right good pull demand back. with that. we seeing. give now, as from we necessitate you the modeling demand But same, be still of and an will right we would we those we have update now, those it well.

Jim Sheehan

Thank you.

Operator

from next Thank Mike Seaport from our the question Harrison comes Global. line And you. of

You may begin.

Mike Harrison

Hi. project Good maybe were give morning. the believe Chile. in there yield more concerns if in success, on I increase lithium level. scaling was It scale, up but that. a had some the moving are commercial to kind the can forward bit wondering have we of I pilot on detail you heard, sounds some little you last like lab at you or

technology is changed that are confident that prime what's to there? you be ready time? going So And for

Luke Kissam

This Yes. Luke. is

that. It equipment. are like we equipment. known through. pilot in any also ran Salar equipment well. It's of at specially in or quite not not worked the pieces very made worked It's confident. from it that There's scale It the new brines things lab We

to confident brine same us of yield It in project. achieve in to our about being increase Salar. pumped this feel XX% lithium allows execute So the we amount ability for the the from a of in the

preservation of going of unit lot for It good forward. capital a the Salar. it's us So gives flexibility and

that's lithium in to best derivatives. So make the world the place

moving excited are and So forward. ability we about we that are

commission sometime to that I in believe. XXXX, expect We

Mike Harrison

little bit regulations right. you All of what seeing HPC ahead about demand Are wondering, a XXXX IMO well, in? talk then you you in kicking are And also can the if I was year? see like ability starting that talk QX, what's additional what the to capacity? maybe you QX? just looks some really the to driving hydrotreating this can about Is ramp Or capture during

Raphael Crawford

around specs We Mike. in up gearing fuel for is see is for world a That's the of there IMO. for diesel beyond fuels increase demand of part general. which customers piece the QX, But in it. sulfur really efforts tightening a low-sulfur our Sure, a the low-sulfur generally of the of blending,

HPC for are So XXXX. to a end, impact because we to that IMO starting positive see of

it is mentioned, business. had a Luke lumpy As

seeing we what of existing opportunities function of growth customers is in in we timing of QX the rebids some and just that So are from a have.

Mike Harrison

very Thanks much.

Operator

And RBC from you. Thank of next Viswanathan Arun line Markets. comes from our the Capital question

You may begin.

Arun Viswanathan

And just that morning. ask of of seen? Could action I you has the Hi. the changed the if And kind characterize Thanks. about at MRL return given wanted you pricing there, the guess. have I investment. some if to Good you [indiscernible] it profile there? all

Scott Tozier

is this Arun, Scott. Yes.

spodumene around little look there. the pricing, is the And term. see have short in at So sales as obviously the the returns you impacts pullback with we of an be a impact we the spodumene going bit in of will that to one

going is long-term Fortunately, all to big mean, under returns. that contracts. marketed changed. the That's hydroxide our dynamic be I driver of hasn't

feel So about still the very we returns. good

Luke Kissam

for to returns for years have feel Yes. And This about able those they the deal. of standpoint, not and is buying Luke. partnership drive this or the quarter expertise this for returns. a next we the From this lithium And over that great be is MRL but the period hydroxide to to with confident time we an combine we good still are the quarter, mining expertise next XX that have. we the in are

Arun Viswanathan

Okay. Thanks. as And just follow-up. quick a

pressures? been any or from China, guess, If kind any in I about you destocking on demand, macro think or concerns term what's shorter going has of impact there on

Eric Norris

know, are and hard for you it, are why where Eric. is if you good theory. just that being My we capital part I know, if tell. based, are But aggravating hand, they working this, running a on exhaust like it's market with at of time you to cash just to have It's prices a the theory all my to as Hard are. hi, That's it. that's very business And cash, you your theory prove. level market Arun, there's see for may a a discussed question. sure. only for factor to of And as discussed the because maybe and opaque business China you and years a hard a feedstocks. a buying destocking can at was In prior level high believe, is we that above look team, probably of there we and demand,

Arun Viswanathan

Thanks. Okay.

Operator

I time, And turn at like back this you. closing Thank call to Dave for would the to Ryan remarks.

Dave Ryan

would today's everyone third quarter participation earnings questions conference. your interest this your I call. like the and We for concludes Thank to you. Okay. in always appreciate thank and

Operator

thank This does gentlemen, and a may for you you Everyone, conference. program and have day. in conclude great Ladies participating the disconnect. today's all

Albemarle (ALB) 9 May 192019 Q1 Earnings call transcript