ALB - Earnings call transcript Q2 2020

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Operator

Ladies and gentlemen, thank you for standing by. And welcome to the Q2 2020 Albemarle Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. now Meredith hand Relations Bandy, would your conference and I today, speaker VP Instructions] like the to to Suitability. [Operator of Investor ahead, go ma’am. Please

Meredith Bandy

Hi. welcome everyone. XXXX Thank conference and second earnings Albemarle’s quarter And call. you, Joel, to thanks

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

President, Executive Catalysts; on available Joining Johnson, Lithium, Officer. today Officer; Chief and call Masters, Financial President, Scott the Specialties; me Raphael for Bromine Kent Crawford, Netha President, Norris, and Chief Tozier, are Q&A. Eric also are

this our some that call. I of As language found plans earnings press over expected which will to made the A to are language during company with and can may contained within the not accordance financial to Please constitute on a measures measures With of proposed federal of reconciliation release refer the today this GAAP. website. GAAP our outlooks, impacted the is in in expected our and our also Kent. of forward-looking laws. cautionary impacts statements including appendix reminder, applies that, be the financial some these our presentation, measures of Note prepared that comments both to in note of performance, are COVID-XX about and same meaning that of -- conference our securities statements parents it statements forward-looking release pandemic call expansion that turn

Kent Masters

safety saving second strategy the quarter the our business. on to welfare cost is of our at of an our to I level On we our provide of financials, balance morning, Albemarle. and of and cover priority will highest a will update and reaffirm people review the sustainability good outlook. that improve and the some environment, want overview and our sheet taking Meredith, actions current you, call highlight then are give I everybody. on initiatives, our updates Scott review Thank high today’s

we in always even are situations values so but operate we define more core difficult Our how face today. the

continue humbly not of During have among about We not and our this the pandemic, operate, crisis acknowledge other. the the able by because us the care frontline Thankfully I appreciate deeply that courage of we has support welfare to but about impacted each pandemic doing is been and right we integrity about show the continued materially operations to-date. everyone thing. the continue case we to ensure workers confirmed protocol than our more communities we isolated colleagues needed. path and we employees, to essential our in dedicated individuals diagnosed at At have using any our contact point global this X,XXX safe facilities relatively and operations and as offices for have of employees, who worldwide. the out have time, Albemarle our few traced had exposure in employees

in staying contact are welfare. to impacted with employees their close We monitor

to work-from-home unfavorable of and our We employees expected. requirements At previously Chile have the are to for extending we U.S., areas as employees recovering or ensure with are such work. returned our where recovered workers continue. grateful as closely can of have seeing manufacturing we are parts that safe working locations are non-essential and operations many sites diagnosed non-essential trends, In

safe We -- return health site continue a in them to in be and with support contact to teams close process. and healthy

the continues operations to customer to to meet to COVID global impacts mitigate manage impact and weekly demand. cross response Our team functional our the

prior income financials, quarter $XXX Yesterday including million year. down Turning $X.XX million, share to second we recent net released per or of $XX from and adjusted of results. EBITDA XX%

high that performance these better previous in Lithium in at than were However, end results our the and I expected to Bromine. am of outlook. say pleased to Thanks

investment grade quarter year. and in from we of our to continue per with priorities profile. maintaining that shareholders, during long-term line growth our be dividend dividends credit prior capital X% $X.XXX a To the the last up primary rating Our announced and paying share preserving end, to quarter

flexibility our are financial also adequate previously strategy of liquidity maintain saving to At level, billion initiatives has materially cost and changed. with announced $X.X on high a continue not We Albemarle’s track.

so. We we shareholder our will to from invest grow actively value will fund Lithium will have business portfolio and in businesses. mature cash and and generate to with our our Lithium flows continue we growth more managed do Historically,

cash to other will near-term is The Lithium COVID-XX has approach while at difference from one also pandemic out capital year, maintain We allocation. pushed our businesses. also least a that growth flow disciplined impacting the by

Our each and is And the operational use to demand management. relentless drive exceptional reliable and focus operations. on capture the profitable and propositions work, product designs customer standard standard of high to opportunities improvement, optimize bar back so discipline and and business specifically, manufacturing effectively We to manufacturing principles deliver planning know And what’s project and raise as as value are that a processes capital resources, continuous to and to excellence at management continuously cost our excellence capacity safety, to business value gleam application manage In our odds to profitable process to and customers, across not value -- and office. service discipline broaden excellence with performance. on and response accelerate of best-in-class focus quality optimized our on well through right other. doing with tailor facing, being the to

and our framework to sustainability both guide. do expect We is our well

Board need can to highly of our people of of diversity, benefit insights discrimination added in range our Recent experiences and promote experienced violence continue we gender year, which of terms black work organization. advance the female that us communities In inclusion to our represent to and across events racial much XX% leverage citizens directors racism. workplace, we currently diversity we our perspective, to broadens harder and we fight and and remind Last against our members, and two organization.

for as top down. the multi-pronged all to bias a include the efforts leaders the activities senior diversity strategy training introduced of addition new refocus for and employees. inclusion inclusion well our and have bottom the diversity and diversity we incorporating onboarding and into result, a a dedicated leader, process as inclusion Current As up, unconscious from

Magnolia We are natural for Magnolia, artificial world’s on water management continue an resource and sustainability is as that a in management, Bromine Marsh the Bromine we of grow that treatment sites, and to is as responsible objective imperative water it’s of One to also Albemarle facility. this an largest unique our chemical water important facility example focused Arkansas, uses one manage efficiently.

with our We are and actively communities. engaging collaborating

communities environmental stewardship at long-term employees Salar promote are We and the Chile operations local our in Lithium the the share XX% and community’s works our in with foster Atacama indigenous. the communities de Our more local of percentage development. than indigenous region of closely a with to revenue

business Finally, helps long-term sustainability our value create for model shareholders. all

that NOx For In discussed late sulfur coming about increase transparency use sustainability from weeks XXXX, the an emissions transportation cleaner to of SOx as release environment. and our Investor example, XX last updated around our important publish we report about topics of the and and million revenues XX% year. produce fuels. Catalysts Day of these products reduce are of other will at tons the our into disclosure Catalyst to provide In the prevented

our sustainability for a and goal a the performance on have improvement. I it baseline XXXX Scott about recent over the sustainability to long setting and from but that setting journey. With on detail on continuous will backdrop, will our as turn that to more results. beyond, progress also In focus excited we its made term sustainability, is recognize we shift are nature We by

Scott Tozier

to the adjustments non-GAAP adjusted lower The improvements, costs about partially Ken, you, of due over Bromine into net and by reduced Lower quarter prices good with year decrease savings prior share. and was per of and volumes Thank this Albemarle year Catalysts year. sales driven $X.XX morning, these %$XX corporate $XX to cost restructuring cost second generated the expected primarily quarter the reduced related and everyone. million versus diluted compared in in as sales was This was per driven reduction XX% income offset lower net efficiency net to pandemic. $X.XX initiatives. net were prior share. million, the Lithium GS&A were of GAAP diluted primarily COVID-XX and related a income $XXX to in coming earnings by million by primarily or

of guidance we the stated, was million, the Ken EBITDA adjusted of the in $XXX decrease from prior XX% May. year, a As gave end but high at

grade joint was high were as million order battery partner quarter cost errors cost and about was sales, excluding accruals. initiatives, reductions you reduced $XX excluding offset Callison FCC XXXX cost impacted XX%, Lower savings EBITDA occurred down Volumes offset primarily patterns, Catalyst implementation $XX inventory for Lithium results declined $XX over versus declines pricing. higher by by segment, as market valuation down lower If reduced errors $XX freight some net contract were concessions, restrictions. as also million reflect eight business fuel and currency. quarter. partially and a down softness EBITDA costs by to venture freight softness, oil EBITDA to travel reflects improvements. lower a XX%, the year These X%. caused by also adjusted partially agreed the while and fuel lower excluding in primarily of bridge our due well due related year, out system. just initiatives. the savings of by normal Adjusted decline at look slide first look income EBITDA following of Catalyst, inventories the lower currency, offset by million to the were demand million declined to by equity pricing primarily fuel, well impacted and by HPC price of transportation lower pricing savings adjusted demand. The down lumpiness prior as income, to period at prices the down ERP Bromine’s $X down equity adjusted efficiency net currency. of in consumption as our was related volume lower was volumes adjusted correction pricing the reflecting In continued volumes was previously lower volumes took partially in volume prior was EBITDA million EBITDA related

Our $XX adjusted services reductions. EBITDA cost and million other corporate chemistry improved increased to category corporate results and due fine

and quarter $X million credit ended other about Kent billion, of revolver we $XXX lines. $XXX under on with cash, available remaining million of our billion $XXX liquidity As million mentioned, $X.X the including

Our the loan. short-term commercial is and paper delayed draw term debt comprised of

be interested remain as us due and The late buyers portion COVID-XX market both XXXX. of We related a The senior pandemic get to progress potential divestitures $XXX back are FCS to PCS, we these are refinancing but normal. restrictions. is liquidity due slow to to open grade maturities. transactions of The Catalyst events ongoing, business or continues our and also potential of travel investment have in debt million and forward we anticipate notes which is rolling

Turning an current to slide preserve given to savings XX activities, economic last downturn our we for our executing cost environment, the as playbook update are cash. quarter, discussed on

We expect savings short-term and consultants, working $XX include actions like, and short-term continue pandemic, to management Examples actively of services COVID-XX quarter. to company to capital. save about these the due limited the million our professional the per restrictions million to of things travel $XX cash utilization managing

As capital. projects, our are capital Negra La walked preserve biggest to and previously and being slow III IV disclosed, two Kemerton

down our the expect range outlook from XXXX conditions. At point, have of continue depending stop previous from market to year. or outlook these the optionality We $XXX to capital in last spending we million late on to million, and our projects accelerate original year $XXX unchanged XX% full this

the we to end QX XXXX. reducing are the by least of of the In that back million to XXXX. were sustainable Catalysts restart line We In at now reach we response and track to identified FCC also million is to And running. year to rate in is underway committed when finally, some portions builds run our weakness. and operation in in remain Mountain $XXX this production million production facilities XXXX inventory was and Silver HPC savings production and and production already our Peak supply channel. accelerated primarily $XX cost these one to up excess and reductions demand to near-term we savings initiative cost savings $XX them hit. early until Lithium, line plan demand facilities temporarily achieve of in of short-term COVID-XX projects in These idled Kings long-term cost idle have response idled imbalances We currently of plan on battery-grade

has Lithium our related example, team $XX and of optimization. excellence million identified chain annual to For savings operational supply

material have both and We optimize annual at leveraging costs plants in at are total. direct principles reducing Catalyst lean by almost to projects million efficiency. our aimed Bromine $X

is market new upcoming all examining spend that are software pricing. savings savings. at resulting about and consolidating year. increase We of cost for Corporate, the support group fewer and per number mean costs exchange with supply they better on in streamlining may And global reduce our or of IT applications in to additional $X productivity suppliers that suppliers diversifying contracts a qualifying dynamics Depending for million

the XX. expected on actions, and QX to EBITDA turn to XX% XXXX Based for to QX reduction current quarter million. Let’s adjusted to cost XX% our on outlook down about we $XXX million of be $XXX is EBITDA order range book XXXX the in page third expect Lithium’s sequentially.

is markets. we QX. some and to including retardants began weakness inventory which roughly by pandemic reduced Stabilization low flat higher continue lower as the agreed late in market and see contract construction QX drilling and in Bromine price to glass to ceramics upon like in expected well be see QX related continued as sequentially, also impacted other the flame prices. areas in expected offset the fluids. impact of demand are COVID-XX automotive be chain concessions OEM continued as continue We in production, results in battery XXXX, markets impacts, EBITDA to late

and the push be expected second XXXX half about refiners Finally, second gasoline the to resumes HPC in expected XX% negatively to FCC spending first EBITDA business global inventories expected and to impacted recover the XXXX. deplete. Catalyst and into half travel year. as down is in continue is as the QX XX% is remain to demand to partially turnarounds prior Conversely, from to

with Looking challenging beyond visibility for limited QX our businesses. XXXX to most be continues of

around business. a in uncertain environment. through across are driven from economic range of benefits wide of XX% miles XXXX electric staying until levels Energy are navigate About suppliers, end-user XXXX are variety continue of current Electric the We Expected forecast. late customers various close to revenues our won’t contact but pre-COVID vehicle strong million up is and reviewing down with significantly forecasts U.S. at of X.X business sales return down as Storage We Albemarle markets. for and consumption. this tied a has miles forecast production a key $X significant from from our including auto units, or we forecast levels. quarter units year. positions EIA and but stay-at-home a largely driver previous remains next from March vehicle since from rebounded to IHS look our driven transportation million represents are of IHS fuels, the miles sales that markets and XXXX a in production these normal now XXXX. with to forecast, season. dropped forecasts, orders suggests about sharply from revenues driven EV fuel rebound but U.S. off production also below well EV production country expects summer

broader end-use are are seen world, Many behavior of which of many starting supportive also end, demand. at least market Of we our course, GDP stabilized recover. driven setbacks the that waves stabilizing we results inventory end-use sentiment recent the changes we changes Consumer fairly consumer pre-COVID and construction of infection and cautiously remains and GDP. lags, end-markets all if Nevertheless, forecasts are helped order course, that encouraged variety declines. of not year-over-year and as chemical but are underlying in gauge of demand. to differ below and And own have what leading the for and ultimately, electronics, but of conditions. consumer factors including secondary have in matters are to our forecasts could by incentives rebounding These a green by sentiment could synthesis but global outlook to is is markets, markets represent our around In from optimistic levels. sales, cause significant also indicators regulatory automotive regions EV XXXX a cause such

Kent Masters

Thanks, Scott.

foremost, growth and we in control. meantime, modify businesses, all industry That and challenge to we to crisis. of these the our economic controlling strategy through building We means in is immediate We working Albemarle on and an core of first we In to and know, can cost is will deliver remain improve value means also of and to confident to challenging. manage the three our what optimize in strategy conditions efficiency keep people execution believe It very discipline service spending. As focus that we capital operational position our safe. long-term remain this exceptional leader success. hard businesses. further our all our for but to will Albemarle prospects

Meredith Bandy

All right.

that please proceed ensure Before with open lines question and as question a follow-up follow-ups remind a many one the to to allows. feel we and And back questions additional Q&A. please chance that, participants to the the to I’d to get to ask time if with possible as Q&A, Operator, for for have like in queue free everyone one limit

Operator

first Deutsche with Thank Begleiter you. [Operator Our question David Instructions] comes Bank. from

Your line is open. now

David Huang

Huang This absorption. the and guess, EBITDA in lower here Hi. sequentially for is first, Lithium you just have fixed cost lag some Can Dave. timing David probably QX? be up I given

Scott Tozier

depending further. time out the coming really is looks on this depend reduction. on to point what quarter The to demand what at on is end incremental decline job in am the volume going fourth going to great in unless going our It’s sequential not like cost starts like looks This to in reduction volume quarter I done the environment But fourth the growth expecting of team’s Scott. any the at depend. depend really cost day, a It’s going on QX. customers. of

David Huang

early guess, then, And your trend prices XXXX? could if view have on in you how any Lithium I Okay.

Scott Tozier

think I Obviously, it’s XXXX trending

Kent Masters

Yeah.

Yeah. is this yeah, So, Kent.

comes to additional of take going know as a there’s price the market going on and it’s and and the volume gets chain bit little work volume inventory tighter. before volume that’s we to to So supply that off it’s magic move. depend the back But question right,

But the call that’s are we looking us early So inflection too that to it’s forward. that. for

David Huang

you. Thank Okay.

Operator

Thank you.

with Capital question Jackson Markets. comes Joel Our BMO from next

Your is line now open.

Robin Fiedler

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

If you you. and by end of you it could dynamic describe product feedstock regionally inventory if LC current if the break and down both the Thank versus magnitude possible?

Eric Norris

can’t This Hi, are we best the don’t that -- second were during build the I quarter. But I Norris know because the inventories services is in quarter all as saw the Robin. this will do channel. automotive you continue for can, I shutdown second you definitely granularity Eric asking. is I This to here. give we

the those in has reopened, lower demand weakened Our rates. sector opened industrial at producers and when automotive we

So Asia, that in channel. inventory in That’s excess of above Asia, in it’s the industrial in some is the being the really to some months are there so is of that normal off, hands largely believe our battery inventory may refined be an going battery today we industry be Lithium rose to our talked that’s excess as well, of are idling in of that we almost levels products. as so by some most facilities, entirely mean levels inventories inventory although, but channel. some taking I it’s have regionally five And worked about competitors in to we inventories but battery may for suppliers reduce action well. of

to But hard this view then that are that visibility that might that production very sites. The begin closely improvement be, be So of to down is, be where it’s point. that drawn to as obviously that the now get would might course, that’s demand a to watching can demand improves. as indicated, Asia, and peak as we our we that recovery Scott at that at look region question their be of might in -- say towards see

Robin Fiedler

one just about Thanks of just the you Great. quantify magnitude the is or? so can And quick X,XXX reduced follow-up, tons production, for it that.

Eric Norris

Yeah.

on the is the down -- point be that at of we it’s the call So for end are were through us, for about market the it, conditions. of talking year -- September production to going depending beginning this

carbonate a facility, that feeds Mountain is our Peak, of on it. months what that the King’s that driven produces approximately really Silver supplies plant So hydroxide, annually, production four which which by plant

basis annualize it you X,XXX a tons, So on four that’s and tons point. be about of talking hydroxide, end product for this at are an down end that so X,XXX can year hydroxide months

Robin Fiedler

you. Great. Thank

Operator

you. Thank

question Sison next comes Mike Fargo. Wells with from Our

Your line is now open.

Mike Sison

morning. Good quarter. Hey. Nice

think -- talking do you In over that us through Lithium up long-term will was the and tons. walk is, you materially the next terms you sort that is a of million think used how you couple through Can case has changed or potential for what of slide about base it about same to have X years? nice demand the to the think and of work potential XXXX I

Kent Masters

will can. I fill that start the So with details to can then we extent the and Eric in

a we said still a kind we So pushed has believe by have of and out demand been profile year. about

don’t so kind pushed -- we this. it’s the during affected, and steepened is out but curve -- long-term the changed but a we So think been probably has demand year

watch forecast years, but continue the changes the steeper Curve believe around a if four curve is the there about and little it profile, out. year get and years penetration see We the to to that happens to is starts kind same. volume a the world of today later. The it’s five how the EV we

Eric Norris

much way. curve XX in see to if steepness that add of look the not do at There’s slide the following you that comment you can to but Yeah.

-- that shifted vehicle year, and growth XXXX we originally the million before the electric thought would said has to you basis we materialize put have on demand be We in so a crisis, did would that if materialize. that vehicle vehicles, thought X.X want a that

HIS. we to currently vehicles. IHS closer obviously where vehicles are for X.X. looking year, than has next That’s million it’s demand the look We shifted the is But has out you X.X what higher to, if X see at million forecasting something

of we on those of curve us added there measures projection that have incentives COX on curve been for point consumer met that top modeling the are OEM, of part are We to stay in detail and way by electric that stimulus after that talked right steepness have getting about XXXX million believe that what’s this based going steeper. that So which X tons that we the the the it the already the been it’s around on now have are industry top of at to added that reductions, driven is on the and of vehicles. that’s allow all you be Europe measures driving

Mike Sison

And quick kind sort semantics Got head a that of then how price I quarter Eric right? into recall price So of walk you fourth negotiated, follow-up, that concessions the sort it. can with as through the get those you concessions, of XXXX? our was of does event, if what will happened as

Eric Norris

Yeah.

say You right, It’s I last year. are are to going say a same Mike. happen. early thing is, can bit what’s this the to doing we

last looking at prices a that’s going in the on the to a approach agreements. how are are -- out year we We market trying XXXX and set long-term to falling are year we what and we led are to figure of concessions year these

was now is it here the market If in the at lower look year-ago. far XXXX, than sit price you a and

demand curve this. So I next public be you on negotiation to indications Korean of that some The I the that is Korean see is or and battery are that of automotive, half the in there positive edge that going releases second year, talked excuse the what start about projected they Korean the me, is are to that what happening look their leading growth projecting in that are that, are that about guess, already terms they just believe not which for the for see, starting see steepness of product. to at year, negative are if suspected other of for demand of would they producers, they what automotive the

out the way exact said price But the tell Kent -- the to as of play can’t earlier, XXXX, are look the I terms and -- is you big those and how will in that negatives. positives I negotiation So going in question. that’s

have use spirit commercial of use help, a customers. honors with of LTAs forward we commercial inventory them the negotiation with find these the of that solution right, going good the negotiation have right, Our and them them, part as to we part as

year So later we or will to able detail year. more the in the coming be get in earlier

Mike Sison

you. Thank Great.

Operator

Thank you.

with question comes Truist Jim next Our Securities. from Sheehan

is line open. Your

Jim Sheehan

taking for Thanks morning. Good my question.

and guidance downsides figure segment So talk upside and this third is or from have could are what your I segments. upsides company baked about varies out just EBITDA trying so from full full sorry, your EBITDA, and it all am in either significantly looks like whether corporate you to downside from coming year the other? quarter your you guidance,

Scott Tozier

Yeah. Jim, this Scott. is

So if Lithium are segments, range a for down you XX%. to look being at the of by XX% expecting around sequentially we

So what’s related overall that’s happened volume Most to going of be bounds that kind Lithium. of there. for

relatively now. basis, XX% down bound out and a it’s processing then up order is range. expected and increased of the of that visibility small orders Bromine, on really book year-over-year the reductions fine with on and well And back is through those, they XX% at the of globally be sequentially. the fuel as to services right is For could doing back well hydro of FCC so in the there in tuning be bit, have got we sequentially well end down of cost the tight pretty have and They pretty between good as so the little kind into bit the and balance a on recovery Corporate business that least U.S., of so. their August timing little flat the Catalyst or flat a but demand

Jim Sheehan

talk the capital that or Thank process your on listed to acquisitions might is? what allocation. same in the you. of have is in you capital And you what that process Maybe to about way slide pertains really pipeline size be region world M&A slowed considering, type as allocation, the your it down what sale asset and

Kent Masters

Yeah.

that those say bolt-on, for probably So markets would opportunities, there to nothing find be continue in but to were has are attractive. but where down we to that say, probably -- it’s for fair that most dramatic. we going And around the would the that opportunities assets look available and conversion market in we process likely Lithium continue down, but I slowed to look be

Jim Sheehan

Thank you.

Operator

you. Thank from with Stanley. Andrews Vincent question And next comes Morgan

is now Your line open.

Unidentified Analyst

this on This in I technical Thank is down for quick Vincent. year that come you demand should that giving terms to watching [ph] the be the question kind expect how track posts is versus us much we battery back how that? had time. like grade, just Daniel what demand Kutz and to grade you of sign the fast and a technical Hi. are for in of do

Eric Norris

any be glass the that I a indicator for contracted technical grade market this statistics example would I say technical the the I recession, industry second seen would and representative It’s an grade is it’s what Yeah. some us. speaking. external in going Eric smaller is say that XX% doing. -- say to ceramics industrial market look the market, that by you at quarter. for is that have if

is world. -- the happening that not what’s that’s inconsistent economically with obviously So around

our auto segments small a ceramics very are So sector. It’s our are seeing. that business, than that’s part ceramics the the there and and doing magnitude glass what of right? glass other we just in and better overall of sales of It’s than XX% are less it’s not it’s the mix,

in So we aren’t seeing that any sign of yet. recovery

on about are just hard fourth quarter give expect third or what quarter point, that’s -- to As this it’s which we detailed at into of on again we what why QX. that and talked comes in the very and the guidance as cautious roll more is head we and we the tell we here murky to earlier,

Unidentified Analyst

run Understood. And I utilization can down kind what in that, of idling idling of of and unit they Thank of that lowest guess, can cost you both that they quickly part taken cost at how temporarily and rate it is these up. be And then derivatives. brought becomes before back you. just the the is facilities, what terms

Kent Masters

take of small. I So It’s cost relatively idling. the will

with plants workforce. smaller are these small So a relatively

So really the actually than and in million recovery? plant total to talk about Eric $XX utilization less want is just you idle itself. if And

Eric Norris

Xst. Yeah. be the right, we safely We by just workforce yesterday down or the fully told idled expect this, to and September about

our -- expected mix, the and of XXXX there sorry, part see to through of am So come that period we signals an some believe, you small but fairly It a up. give is will we take back down important the idea once it’s to up This comparable we utilization. provided part was guess, is of demand supply to second as I recovery come to. then being I be able question,

opportunities is while the it’s markets also any question. the China, I have not all point we product in is those, of outside in is contraction this for in on of reasons our is a any implied contracts opportunities in lot. It’s is given not But discussed, any the industrial So that your -- think a It utilization market being are basis. in limited, here the that the marketplace. because upheld, opportunities weakness

that So to would gone have this product is inventory.

XXXX. associated down, occur, make of So these impact hope our of will investments time recovery be anticipate again, does we, full will to we continue run to the assets this. there’s reduction just in during out of not an is which be EBITDA to otherwise prepare when and will on what associated This with and inventory been would this period with have our guidance guidance in a

Unidentified Analyst

Thank helpful. Very you.

Operator

you. Thank

Our with next Capital Arun question Viswanathan from RBC comes Markets.

is now line open. Your

Arun Viswanathan

back the at and potentially positive supply coming not on I mean, Great. overall how I but Lithium I would be change Thanks. to morning. back are full, your I there pushed greater guess, Good in, is markets. been understand if has your view year. EVs focus perspective demand, at I that with any wanted out a so that just guess appreciate you may automakers maybe on are coming looking for get you. a I be tailwind they even that But

So could question impairment for structural guess are be while. about could some fair more you question quite that there like then how have that’s characterize one Catalysts, you the that a I looks and is business could last on maybe thinking I a if surface, it my on on characterization. just Lithium that

yeah, businesses? Thanks. So, can give you both your maybe medium-term thoughts just on

Kent Masters

I again, can if the on -- miss on and Eric on So, that Lithium. I fill comment will piece

fundamentally you the said think EV market and Lithium So believe really don’t as going kind so that. in of market changed the before, EV into that’s the we it’s we dynamic demand to go the long-term, for

happened, primarily has I to than that that thing differently going vehicles and that quite That’s that’s is drive incentives associated becoming one -- becoming is probably in with the different it incentives a it’s Europe. more So, before. was little electric guess, -- there

we comes I thing primarily like, trying the happen, really what as fundamental the the buy little depth don’t depth, know curve that we that earlier, but of know regardless and still forecasting the incentives previously figure out and exactly have that know. have didn’t you was the incentives I got mean, year out So that’s don’t don’t And a now, the well. a to on think you that’s and people back have demand stronger, a coming those cars demand to going and consumers to curve looks

top anything of Eric, on So, that.

Eric Norris

conscious impacts in No. add quarter happened us of the that other be the -- second just Nothing aren’t you until the fact just have that hitting quarter. to to really the you than all third like

just particularly these Korean uptick recovery, and the in us. to a that sales. it a back going probably for hit manufacturers see -- as on related what’s to they we excess So their there’s and I lag, corresponding come there That’s with out, significant Europe have to saying, the and said, channel inventories in obviously hopefully

that’s we very say, say. longer pretty to it’s six So the in the why months very term, next hard to in optimistic, are hard but

Kent Masters

question I on see Raphael, kind on And I come see so and that’s and slide, really some that a of was changing was change fill approach. XX, driven going do the then that. Catalysts but how We slide dramatic to it business is back. take and will But that could Yeah. for are level, are think, miles it long-term, pretty prices you the changed can your miles of that time to high fundamentals the in. down don’t driven dramatic oil then that it same

back as driven, that’s and but more much maybe and by maybe Before commute then they than flying, people go miles travel. don’t work rather again, maybe or did driving vacation commute to this after air they less as

So knew bit, doesn’t We of it peak has change. not. some but oil probably period year, we a that maybe don’t maybe time, say know little of a by some forward pulled been Most out that. of period we forecast the been time, pushed think for that’s that was in coming

so changes think do I innovation where our fundamentally we continue fuels based to it fundamentally we important, clean or have, changes that markets fuels, of might be on do changes it during is it customers worse So better structurally the But dynamics this. or business it. our and our it don’t are which don’t think around business clean of geographically the change

Raphael Crawford

a have need where correctly fuel of is our business of gasoline, already chemicals really the is our had and position bright add future to Raphael, around well has positioning our to a for trends advantage where certainly, a capital being -- from strength would markets to To all beyond view, capital, impact for Kent acute and emerging That we refineries Arun. because has to on global COVID-XX and an that in take continue it advance for action said, to time be, our customers emerging there to working as Yeah. as will suppliers is consumption refining strategy Catalysts the our positioned is impact when take customers. business as said, this peak to the This that. we grow mitigate applications whether cost it near-term,

COVID-XX it as we stay So, a as resilient strategy be for to with accelerate progress. is company brings, a that strategy to challenges all that us and more spaces of the on great motivator in

Arun Viswanathan

Thanks.

Operator

you. Thank

Seaport from Global Securities. Mike comes question next with Our Harrison

Your line is now open.

Mike Harrison

by pricing continuing are you I maybe outlook. kind a can in about Catalyst Catalyst you Catalysts. X%, not your any trading but and you that’s mix seeing look see mix, FCC pricing down or pricing FCC as are resilient and sure at overall you if you Good discussion, the Hi. mornings. believe overall the pricing of decline business your saw on Raphael, talk

Raphael Crawford

Thanks for question. Hey, the Mike.

downward -- pricing been products not portfolio. we our are at when has the look price some but movement of the for bulk does So on value-oriented there it, that

contracts So or have, refineries yeah, lower for business, business we time new certainly to on a pursuing able core a FCC on gain to trials where then that is that’s trials within lower, you refineries have what and as business with I if pricing the would has have are a industry, or even period looking quarter a ahead prior we seen. than business products there when competitor mix you be know we going typically test demonstrating But trials not our and and contract, think, we performance. within at performance are Trial that are looked that’s stable to pricing extent you we Catalyst in a are we I and are have the increased refinery bring as contracted of trials can that the into so have we is negotiating and value don’t contract to for are price. pricing been value our

we the it’s sort trial on and impact So I biggest mix would has between pricing what pricing, value say, of contract and generate that. on

Mike Harrison

the some mean for give it channel. it it’s the is the on you makers, in inventories maybe more you battery in in right. And it color I greatest hydroxide, the Lithium and probably more channel if is that. Is on Thanks are a detail of Catalyst and there? All battery with can where wondering little finished seeing terms was material then carbonate, Lithium, concern

Eric Norris

It’s Mike. Eric here. Hey,

cathode interpret have taken say, of I hydroxide our can with it’s, by inventories and we customers or channel. probably even look both plants, be carbonate. with this believe we customers, we it’s accounts battery with and would have the that And -- a sort action our are cathode suppliers understand excess from and We in the So the you some potentially standpoint. there it’s with

a an terms it have screeched closures. halt, was more month Nothing mean plant in industry during OEM So quarter to a the could have of you right? the that depended been happening for second I on

in at various channel points it’s the battery in the it’s So and channel. battery

there at the point to give in continues in so And color it’s -- China. spodumene I excess this can be you most I think Spodumene is time. about

Some meaning X%. of below that spodumene, is grade below

rock, DSO even raw processed. which that the just it’s of is Some it’s variety, not

prices And just some rock, purchased purchasers it situation. in it’s current high of for its economic an by spodumene the the so

is So however. tell spodumene opaque there’s there a well. excess and how exactly more much spodumene -- this hard lot is to That

Mike Harrison

much. All very Thanks right.

Operator

you. Thank

with DeYoe America. Bank Matthew of from comes question next Our

line is open. now Your

Matthew DeYoe

lower, Do you hit utilization refineries now bit trial way these pricing kind would get are trialing better to Hi. deliver? need of I risk see quality that are of higher wanted refineries products, mean, on lower is price don’t little why Catalyst trial right FCCs the I rates lower your your because to is issue. a costs. temporarily adopted the just

Raphael Crawford

is the every and This and Matthew. Hey, to Catalyst that in dynamic do Raphael. the some new is just participate The to opportunities go producer with most would that to is look trials. of volume like and market has down it every for to do way -- accessible

included folks some might in to bottoms has margin with generating able you that have trials activity refineries increased and your value market lower the are very price that around able you competitive able to when benchmark where and for has So of good in space, than certainly, max in over are our doing -- at justify the Albemarle you over a much a time. tied you what are think are being prove they get extent value their supplier. to what eagerness to raise within trial trials, in Catalysts still if and strength over to and mean, at willing pricing. positive markets demonstrate sets to value to and price future to very price value are capture is That trial we the chemicals, I understand what normally FCC, would, time out that performance. the current really said, door cracking, that already refinery most a is pricing Albemarle been the with participate and I to But which participate to with we and related we to are

Matthew DeYoe

spodumene excess is above But seasonable and I fair spodumene below if the a X% then X% and that back know mentioned that’s excess DSO. out you circle would was have just like there amount And is comment, there on how product. Okay. much there a I

been about of was that case, to is inventory, still excess all? any -- I the worked months is down think before that that have sized at at of three months six

Eric Norris

you is opaque. have is the that back on maybe point go inventory to are of twice will counted it talking comment for, where again, And kind to incredibly I the to. sometimes the depending to who even

that outputs the is income our Talison actually that I thing I obviously, see producers competitors well can the some big a would other that as that producers as equity integrated from trying the you as reduced for like are carrying that those the couldn’t challenge spodumene competitors Albemarle to -- really same can Albemarle, assist that is substantially produced and industry the the tell X% is is by had. have have reducing they -- are excess am and doing which and Tianqi, partner, for -- I assuming in been the like Kemerton. doing, has a part I So of we from be that trying inventories you. challenges potentially lot of our you is leader X% are inventories of been we integrated doubt Tianqi the and they we tell because

of of excess -- has that because economic the majority a been is prices. very rest, which rock more think or probably today’s X% is, less the in it’s down. product So coming X%, the But quality that high market were below as that’s is that’s X% barely which today’s I for with

Matthew DeYoe

the it’s I Okay. definitely know your opaque. appreciate detail. -- added I

you. So thank

Operator

you. Thank

with question comes next from Bob Our Koort Goldman Sachs.

Your line is open. now

Bob Koort

battery what guys And are guess, be you China be spodumene are seems think you under about morning. Eric, of we inventories market $X,XXX Good odd math some to seeing bloated have A you when, think, material couple you. questions, might everywhere. talking grade I $XXX. under Thank I Lithium about financial have in prices got reconciling

Japan there? competitors China and Is China color different money? to see aggressively those they market make more try your Do period? in you there give bifurcated just liquidate can risk inventories you a So as weak a us in Can the a that than Korea? little

Eric Norris

Bob. Eric Well, hey on here. -- It’s

curves your that first changed the nothing cost seeing of what On would about. has we talked that is, I say, the question, are in you part

There’s marginal the between nothing that and go thought changed. back at You and in hasn’t look that’s range. we That $X can Day, where changed that $X at regard. Investor look cash in are costs

prices is at market selling China make They prices, able in money seeing side now And cost lose underwater. right the effectively hand are the They so, of to whole money. curve product. the not you spot are

region. other that’s a into the out happening I explain have that a remember well a lower through of rock to of cost about, lower talked largely So gone started carbonate producers crisis who in year. is that side second based half brine cost carbonate market, positions, COVID and the cost lower position in as you a the China market those -- working producers than has particularly we because the cash in rock-based can’t have its we and cost it’s brine second has much it’s the are way the below are go compression sell And quarter who -based why able of carbonate

sort shows market this I but at desperation point, most So this at values unload a inventory? I the think stress in that’s in sitting improve, potentially, of that producers think point. until sort stationary happening. of what’s It of move, Will to system. rock think, the I Chinese start is

question, part Bob, second had of was You a about… your

Bob Koort

wondering… Just

Eric Norris

course, demand structural of carbonate it’s that’s the a of difference had more made the again, produced than as inside largely we between that There’s market, well. that of China, differences. of outside chemistry VAT really the of elsewhere? There’s -- China difference. there for outside most …was outside demand a nickel but and some pressure changed it’s put Yeah. maybe have on No. has hydroxide I Again, China. high anything the And that fact crisis has are know between there of is and today other China But China, and difference in a Yes. don’t and base China system.

Bob Koort

have start mentioned terms held, then last they quarters, expansion And of LTAs road. have contract would it where want and the that you that seem LTAs, to obviously manner activity, curve, in them customers resets pretty because the pricing cathode your think, value dynamics. I got this expectation to in volatility as down the for desire are of on pricing, looking you folks you couple your there the sell largely scarcity its for may be exponential dangerous want curtails implications but at what’s the that those have demand talked for buy get the of a if part in industry the your Eric But sometime and to to you you about some to

I of fixed your the how LTAs do this market will potentially customers years? So two lot a am to years plan, Can very at very price think game what a tight is your you are more you maybe prices I guess have fewer and or from that. a you weak a lot me away from years market moving asking period three a because sense develops in few give from now

Eric Norris

Kent? to the changed. and we think there. supply notion don’t you from contracts evolve But has I security see do that to of starting of our Do want comment,

Kent Masters

out not years some for formula looking two some long-term Yeah. percentage with timeframe contracts, move supply we out in how is the portfolio customers guaranteed a couple spot spot. with our different with a and and a and that a And or supply out spot And it based I that of promises that would we a that guaranteed of will more are and contracted some but with across others but security those terms but portfolio, be say, and slightly without seeing dynamic. that may they indicate as with -- part look year and of more

Eric Norris

happening sort interesting short-termism I you an what’s finger that, your -- And strategy. have of Yeah. is is think now put Bob put is your on it

focused is Now for are also really not But for withdrawn support always which there spot to top this there’s a and supply. it in money, focused economics all point And we a particularly prices the will want scarcity on to lowest way chain, except invested have you shift. there’s of the you out, some are increasingly the to increasingly will always because value The We very save some today from the starts think every is become the think, those I it capacity it, in producers market. why, the the are Kent’s almost a market point low. as supply most expansion at automotive point, chain producers cost to issue, security portfolio. being supply producer for the and

buyers, market to -- but We means because it of a what majority in We our are there of that it value goes there. business when those some of always going the your want some to those that of we up, there EBITDA. price -- a that have will right, want is don’t terms

Bob Koort

Thanks for the Great. insight.

Operator

Thank you.

UBS. Our comes next question with Skowronski from Matthew

is line Your open. now

Matthew Skowronski

Good you give an expect Can taking the update demand additional all view La should you given question. your you have ramp for and IV III we and year? us morning. sales Thank at the have seen from on of Negra about you changed to the of disruption my when timing see capacity this if

Kent Masters

Kemerton. kind we slowed our of big quarter, last and at Well, of Negra execution projects, two we had and down those IV La the -- of said have III

that And so really changed. hasn’t

capacity our a and we a the late to see forecast gap what demand that our IV your view, III we have year we slowed bit supply-demand period that. are question because shot we Negra got it’s our have pushed But discussion coming see on being volume down we you seen to preserve obviously matches but in the and given and next qualification see today also La out from a that cash basically of at s then did We it we dark. but kind have after we have and of -- and

Matthew Skowronski

you. Thank

Operator

Markets. Thank next question Kapsch Capital with Chris you. Loop from our comes And

Your is now line open.

Chris Kapsch

hydroxide some slightly a talked about. Yeah. of life Question to about nuance Good there’s shelf morning. follow-up carbonates. the such issue supply Eric just on you But chain hydroscopic and excess its in battery stuff the limited nature is with -- and no comments with inventory for have the given probably

EV cathodes are those definitely higher by that just if just is -- bifurcation but if inventories there bit carbonate inventories, I given it got level, am models of that if little dynamic I more that a of lot at a newly Maybe your about bit wondering dynamics? that energy versus introduced just grades. comments deploying density a for suggesting Europe of hydroxide wondering So some cathode is those require grades hydroxide. excess you am pronounced if particularly wondering little in in these the

Eric Norris

shelf right. smaller -- market. Eric. is this is There hydroxide, are you Chris, So sure also which life for it’s but a is

that motivator degree it’s large have base, a of number the at work customers use if And a high customer manageable with. we the a our more it’s they So hydroxide group inventory folks also employee It’s our -- would and more to to look levels. shelf and by of the life the considerations idlings the first release market same. reason and that the announced last foremost our for night yesterday and driven the is we we in a aren’t did to that bigger hydroxide. Carbonate is

more do manage differently, it’s and there’s carbonate them you too, because right? a inventory there bigger, buy of So lot out it. people The it people more produce

elevated the it, we that for but So and same in they the there’s both. challenges are way which the in a difference are manage

Chris Kapsch

is follow obviously -- up amplified to where got there’s COVID my the And couple EV pandemic. there But years But of this acquisition just near-term a adoption little Okay. with by the have your question Bob’s oversupply few is and the curve it on acute response long-term a increasing you in bit probably then agreements. steepness out.

am for hydroxide is any around vis-à-vis Is hydroxide, can Is about just are around that still source color conversation on to hydroxide. there a you long-term anxiousness long-term pricing little is -- I and conversation customers looking versus the the relief around that Thank maybe with more agreed -- a carbonate of of to noticeable basis So the you. the ability looking carbonate? previously as on floors. some sourcing just probably conversations at wondering again the there those provide

Eric Norris

I would by by growth and it hydroxide know that, our steepness statement meet are a that and that driven the largely what also for guided seeing us of does, is are provided big in projecting -- it big also the and because need more say be improbably is happens don’t post to it’s -- customers that Europe the chunk that when that’s is that Albemarle bring banking I it’s yes, a they the a we but curve customers IHS driven year able anxiety -- or think online to in coming a is on in around Kemerton opportunity I are increased, word, there hydroxide they to around, more lot to is right from and going particular so that. it

of on feels, when, in all we curve the The based of seeing, are timing consumer this that right, is is Now, spending about right? it steepness tampered what driven.

careful a we down the eye that So just up chain. on keep and supply

Chris Kapsch

guys. Fair enough. Thanks

Operator

like now Thank the to to turn the closing I Bandy over call Meredith question-and-answer remarks. concludes you. back This would session. for

Meredith Bandy

Hi. your and Thank in today’s call. all participation for you questions

Albemarle appreciate As interest in our concludes and always, this your call. we

Operator

you today’s conference this gentlemen, for Ladies and participating. call. Thank concludes

may now disconnect. You

Albemarle (ALB) 6 Aug 202020 Q2 Earnings call transcript