Albemarle plans more lithium auctions to boost market transparency

(Image courtesy of Albemarle Chile.)

Albemarle, the world’s largest lithium producer, plans to hold more auctions for the metal used in electric vehicle batteries to boost price transparency and promote a better understanding of the opaque market, an executive said on Tuesday.

The move is one of the most aggressive by an industry leader to clear up the widespread confusion about how lithium is priced. It would also help better underpin supply contracts with automakers hungry for fresh and consistent supply.

“What we’re trying to do is build trust,” Eric Norris, head of Albemarle’s energy storage business, told Reuters on the sidelines of the Fastmarkets Lithium Supply and Battery Raw Materials Conference in Las Vegas.

While lithium has surged in popularity the past decade, confusing futures pricing from market leader China has made it unclear what a realistic global reference point for price should be. The struggle became especially acute after Chinese prices plunged last year and dragged down shares of Albemarle and other Western lithium producers.

The London Metal Exchange has yet to launch a long-planned lithium futures contract and volumes on the CME Group lithium contract are dwarfed by those for copper and other critical minerals.

In response to the price uncertainty, Albemarle auctioned some of its Australian lithium supplies in March, a practice it now plans to replicate globally, Norris said.

“Our intent is to do more of them” in more parts of the world and for various types and grades of lithium, he added.

Albemarle plans to provide its auction data to Fastmarkets and other pricing agencies to formulate into publicly available prices, he said, noting that many of the company’s long-term contracts are linked to such data.

Data sharing should also boost the use of hedging and other financial contracts to reduce risk, Norris said.

“If we can create more volume, more liquidity … that’s going to benefit the entire industry.”

‘Tap the potential’

In Chile’s Salar de Atacama, where Albemarle produces lithium using evaporation ponds, the company has mapped an aggressive growth plan involving the use of direct lithium extraction technology, Norris said.

However, Albemarle has no plans to bid to develop Chile’s other lithium-rich salars, or salt flats, steps that rivals are taking.

“We haven’t fully even begun to tap the potential of what we have in the Atacama,” Norris said.

With the recent drop in lithium prices, now may be the right time for industry consolidation, Norris said, but Albemarle is focused on existing projects.

“There should be bigger players with bigger balance sheets … in this space in order to credibly support the growth going forward,” he said. “We’d never rule out acquisitions, but our priority now is internal organic investments.”

(By Ernest Scheyder; Editing by Richard Chang)


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