Albemarle says 75-80% of its contracts are now long-term variable

Albemarle has continued to shift its lithium sales to long-term variable contracts and away from spot contracts, with a focus on strategic customers through the battery supply chain, according to the president of the company’s energy storage division

Albermarle’s Eric Norris told a webcast for the company’s 2023 investor day that the change to long-term variable contracts for its lithium sales, originally flagged last year, was designed to achieve higher prices and avoid market volatility.

“By evolving our contract strategy to include more index reference variable price contracts, we’ve been able to realize the benefits of higher pricing while moderating volatility. Over the past year, we have renegotiated our legacy, fixed-price contracts, resulting in a portfolio that is split roughly 20-25% spot and short-term purchase orders, and 75-80% long-term variable contracts,” he said.

In 2022, the US-headquartered company’s sales contracts were split around 20% spot, 60% variable index-referenced with a three-month lag, and 20% fixed on a multi-year basis.

The new long-term variable contracts are typically between two and five years in duration, and the company is negotiating for contracts in 2023 onward, Norris noted.

The move comes as lithium producers continue to shift to market-based pricing amid extreme swings in pricing for the raw material, a key ingredient in batteries for electric vehicles (EVs).

The impact of this push to secure access to lithium has been reflected in prices, which increased sharply in the past two years after bottoming out in 2020, following a revival in demand from the downstream battery sector for EVs.

“Assuming year-end 2022 pricing, we expect our full-year realized pricing to be up over 40% versus the prior year. We estimate that every $10 per kg change in full-year 2023 market pricing would equate to a $5-7 per kg change in our own full-year realized pricing,” Norris added.

According to Norris, the tight supply-demand situation has led the company to “become more selective in partnering with our customers, and these partnerships have become more strategic.”

“We’ve established a diversified contract mix across cathode, battery, and original equipment manufacturers (OEM) customers, and are entering into partnerships in advanced energy storage and recycling,” he said.

According to Fastmarkets’ analysts, lithium has been in a supply-demand deficit for the past two years and is expected to be in a 14,300-tonne deficit in 2023.

Albemarle realigned its business units in August, creating two divisions, of which energy storage is one. The unit includes lithium hydroxide, carbonate, battery-grade metal and advanced energy storage businesses.

Keep up to date with market insights and predictions for 2023 and beyond with our NewGen forecasts.

What to read next
Spot market premiums for refined nickel products declined sharply in the US following a long period of stagnation. Elsewhere, premiums were stable while Chinese markets re-opened following the Lunar New Year holiday
Japan was where the world’s first lithium-ion battery and hybrid vehicle were made, but the country is aware that its position in the production of both battery materials and battery cells is falling behind its Asian peers, Fastmarkets heard on Tuesday, January 31
Glencore achieved a 40% year-on-year increase in cobalt output during 2022 to a total of 43,800 tonnes, the company said in its annual production report published on Wednesday February 1
A string of of hefty investment announcements in the electric vehicle (EV) battery ecosystem in the United States, taking advantage of incentives arising from country’s 2022 Inflation Reduction Act (IRA), have raised concerns in Europe about falling behind in the EV market
General Motors (GM) is investing $650 million to develop the Thacker Pass mine in Nevada, the largest known source of lithium in the US and the third largest in the world
Australia-based cobalt and nickel supplier Jervois Global has delayed the start of commercial production of cobalt concentrate at its mine in the US state of Idaho, it said in a quarterly update on Monday January 30
We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.