Albemarle's Q3 2025 Earnings Call: Contradictions Emerge on Spodumene Costs, EV vs Energy Storage Demand, and Supply Chain Optimizations

Date of Call: November 6, 2025

Financials Results

• Revenue: $1.3B for Q3, a decrease from prior year primarily driven by lower lithium market prices
• EPS: Net loss of $1.72 per diluted share; adjusted diluted loss per share $0.19 (excludes noncash goodwill impairment)
• Operating Margin: Adjusted EBITDA margin in the ~20% range; Adjusted EBITDA $226M, up 7% YOY; adjusted EBITDA margin improved ~150 basis points YOY

Guidance:

• Full-year 2025 expected toward the upper end of the $9/kg lithium price scenario; FY lithium pricing assumed ~ $9.50/kg.
• Energy Storage volumes expected up >=10% YOY; ~45% of 2025 lithium salt volumes on long-term agreements with floors.
• Q4 energy storage EBITDA slightly higher sequentially; Specialties Q4 sales ~Q3 but EBITDA lower; Ketjen expected stronger in Q4.
• 2025 CapEx ~ $600M (≈65% reduction YOY); cost/productivity run‑rate ~$450M.
• Positive free cash flow $300M–$400M in 2025; full-year cash conversion >80%; expect ~$660M gross proceeds from Ketjen sales in H1 2026.

Business Commentary:

• Revenue and Earnings Performance:
• Albemarle Corporation reported net sales of $1.3 billion in Q3 2025, with an adjusted EBITDA of $226 million, representing a 7% increase year-over-year.
• 

• The earnings were supported by disciplined cost management, productivity actions, and strong energy storage sales volumes, offsetting lower lithium market pricing.

• Energy Storage Demand and Growth:

• Energy storage sales volume is expected to grow by 10% or more year-over-year, driven by record integrated production, higher spodumene sales, and reduced inventories.

• This growth is particularly strong in China, with sales at local market prices rather than long-term agreements, indicating robust demand.

• Cost and Capital Expenditure Reduction:

• Albemarle anticipates achieving full-year cost and productivity improvements of around $450 million, surpassing the upper limit of initial targets.
• The company reduced capital expenditures for the year to approximately $600 million, reflecting a 65% year-over-year reduction.

• Asset Sales and Financial Flexibility:

• The company announced two transactions to sell a controlling 51% stake in Ketjen's refining catalysts business and its interest in the Eurecat joint venture, expected to generate approximately $660 million in pretax cash proceeds.
• These transactions enhance Albemarle's financial flexibility by providing significant additional cash to deleverage and retain exposure to future growth opportunities in refining catalysts.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Net sales $1.3B and Adjusted EBITDA $226M, a 7% YOY increase; management says FY results now toward the upper end of the $9/kg scenario and projects positive free cash flow of $300M–$400M in 2025. They cite ~$450M of cost/productivity improvements and CapEx cut to ~$600M, and expect ~$660M proceeds from Ketjen transactions, emphasizing improved cash generation and enhanced financial flexibility.

Q&A:

• Question from Aleksey Yefremov (KeyBanc): How will Atlas/spodumene dynamics evolve into H1 2026 — will higher spodumene costs be offset by higher equity income or not?
  Response: They won't predict prices; margin typically shifts to spodumene when prices rise; Talison equity earnings give an immediate benefit while a portion flows into inventory and emerges over ~6–9 months.

• Question from Jeffrey Zekauskas (JPMorgan): In China today, are prices closer to $10 or $11?
  Response: Closer to $10 today; full-year view ~ $9–$9.50/kg.

• Question from Jeffrey Zekauskas (JPMorgan): Are you considering restarting plants where production was paused or lost?
  Response: No — not planning to restart paused plants in the near term; bringing them back would take longer and isn't in current plans.

• Question from Vincent Andrews (Morgan Stanley): Is the 30% adjusted EBITDA at $15/kg referring to the energy storage segment or the company overall?
  Response: That refers to the overall company.

• Question from Vincent Andrews (Morgan Stanley): What do you mean by 'liability management opportunity' on the capital allocation slide?
  Response: Exploring debt-stack optimization and liability management (not just gross deleveraging); no specific actions disclosed yet.

• Question from Edlain Rodriguez (Mizuho): How much of the EV domain is energy storage versus EV and how will those percentages move medium term?
  Response: They track separately; fixed storage is ~25% today and growing faster, but long term the market remains more EV‑oriented.

• Question from David Begleiter (Deutsche Bank): How much Chinese lepidolite supply is currently curtailed vs its peak?
  Response: Eric: ~1/3 of production impacted (about 30,000 tons annually) across ~8 operations including the largest; a modest, short‑term blip depending on repermitting timelines.

• Question from David Begleiter (Deutsche Bank): Any change to your 2030 lithium demand outlook—moved toward upper end of the range?
  Response: Range unchanged but biased upward within that range; demand has surprised to the upside over the past 6–9 months.

• Question from Christopher Perrella (UBS): With extra trains and Greenbushes/La Negra ramps, how much could resource production be up in 2026, and do you have first refusal on Wodgina?
  Response: La Negra near capacity with marginal gains; Talison CGP3 starts at year‑end and will ramp through 2026; no comment on Wodgina process — discussions ongoing with partner.

• Question from Harris Fein (Wolfe Research): Were stronger volumes opportunistic spot/inventory draws and how should we model next year's volume growth?
  Response: Some opportunistic inventory reduction contributed to this year's growth and won't repeat next year; underlying demand and pricing are stronger, but they won't rely solely on that.

• Question from Harris Fein (Wolfe Research): Views on critical minerals policy and scenario planning if governments engage more concretely?
  Response: Supportive of government focus; expects a mix of tools (tax incentives, trade policy, direct investment, public‑private partnerships) to rebuild Western reinvestment; no specifics.

• Question from Laurence Alexander (Jefferies): Have return hurdles changed for new projects given shifting policy in Latin America and the U.S.?
  Response: Return criteria unchanged; current market pricing still generally doesn't justify new western investments; focus is on cost/cash discipline and staying ready to pivot when economics improve.

• Question from Laurence Alexander (Jefferies): Is cost structure sufficient to be FCF positive next year if prices don't improve?
  Response: They are not providing a 2026 forecast yet; have driven significant cost reductions and will continue, but won't commit to next‑year FCF today.

• Question from Patrick Cunningham (Citi): What productivity savings into next year and size of carryover from the run rate?
  Response: Line of sight to a $450M run‑rate this year; many savings will continue into 2026 (sweating assets, ramping facilities), with details to be updated next quarter.

• Question from Patrick Cunningham (Citi): How has bromine supply/demand trended and outlook for Q4?
  Response: Mixed demand (strong electronics/pharma, weaker construction and oil & gas); prices rose mid‑year then eased; market expected fairly balanced into Q4 with seasonal production offline in winter.

• Question from Rock Hoffman Blasko (BofA): Did the energy storage volume beat include pull‑forward and how will contract/spot mix shift in 4Q and thereafter?
  Response: Beat driven mainly by inventory drawdown (not pulling next quarter's production); contract percentage may tick down from ~45% due to increased China spot sales mix.

• Question from Rock Hoffman Blasko (BofA): Preliminary thoughts on 2026 CapEx and when you'd need to turn on CapEx to drive growth after 2026?
  Response: Expect to maintain or slightly lower current run‑rate absent a market pivot; no large immediate reductions — future increases will be incremental and driven by market economics.

• Question from Arun Viswanathan (RBC): Thoughts on spodumene pricing, conversion marginal cost dynamics, and whether supply is tight/loose?
  Response: Conversion is near marginal cost (especially in China); price moves tend to accrue to the resource (spodumene); market is tightening with inventories declining — a demand‑led tightening with some supply lag.

• Question from Arun Viswanathan (RBC): Comments on commercialization in the energy storage market and demand expectations?
  Response: ESS uses the same supply chain as EVs; growth strong globally with LFP dominant near‑term (~majority of ESS), and lithium‑ion expected to supply ~80% of ESS demand in near term; sodium‑ion may emerge longer term.

• Question from Joel Jackson (BMO): If you're not investing beyond CGP3 and some conversion, what will Albemarle be and are you worried about not growing with the industry?
  Response: Focusing on preserving growth optionality via strong resources and disciplined balance sheet; willing to risk some upside to ensure competitiveness through the bottom of the cycle and pivot to invest when returns justify it.

• Question from Joel Jackson (BMO): On‑the‑ground evidence of accelerating ESS growth — hype or real?
  Response: Real — tangible volumes are shipping; cell lines (especially in China) at full utilization and OEMs are actively serving ESS demand alongside EV demand.

• Question from Abigail Eberts (Wells Fargo): Expectations for underlying EV demand next year?
  Response: EV demand expected to continue; EVs represent ~70%+ of lithium demand, China remains strongest, Europe policy supportive, U.S. outlook positive but more uncertain due to policy.

• Question from David Deckelbaum (TD Cowen): How much CapEx would you save post‑Eurecat/Ketjen monetization and how will you use proceeds?
  Response: Ketjen is ~10% of ongoing CapEx; proceeds will be used to delever and for disciplined capital priorities — timing and specifics to be finalized as transaction closes.

• Question from David Deckelbaum (TD Cowen): Will Talison dividends be a credible tailwind into 2026 as CGP3 comes online?
  Response: CGP3 will ramp through 2026; dividends depend on ramp speed and spodumene pricing — too early to quantify but ramp should support improved equity earnings/dividends if pricing cooperates.

Contradiction Point 1

Spodumene Cost Impact on Lithium Margins

It involves differing expectations regarding the impact of spodumene cost evolution on lithium margins, which could affect Albemarle's financial performance and investor expectations.

How do you think spodumene cost changes will impact lithium margins in the first half of 2026? - Aleksey Yefremov (KeyBanc Capital Markets Inc., Research Division)

2025Q3: We're not predicting lithium or spodumene prices, but we expect market tightening. If prices move, the margin could shift to spodumene, though it's less relevant due to the integrated conversion network. The market is what it is, and we're not counting on price movements. - Jerry Masters(Chairman, President & CEO)

What factors could cause demand to reach the lower or upper end of the guided 15% to 40% range in 2025? - Rock Hoffman (Bank of America)

2025Q1: The best guess is in the mid-20% range, which is between the downside and upside scenarios. The wide range reflects the uncertain market conditions. - Kent Masters (CEO)

Contradiction Point 2

Energy Storage vs EV Demand Growth

It involves differing perspectives on the growth and market share of energy storage versus electric vehicles, which are crucial for strategic planning and investor expectations.

Can you clarify the current and projected market share percentages for energy storage versus EVs? - Edlain Rodriguez (Mizuho Securities USA LLC, Research Division)

2025Q3: Energy storage is about 1/4 of the market today, growing faster but still smaller than EVs. Long-term, EVs are more significant, but fixed storage's growth rate is higher, impacting market dynamics. - Jerry Masters(Chairman, President & CEO)

How much of the year-to-date demand is due to tariff prebuying? - Unidentified Analyst (Citi)

2025Q1: We expect lithium demand to grow 2.5x by 2030, driven by EVs. China is over 50% EV, with strong growth in Europe and potential in the U.S., despite policy uncertainties. - Eric Norris(Executive VP & Chief Commercial Officer)

Contradiction Point 3

Capacity and Supply Chain Optimizations

It involves differing statements about the company's ability to manage capacity and supply chain optimizations, impacting operational efficiency and investor confidence.

Are you considering resuming operations at any of your paused plants? - Jeffrey Zekauskas (JPMorgan Chase & Co, Research Division)

2025Q3: We have achieved a consistent run rate of 90% at our lithium conversion facilities over the past 8 quarters, and we have delivered on our customer commitments. - Neal Sheorey(Chief Financial Officer)

How will you approach cash management and ROI over the next 3-5 years? - Colin Rusch (Oppenheimer)

2025Q1: We're striving for the high end of the range. We've reached 90% run rate, and we're identifying opportunities to reach the top end. Productivity improvements are ongoing beyond this program. - Kent Masters (CEO)

Contradiction Point 4

Production Capacity Utilization and Supply-Demand Imbalance

It reflects differing views on the utilization of production capacity and the extent of the supply-demand imbalance, which can influence operational decisions and market strategies.

What portion of supply is affected by Chinese lepidolite curtailments, and what is the reduction in production? - David Begleiter (Deutsche Bank AG, Research Division)

2025Q3: Only about 30,000 tons annually, a minor blip in the scheme of the market. It's a matter of getting new permits, but the impact is not significant. - Jerry Masters(CEO)

What factors could cause the contract vs. spot mix to shift from 2Q to 2H, and does this suggest a split less than 50-50 by 2026? - Rock Hoffman Blasko (BofA Securities)

2025Q2: The mix change is due to customers drawing more volume than anticipated in this quarter, not necessarily because of a structural shift. The company sees the mix moving around quarterly, but the overall strategy and long-term agreements remain in place. - Jerry Kent Masters(CEO)

Contradiction Point 5

Contract Mix and Spot Sales

It involves differing descriptions of the contract mix and spot sales, which impacts revenue predictability and pricing strategies.

Did the energy storage volume beat include any sales pulled forward from future periods, and where is the contract spot mix expected to shift in Q4 and beyond? - Rock Hoffman Blasko (BofA Securities, Research Division)

2025Q3: The pull forward is mostly from inventory reduction. There's a rush for EVs due to 30D tax credits expiration. China keeps sales local, impacting mix. - Jerry Masters(CEO)

Is the remaining 50% of the contract mix not under long-term agreements spot-based? Did any significant tranches of long-term agreements recently undergo renegotiation with floor resets? - Patrick Cunningham (Citi)

2024Q4: We do not expect a significant number of these contracts, 50% of which have floors, to be renegotiated in the near term. - Kent Masters(CEO)