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Albemarle (ALB) Gains on Strong Lithium Demand Amid Cost Woes
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Albemarle Corporation (ALB - Free Report) is benefiting from strong lithium demand and expansion initiatives. However, it faces headwinds from input cost inflation and inventory destocking.
The stock has gained 14.4% in the past year compared with the industry’s rise of 15.5% in the same period.
Image Source: Zacks Investment Research
Strong Demand & Expansion Initiatives Drive ALB
Albemarle is experiencing positive results driven by strong demand for lithium. Increased customer demand, capacity expansion and improvements in plant productivity are contributing to higher volumes.
Albemarle experienced an increase in volumes during the first quarter of 2023, primarily driven by the expansion of La Negra III/IV in Chile and a surge in tolling volumes to meet the growing demand from customers.
The expansion project of La Negra III/IV in Chile played a vital role in increasing the company's capacity and enhancing plant productivity. As a result, Albemarle met the growing customer demand for lithium by increasing its production output. These contributed to the notable rise in volumes observed during the first quarter.
Furthermore, Albemarle witnessed an upswing in tolling volumes during this period. This surge can be attributed to the expanding demand for lithium-based products.
Cost-saving and productivity initiatives have also been beneficial for Albemarle. These actions are expected to support the company's margins throughout 2023. Additionally, Albemarle is strategically executing projects aimed at increasing its global lithium conversion capacity. The company is focused on investing in high-return projects to enhance productivity and is well-positioned to capitalize on the long-term growth in the battery-grade lithium market.
Albemarle has achieved significant milestones in its expansion plans. The Kemerton I lithium hydroxide conversion plant in Western Australia began production in July 2022, while Kemerton II has completed its mechanical phase and is currently undergoing commissioning. Furthermore, Albemarle has made the final investment decision to construct Kemerton III and IV. The acquisition of the Qinzhou plant in China is expected to contribute to conversion capacity and lithium volumes.
In a recent announcement, Albemarle revealed the site for its lithium mega-flex facility in Chester County, SC. This new hydroxide facility will require an initial investment of $1.3 billion or more and will enable the company to meet the growing demand for electric vehicles and lithium-ion batteries.
The mega-flex plant will process various lithium feedstock, including recycled batteries, to produce approximately 50,000 metric tons of battery-grade lithium hydroxide annually. The facility's capacity can be expanded to 100,000 metric tons, supporting the production of approximately 2.4 million electric vehicles per year. Moreover, the facility aligns with the Inflation Reduction Act, promoting the localization of crucial minerals in North America.
Input Costs and Inventory Destocking Pose Challenges
Despite the overall positive outlook for Albemarle, there are certain areas of concern that require attention. The company's Ketjen unit is grappling with the impact of elevated input costs, which are anticipated to affect profit margins in the near future.
Additionally, Albemarle's Specialties unit is facing challenges due to weaker demand and the destocking of customer inventory, resulting in a decline in volumes. The softening demand in the consumer electronics sector further compounds these headwinds. It is anticipated that these factors will continue to exert pressure on Albemarle's performance during the second quarter of 2023.
The Zacks Consensus Estimate for L.B. Foster’s current-year earnings is pegged at 53 cents per share, indicating year-over-year growth of 112.5%. The company’s shares have gained around 14.4% in the past year. FSTR beat the Zacks Consensus Estimate in all the last four quarters. It delivered a trailing four-quarter earnings surprise of 140.5%, on average.
Koppers currently carries a Zacks Rank #2. The consensus estimate for current-year earnings for KOP is currently pegged at $4.40, suggesting year-over-year growth of 6.3%. Koppers’ shares have rallied roughly 56.5% in the past year.
The Zacks Consensus Estimate for Linde’s current-year earnings has been revised 4.4% upward in the past 60 days. LIN beat the Zacks Consensus Estimate in all the last four quarters, with the average earnings surprise being 6.9%. The company’s shares have gained 39.7% in the past year.
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Albemarle (ALB) Gains on Strong Lithium Demand Amid Cost Woes
Albemarle Corporation (ALB - Free Report) is benefiting from strong lithium demand and expansion initiatives. However, it faces headwinds from input cost inflation and inventory destocking.
The stock has gained 14.4% in the past year compared with the industry’s rise of 15.5% in the same period.
Image Source: Zacks Investment Research
Strong Demand & Expansion Initiatives Drive ALB
Albemarle is experiencing positive results driven by strong demand for lithium. Increased customer demand, capacity expansion and improvements in plant productivity are contributing to higher volumes.
Albemarle experienced an increase in volumes during the first quarter of 2023, primarily driven by the expansion of La Negra III/IV in Chile and a surge in tolling volumes to meet the growing demand from customers.
The expansion project of La Negra III/IV in Chile played a vital role in increasing the company's capacity and enhancing plant productivity. As a result, Albemarle met the growing customer demand for lithium by increasing its production output. These contributed to the notable rise in volumes observed during the first quarter.
Furthermore, Albemarle witnessed an upswing in tolling volumes during this period. This surge can be attributed to the expanding demand for lithium-based products.
Cost-saving and productivity initiatives have also been beneficial for Albemarle. These actions are expected to support the company's margins throughout 2023. Additionally, Albemarle is strategically executing projects aimed at increasing its global lithium conversion capacity. The company is focused on investing in high-return projects to enhance productivity and is well-positioned to capitalize on the long-term growth in the battery-grade lithium market.
Albemarle has achieved significant milestones in its expansion plans. The Kemerton I lithium hydroxide conversion plant in Western Australia began production in July 2022, while Kemerton II has completed its mechanical phase and is currently undergoing commissioning. Furthermore, Albemarle has made the final investment decision to construct Kemerton III and IV. The acquisition of the Qinzhou plant in China is expected to contribute to conversion capacity and lithium volumes.
In a recent announcement, Albemarle revealed the site for its lithium mega-flex facility in Chester County, SC. This new hydroxide facility will require an initial investment of $1.3 billion or more and will enable the company to meet the growing demand for electric vehicles and lithium-ion batteries.
The mega-flex plant will process various lithium feedstock, including recycled batteries, to produce approximately 50,000 metric tons of battery-grade lithium hydroxide annually. The facility's capacity can be expanded to 100,000 metric tons, supporting the production of approximately 2.4 million electric vehicles per year. Moreover, the facility aligns with the Inflation Reduction Act, promoting the localization of crucial minerals in North America.
Input Costs and Inventory Destocking Pose Challenges
Despite the overall positive outlook for Albemarle, there are certain areas of concern that require attention. The company's Ketjen unit is grappling with the impact of elevated input costs, which are anticipated to affect profit margins in the near future.
Additionally, Albemarle's Specialties unit is facing challenges due to weaker demand and the destocking of customer inventory, resulting in a decline in volumes. The softening demand in the consumer electronics sector further compounds these headwinds. It is anticipated that these factors will continue to exert pressure on Albemarle's performance during the second quarter of 2023.
Albemarle Corporation Price and Consensus
Albemarle Corporation price-consensus-chart | Albemarle Corporation Quote
Zacks Rank & Key Picks
Albemarle currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the basic materials space include L.B. Foster Company (FSTR - Free Report) , sporting a Zacks Rank #1 (Strong Buy), and Koppers Holdings Inc. (KOP - Free Report) and Linde Plc (LIN - Free Report) , carrying a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for L.B. Foster’s current-year earnings is pegged at 53 cents per share, indicating year-over-year growth of 112.5%. The company’s shares have gained around 14.4% in the past year. FSTR beat the Zacks Consensus Estimate in all the last four quarters. It delivered a trailing four-quarter earnings surprise of 140.5%, on average.
Koppers currently carries a Zacks Rank #2. The consensus estimate for current-year earnings for KOP is currently pegged at $4.40, suggesting year-over-year growth of 6.3%. Koppers’ shares have rallied roughly 56.5% in the past year.
The Zacks Consensus Estimate for Linde’s current-year earnings has been revised 4.4% upward in the past 60 days. LIN beat the Zacks Consensus Estimate in all the last four quarters, with the average earnings surprise being 6.9%. The company’s shares have gained 39.7% in the past year.