Ladies and gentlemen, thank you for standing by. And welcome to the Albemarle Corporation Q4 2020 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. Please be advised that today’s conference is being recorded. I would now like to hand the conference to your speaker today, Meredith Bandy, VP of Investor Relations & Sustainability. Please go ahead, ma'am.

All right. Thank you, Joelle. And welcome to Albemarle’s fourth quarter 2020 earnings conference call. Our earnings were released after the market closed yesterday and you will find the material posted to our website under the Investor Relations section at albemarle.com. Joining me on the call today are Kent Masters, Chief Executive Officer; and Scott Tozier, Chief Financial Officer. Raphael Crawford, President, Catalysts; Netha Johnson, President, Bromine and Eric Norris, President, Lithium, are also available for Q&A. As a reminder, some of the statements made during this conference call, including our outlooks, expected company performance, expected impacts of the COVID-19 pandemic and proposed expansion projects may constitute forward-looking statements within the meaning of federal securities laws. Please note the cautionary language about forward-looking statements in our press release and that same language applies to this call. Please also note that some of our comments today refer to financial measures that are not prepared in accordance with GAAP, a reconciliation of these measures to GAAP financial measures can be found in our earnings release and the appendix of our presentation, both of which are on our website. Now, I will turn the call over to Kent.

Thanks, Meredith. And thank you all for joining us today. On today's call, I will highlight recent accomplishments and discuss our strategy to capitalize on the very attractive long-term growth trends we see for our businesses. Scott will give more detail on our result outlook and capital allocation. I'm pleased to say that Albemarle reported solid fourth quarter results including net sales of $879 million and adjusted EBITDA of $221 million, both of which were at or above the high end of our previous outlook. I'm also encouraged by the rebound we began to see in the second half of the year, particularly for bromine and lithium. We expect to generate full-year 2021 net sales of between $3.2 billion and $3.3 billion and adjusted EBITDA of between $810 million and $860 million, both up from 2020 results. As I'm sure you're aware, earlier this month we completed a $1.5 billion capital raise. The proceeds of this offering provide the financial flexibility to execute our long-term strategy, including the acceleration of high return growth projects. Now, if we turn to slide five, we have a clear strategy to drive sustainable value for our shareholders. Albemarle has four primary strategic objectives. First, we will grow profitably. We have identified and planned a portfolio of low capital intensity high return projects. These projects leverage our diverse world-class resources in both lithium and bromine. Over the past five years, we have built the internal team and capabilities to execute these projects on time and on budget. In addition, we have long-term commercial relationships with customers that are required for these projects. We are working to ensure that we are aligning with their strategic requirements while achieving adequate returns for our shareholders. Of course, the majority of our growth will be lithium. But at the same time, we will be investing in our bromine projects. This will include highly efficient Brownfield projects with attractive returns and short paybacks. I'm sure Netha will be happy to give you more detail when we get to Q&A. Second, we will maximize productivity. Over the past year, we have optimized earnings and cash flow generation across our business including our very successful sustainable cost savings program. Operational discipline is essential for generating cash flow and supporting growth. And we will not take our eyes off the ball, even as we move into an accelerated growth phase. Third, we will invest with discipline, focusing our capital investments on our highest return opportunities; just as we have in the past, we will actively assess our portfolio for opportunities to unlock shareholder value. We will also continue to maintain our investment-grade credit rating and support our dividend. Fourth, and finally, we will advance sustainability across our businesses, which is a core value for Albemarle. Our aim is to increase sustainability throughout the value chain from the resource to the end use of our products. Most recognizably, we develop lithium products that enable the reduction of greenhouse gas emissions through the adoption of battery electric vehicles. Our catalyst business contributes to sustainability by helping refiners produce cleaner transportation fuels. And our bromine products contribute to consumer safety by preventing fires in electronic equipment. With continued regulatory changes, advancements in technology and investments in infrastructure like charging stations, the current environment is ideal for a step-change in EV adoption. We are seeing this play out in the acceleration of global EV sales led by rebounding demand in China and new demand in Europe. Global EV sales increased 45% during 2020 and are expected to increase by over 70% in 2021. On the right-hand side of the slide, you see demand projections for lithium over the next five to 10 years. Based on our internal estimates, we believe demand will reach more than 1.1 million tons by 2025, up from around 300,000 tons today. This is slightly higher than third-party projections from industry analysts like Benchmark Minerals, Roskill, and the CRU Group. But as you can see, the consensus is that the industry expects to see significant growth in the coming years. As the industry leader in lithium, Albemarle is able to take these external estimates, internal forecasts, and discussions with our strategic customers and suppliers to generate a detailed demand forecast. On slide seven, you see other metrics we use to gauge the future of the lithium market. While Albemarle's demand outlook for lithium is above third-party estimates, our outlook is below some of the more ambitious targets from automotive OEMs. For example, Tesla's vision of three terawatt-hours of battery production by 2030 would translate to roughly 2.3 million tons of lithium. That means that Tesla's demand alone would exceed estimates for the entire market. Additional regulatory impacts, for example, if the U.S. decides to adopt more European-like EV incentives would be incremental to our estimates. Total lithium demand is expected to grow by about 30% per year from 2020 to 2025, led by lithium consumption in electric vehicles, which is expected to grow by 47% per year. Two other trends support lithium demand: increased adoption of battery electric vehicles and larger battery sizes. Battery electric vehicles and larger battery sizes improve the consumer experience with longer driving ranges, and innovation in batteries is also driving shorter charging times. It's important to note that this outlook does not assume a major shift in battery technologies over the next five years. Advanced battery technologies like solid-state batteries could potentially increase lithium intensity later this decade. Since 2015, we've nearly tripled our nameplate conversion capacity to 85,000 tons per year. Later this year, we expect to complete two major projects, which we refer to as Wave 2. Wave 2 consists of the La Negra III and IV project and Kemerton I and II projects, which will more than double our current capacity to 175,000 tons per year. Over the last five years, we engaged with our customers with long-term volume commitments to execute this portfolio of projects. Now, with this new acceleration in demand, customers are asking us to repeat the model. Our next two waves of expansion could once again more than double our nameplate capacity. With lower capital intensity, we expect these projects to generate very attractive returns. The identified and planned Wave 3 projects would add 150,000 tons of annual capacity over the next three to five years. This third wave includes a conversion plant in China, which would be part of our MARBL joint venture, a smaller expansion at our Silver Peak asset in Nevada, another plant in China on a new mega site, and Kemerton III and IV, which is a Brownfield project in Australia. We also have identified opportunities for a fourth wave of projects. These could include further expansions in Australia, China, and Southeast Asia, and the potential to restart the mine and expand our conversion facility at Kings Mountain in North Carolina. Wave 4 also includes options to support customers looking to localize supply, for example, by converting carbonate to hydroxide near the battery manufacturer. And before we continue, let me update you on our Wave 2 projects. So La Negra III and IV enables us to add lithium carbonate capacity at the very low end of the cost curve, the project remains on track for mechanical completion in mid-2021. Kemerton I and II, our new lithium hydroxide conversion plant in Western Australia is on track to reach mechanical completion late in 2021. Kemerton is core to our hydroxide capacity in line with expected strong long-term market demand. Both of these projects will add significant commercial lithium sales beginning in 2022, following commissioning and customer qualification processes. As we move from Wave 2 to Wave 3 projects and beyond, we expect an estimated 40% reduction in capital intensity to support compelling economic returns. We can achieve these capital efficiencies and returns for three key reasons. First, we were able to leverage our experience in project execution by building standardized plants with economies of scale. For example, we expect the new hydroxide plant would be a standard two trains or 50,000 tons per year, similar to what we are building at Kemerton today. Second, in many cases, we're moving from Greenfield to Brownfield economics, just as today we're moving from La Negra I and II to La Negra III and IV. Likewise, we'll move from Kemerton I and II to Kemerton III and IV and so on. As with Kemerton, the focus will be on building what we call mega sites, standardized large-scale plants, able to support multiple trains for lithium conversion. Finally, we'll be buying or building additional facilities in low-cost jurisdictions, as we did when we successively acquired and then expanded our Xinyu facility in China in 2016. Before I turn it over to Scott to review recent results, I'd like to acknowledge all the hard work by the Albemarle team to continue to operate during the global pandemic, as well as their ability to achieve significant progress on our long-term strategy. A year ago, when my predecessor laid out our 2020 strategic objectives, I don't think any of us could have imagined how the year would play out. Despite all the challenges, our team has delivered. We set ourselves up to grow profitably, keeping our major lithium capital projects on track for 2021 completion. We maximized productivity, achieving $80 million of sustainable cost savings in 2020, 60% above our initial targets. We demonstrated financial discipline, completing our 26th consecutive year of dividend increases and maintaining our investment-grade credit rating throughout the pandemic-related downturn. And finally, we improved the sustainability of our businesses by establishing baseline environmental data and improving our reporting and transparency. Now I'll now turn the call over to Scott for a detailed review of the 2020 financial results.

Thanks, Kent and good morning everyone. Albemarle generated fourth quarter net sales of over $879 million, a decrease of about 11% compared to the prior year, but at the high end of our previous outlook. This reduction was primarily due to reduced prices and lithium as expected coming into the year and reduced volumes in catalysts offset by improvements in bromine. GAAP net income was $85 million, and adjusted EPS of $1.17 excludes a pension mark-to-market loss due to lower discount rates. As Kent stated, adjusted EBITDA was $221 million, above the high end of our previous outlook. Turning to slide 13 for a look at adjusted EBITDA by business segment. Lithium's EBITDA declined by $17 million versus the prior year. Pricing was down about 20% in the quarter due to contract pricing adjustments agreed in late 2019, as well as product mix. Volumes were higher than expected due to a combination of improving demand and customers fulfilling their full year contract commitments. Cost savings helped offset the impact of lower prices. Bromine's EBITDA was up about $7 million, the increase was due to higher volumes and higher pricing. Bromine is overall a good news story. The business has essentially rebounded to pre-pandemic levels. In Q4, they benefited from higher demand, customer restocking, and some short-term supply-demand imbalances for both raw materials and finished goods. Catalysts EBITDA declined by $53 million, primarily due to lower volumes. This business continues to be the most challenged of the three due to ongoing travel restrictions, as well as reduced refinery capacity utilization and margins. Fluid Catalytic Cracking or FCC volume improved sequentially but remained down compared to the prior year quarter. Hydroprocessing catalyst or HPC volumes were also down with a tough comparable relative to an unusually strong Q4 2019. Our corporate and other category EBITDA decreased by $8 million, due to a mix of slightly lower fine chemistry services results and slightly higher corporate costs. The FCS business is contract-driven and can vary quarter to quarter. Full year results were very strong compared to history. Comparing the full year to the fourth quarter, you can see it and get a sense of the rebound we started to see in the second half of 2020, particularly for lithium and bromine. We are pivoting capital allocation to prioritize high return growth projects to align with strategic customer demand and maintain our leadership positions. We remain committed to preserving the financial flexibility necessary to fund growth and to maintain our investment-grade credit rating. We'll also continue to support our dividend. Although dividend growth may be lower than the historical average while we build out the next wave of growth projects that will enable higher return opportunities. Finally, we will pursue a disciplined and thoughtful approach to investments, including M&A and joint ventures. As we said in the past, the most likely M&A you'd see us do would be bolt-on acquisitions of lithium conversion assets, in cases where buying allows us to grow more quickly and generate better returns than building. We are finalizing the sale of our Fine Chemistry Services and performance catalysts solutions businesses and expect to update you in the coming months. Let's turn to slide 15 for a look at our balance sheet. The primary use of proceeds from our equity offering is to accelerate profitable growth. About 90% of the proceeds are for lithium growth, with most of the remainder for enhancements to our bromine business. The returns on these projects are highly attractive, and we expect to generate returns at least two times our weighted average cost of capital at mid-cycle pricing. These are large, long-dated projects with a bulk of incremental spending in 2022 through 2025. In the meantime, instead of holding the proceeds as cash, we plan to delever, which will reduce interest expense and cash drag on the balance sheet. This will enable us to use cash and debt capacity to fund investments as they are approved. Our long-term target net leverage ratio remains two to two and a half times adjusted EBITDA. Pro forma for the offering, we're below that range, but expect to increase our leverage as needed to accelerate growth and deliver returns to shareholders. Overall, we expect 2021 results to improve year-over-year. For the total company, we expect net sales to be higher year-over-year as our businesses continue to recover from the events of 2020. Adjusted EBITDA of between $810 million and $860 million also suggests potential upside compared to 2020 due to higher net sales and ongoing cost savings. We expect CapEx to be slightly higher year-over-year as we begin to execute our accelerated growth projects. However, as I mentioned earlier, the bulk of that spending for these projects will be in 2022 to 2025. Net cash from operations is expected to be lower due to higher cash taxes and higher inventories as we start up the two new lithium plants. Expectations for adjusted diluted EPS of $3.25 to $3.65 is lower than last year due to higher taxes and depreciation, as well as the increased share count. Due to the recent severe winter weather, we have temporarily shut down four of our U.S. plants; our Bayport, Pasadena, Magnolia, and Baton Rouge plants have been down since Monday. Once it is safe to do so, we will restart these facilities. And this situation is still evolving. At this point, we expect some impact to Q1 results and potentially Q2. It's possible the weather will have more of an impact than what is currently included in this outlook, and we'll update you if there are any material changes. Let's turn to slide 17. Lithium results are expected to be relatively flat compared to 2020. We expect slightly higher volumes with the restart of North American production late last year, as well as modest efficiency improvements. As usual, we expect volumes to be back half weighted for lithium. At this point, we still anticipate slightly lower pricing depending on full-year average realized pricing for carbonate and technical grade products. Our new contract structures provide increased flexibility to increase price in response to improving market prices. Lithium costs will be slightly higher year-over-year related to the startup costs associated with La Negra and Kemerton, partially offset by continued cost and efficiency improvements. And as Kent discussed, the long-term growth story for lithium is intact. In catalysts, we expect 2021 results to be flat year-over-year, including higher PCS earnings. We expect the decline in North American refining catalysts volume. This is primarily a result of one customer who recently indicated that they would de-select Albemarle's catalysts due to our public support for electric vehicles. Longer term, we are continuing to position the catalysts business to grow in emerging markets and capitalize on our strengths as a global specialty chemicals producer in the crude to chemicals market and the renewable fuels market. Raphael can give more color on the challenges and opportunities we see for our catalysts business during Q&A. In bromine, we expect full-year 2021 results to improve modestly, with continued economic recovery and a return to sold-out plants. Looking ahead, we see steady demand increases for our flagship fire safety products driven by new technology trends, like 5G and electric vehicles. I'll turn it back to Kent to review our strategic objectives for 2021.

Thanks, Scott. Albemarle finished strong in 2020, and we are excited about the opportunities ahead of us in 2021. We will continue to execute our long-term strategy. The successful completion of our Wave 2 projects and investment decisions on the new expansion projects in lithium and bromine. We are also working with customers to reach commercial agreements for a majority of new capacity prior to investing. We will continue to maximize productivity with operational discipline across our businesses, including cost reduction, lean principles, continuous improvement, and project execution excellence. We expect to achieve $75 million of productivity improvements in 2021. We will be disciplined stewards of capital investing in high-return growth, maintaining our investment-grade credit rating and supporting our dividend. Finally, we will continue to implement and improve sustainability across our company including setting near-term goals to reduce greenhouse gas emissions at our existing operations and exploring science-based target options for all three of our businesses. And with that, we'd like to open up the call for questions. So Joule, over to you.

Thank you. Our first question comes from David Begleiter with Deutsche Bank. Your line is now open.

Thank you. Good morning, Kent, on recycling in lithium, when do you expect it to become a bigger part of the market? And what will be Albemarle's role in lithium recycling going forward?

I’ll begin by saying that we have activities related to lithium, but we anticipate it will take several years before it becomes a significant part of our business. There needs to be a sufficient supply of lithium in the market to support its lifecycle in vehicles and subsequently its recycling. Our involvement in this will depend on exploring different business avenues. When lithium is recycled, it resembles the processes at our conversion facility. Therefore, we expect to be involved in this area, although it will be several years before it materializes. Eric, do you have anything to add?

Sure, Kent. I'd add that, we have a number of efforts already with existing customers, both in the U.S. and in Europe, who are very focused on investing in recycling capabilities. In some cases, in Europe, it's part of the EU battery directive. Those targets within the EU, for example, are still being set and being discussed. The industry is offering its views on technology as our way and when it will be ready. And as Kent pointed out, we're doing some novel process development, linking it into how we might run our conversion plants or adapt those plants and those designs for that capability. So it is early days. But Albemarle is really well-positioned with its customer base, and it's spread across the various cathode technologies and with our global footprint to really take advantage of that trend as it develops in the next decade.

Thank you. And just on your Wave 3 projects you listed on slide eight. When should we see, expect a formal announcement, and which projects will be moving forward? And how do you rank order these projects right now in your mind as the likelihood of moving forward first?

Yes. I think the order that we listed them, that's kind of our order. So we expect to see a China facility would be the first thing that we would move on. We're working on that, investigating it, doing planning around it now. But it's still at a point where it could be an acquisition. And then, an acquisition use in has some element of work to it before it really becomes an Albemarle facility or a Greenfield plant. But we're working on that now. And we'd probably come to a FID on that late 2021, depending on whether it's an acquisition or a Greenfield.

Thank you very much.

Thank you. Our next question comes from Ben Kallo with Baird. Your line is now open.

Thanks for my question. Can you share your insights on the visibility of your lithium sales as we approach next year? We've noticed numerous announcements from major automakers as well as smaller startups. How do your sales teams engage with these companies, and what is the lead time for those interactions? Additionally, looking ahead to next year, I believe the estimates are around $850 million in EBITDA this year, increasing to over $1 billion next year. While I’m not asking for guidance for 2022, could you provide some factors affecting growth in 2022 regarding both volume and pricing? Thank you.

Good morning, Ben. This is Eric Norris. First in terms of the visibility we see near term, which I think was your first question. We have two approaches we take, right? One is exactly what Kent described in the call, which is a macro to micro approach of modeling demand. And that has led us with some of the announcements you've referenced to increase our demand outlook on a macro basis. A big part of that is what happens on the ground with our salespeople. Our strategy has been and will continue to be to use contracts to secure long-term volumes. That requires a discussion with a customer to commit anywhere from three to five years. And a discussion that follows that into the details of what they are looking at from a specific chemistry, location, and quantity point of view. So I'd characterize our visibility is quite reasonable and good in that regard, giving us the certainty we need to expand and positioning us well in the market to grow with the additional resources we have. Maybe you could repeat your second question.

My second question was about the Street's modeling of approximately 20% growth, primarily attributed to lithium from 2021 to 2022. Can you discuss the factors we should consider without providing guidance, including the volume you are bringing in and how we should assess that in relation to pricing that may improve as you enter into new contracts?

Yes. Ben, this is Scott. I'll take that question. So as you look into 2022, the volumetric growth coming from lithium with the startup of La Negra III and IV and Kemerton I and II is clearly the highlight for that year. However, we do see continued recovery in refining catalysts as transportation fuels and refinery utilization continue to improve, and potentially some additional growth in bromine as some of those early growth projects come to fruition and we're able to place that into the market. So, I think we're well-positioned going into 2022 to see very meaningful and high-return growth in that year.

Great. Thank you, guys.

Thank you. Our next question comes from Chris Kapsch with Loop Capital Markets. Your line is open.

Yes. Good morning. Thanks for taking my questions. So, on the upward revisions here, 2025 lithium demand forecast, you pointed to, obviously, the EV penetration and the mix of EVs larger batteries as the drivers. I'm just wondering if you could provide color on the outlook from a hydroxide versus carbonate standpoint. I'm just curious if the upward revision is tied mostly to higher energy density EVs, and therefore more skewed towards hydroxide?

Good morning, Chris. In regard to demand and the product mix, the current market shows a distribution of about 30% hydroxide and 70% other products. Looking ahead to 2025, we anticipate this will shift to approximately 60% hydroxide. The majority of growth is expected to occur in high nickel chemistries utilizing hydroxide. While there is still some growth projected for carbonate in traditional technologies like LSP, the growing energy density targets of Western OEMs will predominantly favor hydroxide. This trend was evident even in 2021, where demand growth was greater for hydroxide compared to carbonate. Albemarle is well-prepared for this shift, as we are increasing our production capacity in both hydroxide and carbonate. Moving forward with Wave 3, most of our resources will be directed towards hydroxide for the reasons mentioned.

Got it. That's helpful. And the follow-up is regarding your comments about your contracts, which sort of are seemingly kind of sort of a perpetual renegotiation right now. But you mentioned the ability to lift prices higher. I'm curious if there's also a floor in the renegotiated contracts and if it applies to both EV supply chain customers and industrial grade customers also. And then just any color on just as the tone of the conversations given that the world kind of has changed over the last three to six months. If they feels like the leverage has shifted back from them to the suppliers given maybe concerns about security of supply? Thanks.

I'll begin by addressing that point, and then Eric can add some insights. We're uncertain at this stage. For our industrial customers, the long-term contracts primarily involve the EV market. Therefore, when we refer to our long-term contracts, we are mostly referring to the EV sector rather than the industrial side. While the leverage has indeed shifted, it has altered the nature of our discussions. Our long-term prices still exceed the spot market prices despite recent changes, but there is reduced pressure on these contracts. This does not imply that there is no pressure at all, just that it is less than before. If this trend persists, we expect it to continue in that direction. Eric, would you like to add anything?

The only thing I would add Kent and Chris is that these contracts, you've characterized them, Kent, as if or Chris, as if they have been perpetually negotiated and that they may be one size fits all, that's the change. We did make an adjustment, a concession as the market pricing collapsed a year ago. And now, we're moving into restructuring these contracts based on customer needs. And there are going to be some that are going to look like spot. And that's going to be, as Kent pointed out, some of those contracts in the TG area and perhaps in the China market. There's others are going to be like the old variety, but the vast majority is going to be variable-based pricing that reflects some market index, global index, not necessarily just China. And that's positioning us well as we go into an improving market from a price standpoint to benefit from a growth standpoint.

Very helpful. Thanks.

Thank you. Our next question comes from Laurence Alexander with Jefferies. Your line is open.

Good morning. So, I guess two questions. First, on the recycling comments earlier, is the message that you'll engage in significant recycling, when the returns are double your whack? Or is it that you are engaging in a significant amount of R&D, to try and position yourself for when that market develops? I mean, are you subsidizing the market to some development to some extent? And secondly, can you speak to the trends in conversion costs, as specs change at the automotive OEMs? Are the costs rising or falling over the next few years?

Yes. We are currently investing in research and development for recycling and discussing potential business models with customers, but we are still in the early stages of this process. Our focus right now is on determining the business model and our role in it, while also advancing our R&D efforts. We are not just waiting for expected returns; we recognize that it will be several years before we see significant lithium available for recycling. What was your second question?

Just with respect, as auto OEM or as the battery specs are evolving, as the conversion costs rising or falling, is it becoming tougher to meet those specs?

Yes. So, I mean, the specs are evolving. And but I don't know the processing costs are really going up. So we're driving hard on productivity to try and drive those costs down. There are in some cases, some steps that we've modified in order to meet some of the specs around crystallization. I don't think it's driving the cost up at this point. But it's probably offsetting some of our productivity gains. But as it gets more sophisticated, but we get better at making it. A lot of that's about process control. We are looking at one step in the process that we have to add in, which would add a little bit of cost, but I think we would at a minimum we'd offset that with our productivity.

Thank you.

Thank you. Our next question comes from Mike Harrison with Seaport Global Securities. Your line is now open.

Hi, good morning. Wanted to ask about the lithium business; your pricing and mix you said was down 20%. Typically, I think about pricing flowing through pretty directly to the bottom line. And so that 20% decline would have been something like $80 million of an EBITDA headwind. Yet your EBITDA was only down $18 million. So how did you make up that fairly significant difference? It doesn't look like volume would have been big enough to make that up on its own.

Yes. This is Scott. I would point to. There is volume growth in the quarter on a year-over-year basis. But also we're seeing the results of our productivity actions from a cost perspective. And so, that's been a big focus that we started in 2019 as we're trying to maximize the productivity and not only have the world-class resources that give us low costs, but also have low-cost operations. And we're seeing the benefits of that very clearly in the fourth quarter. And we'll see the benefit of that in 2021 as well, both on the cost basis, but we're seeing some volumetric growth just from the yield enhancements and improvements that the engineers are able to get out of our plants. So all pointing in the right direction for us.

And I would add to that. That mean those productivity improvements, that mean they flow through, it's much more difficult to get them in flat volumes. As we get volume growth, those really start to show up. But there'll be new facilities, which will then kind of redo the playbook on productivity again. But I think as volume grows, those really show up more.

Understood. Okay. And then over on the catalysts side, you mentioned the changing customer order patterns affecting maybe the cadence of the year. But I wanted to dig in a little bit on this customer that de-selected you guys, because of your support for electric vehicles. Do you see that as kind of a one-off happening with a specific customer? Or are there other customers where you see this coming into play going forward?

Yes. So difficult to predict the future, but we kind of see it as kind of one customer took exception. And we're going to work pretty hard to gain their confidence and get that customer back. But they've kind of taken a different view at the moment.

Thank you. Our next question comes from Arun Viswanathan with RBC Capital Markets. Your line is open.

Great. Thanks for taking my question. Just curious on the pricing outlook; you commented that maybe, your overall pricing would be down a little bit year-on-year in 2021 versus 2020. And we have seen some initial improvement in pricing, I guess, in certain markets. So, maybe you can just give us your thoughts on how price and both carbon and hydroxide evolves through the year as you see it. And maybe if there's any regional differences between China and North America, that'd be helpful? Thanks.

So I'll make a comment and Eric can add some color. But I mean, I think we see the same numbers that you're seeing around spot prices. So they have moved China spot prices. So we sell little to no volume in China on a spot basis. So it's not directly applicable, but it is indicative of the market. But we've not really seen prices change outside of China for the contract prices we haven't really seen. But as I'd said earlier, it lessens the pressure on our discussions with customers. So it's not as much downward pressure as we had seen, say, second quarter, third quarter of last year, because of spot prices that have turned up. But we'll just have to see how it plays out during the year. At the moment, the spot prices are still below our contract prices. So it's not like a sea change. If it continues to move, that could give us some upside. But at the moment those prices are still below our contract prices.

And so I'd add to that. The prices in China that you're seeing are largely carbonate, and have largely inflected in the past two months. It's a bit early. It's an encouraging sign, but a bit early to extrapolate that to the world. And as Kent pointed out, our business is biased to more world, or ex-China prices and in China prices. And most of our outlook is around carbonate and TG products, not around necessarily battery-grade hydroxide, which is relatively flat in its outlook. So it's an encouraging sign. And the way we've got our contracts structured, should it continue to broaden and deepen over time that trend, then we're in an extremely good position to benefit from that going forward. And we'll just continue to watch it. I would say it's a matter of from where we are today. It's not a matter of if prices inflect upwards broadly, it's just a matter of when. And 2021 is a transition year. I think as we go forward in the future years is going to get pretty tight.

Great. Thanks for that detail. And maybe you could also offer your thoughts on a little bit longer term, you noted that it is going to get pretty tight. Would you expect pricing to kind of head back towards prior peaks that we saw in 2017 and 2018? And also maybe you can just comment on that as it relates to spodumene as well? Thanks.

Yes. So I would say, I mean, we're predicting the future, right? And this industry has really only been through one down cycle, so we're coming off that. We don't anticipate that prices move back to the peaks that they were before, but we don't know that. So I think I'll leave it at that.

Yes. Regarding spodumene, we believe that the price increases in China are primarily due to a fundamental shortage of available carbonate inventory and spodumene supply. This has led to an upward trend in prices for chemical grades of spodumene. If this trend continues, it should result in increased supply to meet market demand. However, as Kent mentioned, predicting the future is challenging given the maturity of this market, and we will keep monitoring the situation.

Thank you. Our next question comes from Vincent Andrews with Morgan Stanley. Your line is now open.

Thank you. Thank you for taking my question. I just wanted to bridge the Wave 3 on slide eight with sort of the plans from when you did the MARBL JV. And just looking back at that slide, you were going to build two stages of 50,000 tons of LCE at Wodgina, and it was going to be $1.6 billion split between the two parties. Doesn't seem like you're still planning to do that at Wodgina. So what's changed and why? And that $1.6 billion number as it relates to 250,000 ton plants? Is that still a good approximation of what it would cost in Australia? Presumably, it's less than China. Just if he could just help us bridge that, that'll be very helpful?

Yes, our plans for the MARBL joint venture have evolved. The initial conversion will be at Kemerton I/II, and we currently anticipate that the second conversion facility, which would also produce an additional 50,000 tons, will be located in China. This is likely to be the first project we mentioned in the Wave 3 projects.

Okay. But presumably, that's going to come in less than the Australian CapEx cost that you'd envisioned. Is that correct?

Yes. Absolutely. So it'll be quite a bit less than a Western Australia plan.

And if I can also ask, what is the plan in terms of the Wodgina facility I believe is in care and maintenance mode right now? Do you intend to leave it like that? Or do you anticipate bringing it back online at some point this year?

Well, I don't have clarity on this year yet. We need to see how the Kemerton project develops, and then we'll focus on accelerating growth. Wodgina is included in our plans as a resource, and it's a high-quality one. However, I can't specify when we will utilize that resource. It will be tied to the initiation of our phase 3 projects when we will require it.

Thank you. Our next question comes from Kevin McCarthy with Vertical Research Partners. Your line is now open.

Hi, good morning. This is Cory on for Kevin. As it relates to the bromine business, at your 2019 Investor Day, you talked about expecting to resource discovery and expansion of offshore drilling. Obviously, things have changed. So how would you view the market changed? And can you talk a little bit more about your U.S.-based bromine expansion?

Yes. I think in terms of our view of the offshore oil market, I think it's muted slightly, things have changed a little bit. But we do see oil prices recovering, which we know with the lag time of six to nine months is going to be good for our business going forward. In terms of the U.S. expansion, it fits right along to the corporate strategy of accelerating lower capital intensity, higher-return growth projects. Magnolia, for example, is a great jurisdiction for us. We've been there for decades. And we know those assets well. That really lends itself to investments that have a quicker return and a higher return. And those are the ones we'll leverage as we grow this business going forward.

Thank you. And if I may follow up, sort of pivoting here on divestitures. It sounds like you're close on performance catalysts. Do you have any expectations regarding aggregate proceeds and timing? And with lithium recovering and equity raises recently, would you consider separating the balance of your catalysts business at some point?

Yes, regarding FCS and PCS, we are progressing as planned, although the pace has been affected by COVID. I would say we are getting back on track, but we are not there yet. As mentioned earlier, we will inform you when we are closer to finalizing those deals. In terms of catalysts, we still believe we are the most suitable owners of that business given our extensive experience. Despite challenges posed by COVID-19, reduced miles driven, and lower refinery utilization, we maintain confidence in our strategy of shifting towards crude to chemicals in Asia. We appreciate the products and innovations we offer in that sector and believe we remain the best owners of this business. Therefore, we do not have any immediate plans to divest our catalysts, as they are essential to our operations. All three businesses in our portfolio are considered core.

Thank you. Our next question comes from Jeff Zekauskas with JP Morgan. Your line is now open.

Thanks very much. You're bringing on 50,000 tons in Kemerton, 30,000 of which is yours; you're bringing on 40,000 tons at La Negra. And you said that demand is going to be really strong for electric vehicles over a three-year period, much stronger than people thought before? So as the base case, how many tons do you expect to sell out of those two units in 2022? I know it takes time to ramp up. So of the 40,000 and the 30,000 that's yours, as a base case, how much will you sell in 2022?

So, Eric, if you want to look at the detail on that, I would think as we bring those plants on and ramp them up, we'd expect to be selling about half of each in the first year. We have an example, Jeff, we've done this once before as part of Wave 1, Wodgina II. That plant came up a little north of 50%, but it was a Brownfield facility with much of the existing infrastructure in place from the prior acquisition. Kemerton is Greenfield, and considering that, 50% feels reasonable. The same goes for La Negra as well for 2022.

For my follow-up, is there any volume or EBITDA benefit from either of these two projects in 2021? I assume the rock for Kemerton will come from Talison Greenbushes since the Wodgina mine is currently inactive. Is that correct? And what will the impact be on 2021?

I don't expect much to happen in 2021. We are facing increased costs due to commissioning new operations. Even if we manage to boost sales, those costs will likely offset any benefits. I wouldn't plan on any advantages in 2021. Initially, we will probably notice the impact from the Kemerton project, especially in the early phases with Talison's products.

Thank you. Our next question comes from PJ Juvekar with Citigroup. Your line is now open.

Yes. Hi, good morning. Currently in China, the carbonate prices are higher than hydroxide prices because of the comeback of the LSP batteries. Do you think that's a trend? Or is it an anomaly that may not last? And then secondly, just on pricing, you had given sort of 15% concessions on certain contracts in 2020. And the expectation that the time was in 2021, those contracts will go back to original pricing. Did that happen on those contracts?

So on the first question, good morning, it's Eric here. The carbon delta on carbonate and the inversion of carbonate being higher than in the past—historically, hydroxide is a dollar or two lower. We believe that's a result of a quickly changing market in China, which mostly relies on carbonate rather than a long-term trend. It's crucial to realize that much of the hydroxide market is supplied by low-cost brine producers, including Albemarle, which converts to hydroxide, as we do at Kings Mountain. Without that supply, there's insufficient volume for the marketplace. Therefore, the economics indicate that there needs to be an incentive for those producers to switch to hydroxide. We anticipate that this will revert, and we are well positioned in both product lines to take advantage of that. PJ, what was your second question again, please?

So you have contracts that were reset in 2020 lower, and they were expected to go back to the original price in 2021?

Our strategy has been to migrate these contracts to benefit from the recovering market price. We have converted several of them and struck new ones based on a market reference price, either in whole or in part, depending on the customer. We will continue with this approach for the remainder of the year and beyond. Our goal is to take advantage of price increases rather than reverting to fixed prices from the past, even though some customers are requesting that. The strategy is not a one-size-fits-all solution, but we aim to benefit from the improving market conditions in how we structure these contracts.

Great. Thank you for that.

Thank you. Our next question comes from Bob Koort with Goldman Sachs. Your line is now open.

Thank you very much. I wanted to explore more about the MARBL integration and its connection to your lithium expansion. I have a couple of questions regarding this. What will be the transfer price from Talison to the Kermerton MARBL joint ventures? Additionally, why pursue the Chinese expansion alongside MARBL if you could secure 100% ownership? Given that you have the financial capability to support that kind of expansion, why would you share the opportunity instead of keeping it all for your shareholders?

Yes. The short answer is that in our initial agreement, we aimed to complete two of the 50,000 tons, with the next project anticipated to be in China as part of the joint venture. The joint venture was established primarily to secure resources for the Wodgina mine, which we have, and to leverage their mining expertise, as we specialize in chemical processing. This collaboration is based on the original deal with them, and we are committed to undertaking another conversion project together.

Okay. And maybe if I could get an answer on the transfer price from Talison. And then also, your new La Negra project is going to use a thermal evaporator. Can you talk about what that does to the cost structure out of La Negra III and IV versus the capacity that's already there in I and II from a cost curve standpoint? Thanks.

On the transfer price, it's based on an established market price that we adhered to according to Australian tax regulations. It's a market price, representing an arm's length transaction. Regarding the thermal evaporator, it was a project focused on returns driven by financial factors and sustainability. This technology allows us to operate with significantly less water, which is crucial in regions with limited water resources. The returns from the project were good, though I can't recall the specific figures, and while they weren't extraordinary, there was a notable sustainability benefit as well.

Great. Thanks very much.

Thank you. Our next question comes from Mike Sison with Wells Fargo. Your line is open.

Hey, guys, good morning. Just one quick question on your 2025 forecast. Do you in the sort of pundits believe the industry can sort of support that by then? And then how much capacity do you hope to have online by 2025 to support that growth?

I can't speak for the industry, but as we observe the acceleration in electric vehicle adoption, it's influencing our current shift toward enhancing our growth plans. Our goal is to maintain our market share in this area. Eric, could you provide insights on the capacity expected in 2025? I don't have that figure readily available.

Well, I think a rule of thumb way to think about our capacity growth, and the plans that we put forth for Wave 3 and for Wave 4 to sustain our leadership and grow with the market, it's going to be hydroxide weighted the growth. We already comment on that earlier, in an earlier question. And it's going to require as you get on the middle part of the decade us to bring at least 50,000 tons to market a year of hydroxide. And that is what that plan, if you look at the details, would enable into the middle of a decade and beyond. So approximately speaking, you're talking about 150,000 tons of growth a year in the market price, or in that neighborhood, Mike and are bringing on 50,000. That's the kind of pace we're looking at.

Great. Thank you.

Thank you. This concludes our question and answer session. I would now like to turn the call back over to Kent Masters for closing remarks.

Okay. Thank you, Joelle. In closing, Albemarle is well-positioned to capitalize on long term growth trends for all three of our core businesses. We have built the capabilities to accelerate low-capital intensity, higher-return growth. At the same time, we will continue to control what we can control. That means, first and foremost, focusing on the health and well-being of our employees, customers, and communities. It also means building operational discipline and sustainability into all aspects of our business including manufacturing, supply chain, capital project execution, and customer experience. We remain confident in our strategy, and we will modify execution to position Albemarle for success. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.