Albemarle Corp (ALB) Q2 2026 Earnings Call Transcript

And welcome to Albemarle Corporation's Q2 2026 earnings call. I will now hand it over to Meredith Bandy, Vice President of Investor Relations and Sustainability.

Thank you and welcome everyone to Albemarle's second quarter 2026 earnings conference call. Our earnings were released after market closed yesterday.

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And welcome to Albemarle Corporation's Q2 2026 earnings call. I will now hand it over to Meredith Bandy, Vice President of Investor Relations and Sustainability.

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growth opportunities in energy transition and energy resilience including strong global grid storage demand. Finally, we remain focused on execution and disciplined capital allocation to enable us to grow rateably through the cycle. With that, I'll turn the call over to the operator for Q&A.

We will now move into our Q&A portion. If you'd like to ask a question, please press star 5 to raise your hand. As a reminder, that's star 5 to raise your hand. Also, please bear in mind this Q&A session is limited to one question along Can you re-read that, Sophie? Yeah, do you want me to just read it straight away, or are you going to go to the end?

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Hello, and welcome to Albemarle Corporation's Q2 2021. ...transition and energy resilience, including strong global grid storage demand. Finally, we remain focused on execution and disciplined capital allocation to enable us to grow rateably through the cycle. With that, I'll turn the call over to the operator for Q&A.

We will now move into our Q&A portion. If you would like to ask a question, please press star 5 to raise your hand. As a reminder, that is star 5 to raise your hand. Also, please bear in mind that this Q&A session is limited to one question and one follow-up per person. Our first question is from, let it prefer, your line is now open.

And welcome to Albemarle Corporation's Q2 2026 earnings call. I will now hand it over to Meredith Bandy, Vice President of Investor Relations and Sustainability.

Thank you and welcome everyone to Albemarle's second quarter 2026 earnings conference call. Our earnings were released after market closed yesterday and you'll find the press release and earnings presentation posted to our website under the Investors section at albumroll.com. Joining me on the call today are Kent Masters, Chief Executive Officer, and Neil Sherry, Chief Financial Officer, Mark Mummert, Chief Operations Officer, and Eric Norris, Chief Commercial Officer, are also available for Q&A. As a reminder, some of the statements made during this call, including outlook, guidance, expected company performance, and strategic initiatives, may constitute forward-looking statements. Please note the cautionary language about forward-looking statements contained in our press release and earnings presentation, that same language applies to this call. Please also note that some of our comments today may refer to non-GAAP financial measures. You can find reconciliations in our earnings materials. And now I'll turn the call over to Kent.

Thank you, Meredith. Our strong start to 2026 continued in the second quarter, supported by disciplined execution and improving conditions across our key markets. Second quarter net sales of 1.7 billion dollars increased 31 percent year over year driven by higher pricing and energy storage and both higher pricing and volumes and specialties. Adjusted EBITDA more than doubled to 858 million dollars with our enterprise EBITDA margin expanding to 49 percent. Importantly we converted that performance into cash we generated 710 million dollars of cash from operations representing a more than 80 percent operating cash conversion and 638 million dollars of free cash flow in the quarter we are also on track to reach the high end of our 100 to 150 million dollar full year target for cost and productivity improvements these results reflect a deliberate focus on operational excellence and cost discipline. We also benefit from globally diverse and resilient key end markets. Global lithium consumption was up 45 percent year-over-year through May, tracking above our forecasted range, driven by continued strength in stationary storage and improving growth in electric vehicles. Needed supply increases are coming to market slower than demand growth, due to limited spodumene availability, temporary disruptions in shipments from Africa, and slower-than-expected ramp-up of Chinese lipidolite mines. And as a result, inventories are low and the physical lithium market remains tight. We are improving our 2026 outlook considerations, including raising our specialty sales and EBITDA outlooks due to a strong year-to-date performance and reducing expected capital spending thanks to ongoing capital efficiency efforts. Beyond our 2026 outlook, we are also advancing resource options that can support sustainable growth through the cycle. On today's call, I'll focus on our efforts at the Salarda Atacama, where we're leveraging decades of brine processing expertise to advance direct lithium extraction. We also have opportunities at our Australian Hard Rock Joint Ventures. Wajina is outperforming on better-than-planned ore availability and recoveries. This is helping offset the impact of a fire at Greenbush's CGP3 plant, which occurred on June 9th. CGP3 restarted on August 1st. Now, I'll turn it over to Neil to discuss recent results and outlook. I will then cover recent market trends and give more detail on our resources before we open the call for Q&A.

Thank you, Kent, and good morning, everyone. I'll begin with our second quarter results on slide five. Second quarter net sales were $1.7 billion, driven by energy storage pricing up 73%, while specialties pricing and volumes were up 11% and 8%, respectively. Adjusted EBITDA for the quarter was $858 million, up 155% year-over-year, reflecting higher net sales and our ongoing cost and productivity improvements. Both segments contributed to this strong growth, with energy storage adjusted EBITDA up 229% and specialties up 61%. Net income attributable to Albemarle was $480 million, and we reported diluted earnings per share of $3.52. Turning to slide 6, I'll walk through the key drivers of our year-over-year EBITDA performance. As I mentioned, second quarter adjusted EBITDA increased primarily due to higher pricing in both segments. Due to higher lithium pricing, our cost of goods sold reflects increased Chilean commission payments and higher price spodumene inventory. The impact of higher spodumene pricing is offset by increased equity income from our Taliesin joint venture versus the prior year. Across both segments, cost and productivity improvements help offset raw material and supply chain cost increases related to the situation in the Middle East. Corporate and all other reflects a reduction in adjusted EBITDA due to the Ketchin Refining Solutions divestiture, partially offset by favorable foreign exchange impacts. Turning to slide 7, we are maintaining our total company outlook ranges and expect to come in at the high end of the scenario ranges due to strong year-to-date performance and an increased specialties outlook. These factors offset modestly lower expected energy storage sales volume due to the fire at the CGP3 plant at the Taliesin Joint Venture. Our outlook ranges continue to reflect the expected impact of supply chain disruptions related to the situation in the Middle East, which we still estimate at approximately $70 to $90 million on an unmitigated basis for the full year. In specialties, we are increasing our outlook due to higher pricing and volumes, which I will cover in more detail on the next slide. The specialty segment delivered another strong quarter. Net sales were $424 million, up 20% year-over-year, and adjusted EBITDA was $118 million, up 61% year-over-year. Adjusted EBITDA margin was 28%, up 700 basis points from the prior year period. The solid performance in the second quarter was primarily due to higher pricing and volume and favorable product mix as a result of bromine market disruptions related to the situation in the Middle East. As a result, we are increasing our full-year outlook ranges, raising net sales to $1.4 to $1.6 billion and adjusted EBITDA to $275 to $325 million. This increase reflects strong year-to-date performance as our teams have worked to capture the upside of increased bromine pricing while mitigating Middle East-related supply chain disruptions through proactive cost management. Our second half outlook assumes stabilization of the bromine market as we've seen pricing normalize since reaching a peak in April, and it reflects continued uncertainty in the Middle East. As such, we expect third-quarter net sales and EBITDA to be lower sequentially. Long-term, we continue to see margin upside for the specialty segment as our business and asset diversity continues to deliver positives. Specialties benefits from diverse end markets, including electronics and semiconductors, building and construction, oil and gas, and pharmaceuticals. Geographic diversity also complements the platform's end-market diversity and adds resilience against regional volatility. Turning to energy storage on slide 9, net sales increased 78% year-over-year and adjusted EBITDA increased 229%, both driven by higher pricing. Second quarter sales volumes were 65,000 tons lithium carbonate equivalent, or LCE, with an average realized price of approximately $20 per kilogram LCE. Realized price was approximately 15% below market pricing due to the dilutive impact of spodumene sales on an LCE basis and the three-month pricing lag for our long-term agreements. See slide 24 in the appendix for additional information. For the third quarter, net sales and adjusted EBITDA are expected to decrease sequentially due to lower sales volumes and assuming that pricing is lower sequentially for the quarter as it stands today. Additionally, energy storage margins are expected to decrease sequentially due to the timing of spodumene inventories and also assuming that today's pricing continues for the quarter. As a reminder, it takes approximately four months to ship and process spodumene purchased from the Taliesin Joint Venture. In a rising price environment, this creates a margin tailwind as we process lower-cost inventory while benefiting from higher selling prices. In a declining price environment, that timing effect reverses and is dilutive to margins. For the full year, energy storage sales volumes are now expected to be in the range of 225 to 235,000 tons LCE, or flat to down 4% year over year. This reflects the delay in the CGP3 ramp following the June 9 fire, partially offset by better-than-planned production at Wajina. As Kent mentioned, CGP3 restarted last weekend and is now ramping back up. Turning to slide 10, we continue to focus on converting earnings into cash, as evidenced by our performance over the last three years. First half operating cash flow conversion is at the high end of our long-term target range of 60 to 70 percent. In the second quarter, we benefited from increased Taliesin dividends and non-recurring working capital reductions driven by favorable inventory and accounts receivable. On a full-year basis, we still expect cash flow to be impacted by $87.5 million of deferred revenue related to our 2025 customer prepayment, which benefits EBITDA but does not contribute cash, and approximately $100 million of spend related to idling Kemerton Train 1. Slide 11 highlights our continued focus on cost and productivity. Thus far, we have achieved approximately $100 million of run rate savings year-to-date. This performance puts us on track to reach the high end of our $100 to $150 million full-year target. Across these gross improvements, roughly 40% has been driven by supply chain and back-office initiatives. The remaining 60% includes manufacturing cost-out and incremental volumes and yield. Examples of these productivity improvements include de-bottlenecking projects at La Negra, JBC, and our lithium conversion sites in China. Importantly, these improvements continue to help us offset the supply chain disruptions and cost inflation related to the situation in the Middle East. With that, I'll turn it back over to Kent to discuss the market outlook.

First, let me highlight the breadth of Albemarle's in-markets and why we are generally seeing resilient demand trends. Our portfolio serves key markets across mobility, energy, connectivity, and health, and that diversity strengthens our resilience through the cycle. Electric vehicles and stationary storage remain significant long-term growth drivers. Together, these two in-markets make up about 50 to 60 percent of Albemarle's total net sales last year. We'll talk in more detail on both these markets in a moment. In specialties, electronics and semiconductors, building and construction, and oil and gas remain key market segments. AI-related demand continues to support electronics and semiconductor applications. In oil and gas, clear brine fluid demand has remained stable in the Middle East, while geopolitical uncertainty has incentivized demand in other regions, such as the Americas and Europe. We conserve all these geographies from our global asset network, creating resilience in volatile environments like we face today. Let's now turn to a deeper dive into EV and stationary storage markets. Turning to slide 13, lithium demand is up 45% through May, primarily driven by continued strength in stationary storage. We are increasing our 2026 and 2030 stationary storage forecast ranges due to that strong demand. We now expect stationary storage battery production of 900 to 1,100 gigawatt hours in 2026, up 11 percent or 100 gigawatt hours from our prior forecast. We are also raising the low end of our 2030 stationary storage range to between 1,500 and 2,000 gigawatt hours, up approximately 9 percent from our prior forecast. As a result of this change, we are also raising the low end of our 2030 forecast for total lithium demand by 100,000 tons. Lithium demand growth continues to outstrip supply growth. As a result, we exited the second quarter near record lows in terms of days of lithium salts inventory. Based on mass balance calculations, we also estimate spodumene inventories are at near historic lows. And some conversion sites in China have reportedly shut down or reduced production due to the lack of spodumene availability. Lithium demand continues to diversify by application and geography as stationary storage gains share. Slide 14 highlights the strength of stationary storage demand. Global stationary storage production has nearly doubled year-over-year with broad support across most geographic regions. Long-term demand remains supported by multiple secular trends. First, global electricity demand growth is accelerating, led by urbanization, AI and data centers, and EVs. With grid upgrades taking multiple years, stationary storage is the fastest and most cost-effective way to support grid reliability. Also, policy support in regions like China, Europe, and Australia improves project economics for stationary storage and renewables. We now expect stationary storage to make up about 30 percent of 2026 global lithium market demand, nearing parity with light-duty EVs. Turning to slide 15, year-to-date global EV sales are up 10 percent year-over-year. EV sales growth inflected in the second quarter, up 16 percent versus prior year. European EV demand remains strong, up 31% year-to-date, driven by policy support in key markets like the UK, Germany, France, and others. Europe also benefits from increased model availability and affordability as Chinese OEMs have increased exports and domestic production for the region. In China, growing EV exports and larger battery sizes have helped offset weaker domestic EV unit sales. The rest of the world was the fastest growing region in the first half, up 90 percent year over year, and has overtaken North America as the third largest market, led by growth in Brazil, Australia, India, and South Korea. Turning to slide 16 for an update on our Australian joint ventures. As previously mentioned, Greenbush's CGP3 plant restarted on august 1st we had previously expected the plant to reach full run rate by year end prior to this incident the plant was ramping ahead of schedule however to ensure adequate contingency for our downstream operations we've assumed cgp3 reaches full run rate in the first quarter of 2027. green bushes is in the middle of a multi-year transformation mine optimization studies are progressing well and we anticipate operational improvements and further brownfield expansion projects. Our primary focus remains on operating the mine safely and we have good alignment with all partners towards that goal. At Wajina, operations are performing well, supported by better than planned ore availability and recoveries. All three processing trains are now operating ore quality is expected to remain consistent next quarter before improving later this year as the availability of clean ore increases as we have highlighted before these hard rock assets are important part of our long-term resource position and provide near-term brownfield growth opportunities moving to slide 17 albemoral has decades of brine processing expertise at Magnolia and Silver Peak in the United States, the Solarda-Atacama and La Negra in Chile, and JBC in Jordan. That foundational experience informs how we are advancing DLE technology at the Solarda-Atacama. Our dedicated team of scientists, engineers, and operators have a deep understanding of DLE fundamentals based on more than 10 years of research and innovation. Over that time, we've evaluated dozens of DLE technologies, including both proprietary and third-party solutions. Our highest and best opportunity to leverage DLE is in the Salar to Atacama, based on the large-scale and high-grade of that world-class asset. At the Salar, we have progressed from scientific research and lab-scale work to pilot validation and integrated pilot testing. In March of 2026, we submitted an environmental assessment permit for a DLE project at the Salar to Atacama. Our phased approach to DLE is intended to support future growth and sustainability while leveraging Albemarle's existing infrastructure and process chemistry expertise. We intend to advance this project prudently, subject to regulatory approvals, community consultation, and technology validation. On slide 18, we show our phased DLE concept at the Salar to Atacama. Our current environmental permit submission seeks authorization for up to six trains. The planned investment will start with one train as we prove the technology at a commercial scale. Under this scenario, lithium-rich brine would be extracted from the Salar through pumping wells and sent in parallel to the existing evaporation ponds and the proposed DLE plant. The concentrated lithium solution from the DLE plant would be combined in the final solar evaporation ponds and further concentrated before being converted at Lanagra into battery-grade lithium carbonate. Our proposed DLE plant does not use solvent extraction, meaning that we retain the option to reincorporate the lithium-depleted brine back into the solar through dedicated wells. The Atacama Integrated Pilot Plant has operated for more than a year, our over 3,000 operating hours, giving us valuable data and confidence in our process design and scale-up capability. Recoveries are critical to efficiency and sustainability, particularly in brine deposits. This is something we've worked on for years. A conventional pond system recovers about 30 to 40% of the lithium in extracted brine. With Albemarle's solar yield improvement technology, we've been able to increase recoveries to 50 to 60%. Our DLE pilot plant has demonstrated recoveries of over 90%, allowing us to extract more lithium with a smaller footprint and more fully utilize this world-class resource. Our team is also focused on minimizing water footprint in Chile. Approximately 85% of processed water is recycled at the current DLE pilot plant. Our DLE project is consistent with our broader strategy, leverage our world-class resources, technical expertise, and existing infrastructure to create durable long-term value while improving sustainability outcomes. In summary, Albemarle delivered another strong quarter, including net sales of $1.7 billion and cash from operations of $710 million. We are improving our 2026 outlook considerations by increasing specialties outlook, optimizing capital expenditure spend, and tracking toward the high end of our cost and productivity target. We are also capitalizing on long-term secular growth opportunities in energy transition and energy resilience, including strong global grid storage demand. Finally, we remain focused on execution and disciplined capital allocation to enable us to grow rateably through the cycle. With that, I'll turn the call over to the operator for Q&A.

We will now move into our Q&A portion. If you would like to ask a question, please press star 5 to raise your hand. As a reminder, that is star 5 to raise your hand. Also, please bear in mind this Q&A session is limited to one question and one follow-up per person. Our first question comes from David Greiser with Deutsche Bank Security. Your line is now open.

Good morning. Kent and Neil, can you just clarify your comments on guidance coming at the top end of the scenario ranges? Which one are you referring to? Total company or energy storage? Just some clarification. That would be great.

Good morning, David. This is Neil. It's really both, and maybe I can clarify that a little bit. So we were referring to the $20 per kg LCE scenario. And actually, there's a couple of reasons why we say that we're towards the top end. First of all, if you look at market pricing so far this year in the first half of the year, it has trended actually on average a little bit higher than $20. So naturally, that pushes us towards the higher end of the $20 range. Then in addition to that, obviously, we've had a little bit better volume performance in the first half of the year. We've been working on our cost and productivity improvement. And at least at an enterprise level, you had the very strong performance from specialties, particularly in the second quarter. So for all of those reasons, at an enterprise level, if pricing had been at that $20, we would be towards the upper end of that range in the first half of the year. And then the same would be true for the energy storage segment as well.

Very helpful. And, Kent, just on a potential government funding for lithium, there's been increasing talk about the government focused on critical mineral supply chain and shoring that up in the U.S. Can you talk about where you stand on those discussions? Thank you.

Okay. So, look, there has been a lot of talk about it and discussions, and we've talked to the government quite a bit. So we've been involved in that process for quite some time. I don't have anything to tell you about today that involves that, but it continues around critical minerals. Lithium is probably not the highest priority across all those critical minerals, and you probably see that from the projects that they've announced. But we have conversations. We're talking to them, but we have nothing to tell you about today.

Thank you.

Our next question comes from Patrick Cunningham with Citi.

Your line is now open.

Hi. Good morning. This is Rachel for Patrick. So you've noted lithium demand is accelerating higher than expectations and growing faster than supply. So I'm curious to hear kind of your latest thoughts on the supply side of the equation and if the market requires higher pricing levels to support new investments.

Okay.

So you kind of said it. So demand is a little stronger than we were anticipating. It is strong. There's a bit, it was, EVs were weak in the first quarter, but they kind of trended back in the second quarter. And then energy storage demand is kind of off the charts. And that, and so with EVs coming back, there is strong demand. Supply is a little behind that. So when we look out, say for the year, there is supply coming on and you always need that supply to come on because this market is growing. It's a little, it's behind demand. So that's probably why you see inventories getting down to levels which we haven't seen for a while. So the inventory, so the physical market is very tight. And then you'll see, you know, there are projects on the board. We expect investments to come. You need that to keep up with supply. And then your question about is pricing driving that? I don't mean we're in a range where good projects, people will invest in good projects and more speculative projects, probably not. So it's not a bad place from a pricing perspective. I don't think it's driving projects that weren't planned and it's not taking projects that were planned off the books. So it's not a bad place to be.

Got it. Thank you so much for that. And you've raised both the 2026 and 2030 stationary storage demand forecast. So, here's to hear if anything changed specifically in your customer discussions or project pipeline visibility to give you the confidence to increase the longer-term outlook. Thank you.

Yeah, look, I think it's just the confidence that we see in the projects that are happening, the supply chain that's getting built out and all the activity. Eric, maybe you want to talk about any specific customer discussions that give us more confidence?

Well, most of the chemistry in question that we're talking about that's driving this, that's driving our demand is iron phosphate chemistry that comes out of China. So our customer discussions there indicate a market that is tight and struggling to keep up with installation demand. Installations are exceeding actual battery production. We can track sort of about a one-year lag between when lithium is sold and when it goes into an installation. And the latter, the insulation number that's been announced, is larger than what's being produced today. And that drives a healthy market.

We're seeing that in our customer base in China right now.

Our next question comes from John Roberts with Mazuho.

Your line is now open.

Thank you. Could you talk a little bit about the constrained supply out of both Africa and China, the paleolite? How long would you expect that to last?

Yeah, so that's been a story over the last year, I would say, and it's starting to move. So you see that starting to move, and that'll go into the back half of the year of a bit of additional supply. I think it's a little different. Africa's moving a little faster. Lapidolite, I think we've seen one mine come back on and start to ramp up. So that will add capacity. But as we said, the market's pretty tight. Inventories are low. We kind of need that. that capacity.

And then what's the sequential price assumed for bromine in the specialties guidance? Hi there, John.

This is Neil. So look, it's hard to give you a specific price on bromine for the third quarter, mainly because as we've shown you before, there is a bromine index in China, but only about a third of our volume tracks that bromine index. One thing I will say about the Chinese bromine index, which you can observe, is that index hit a peak back in the second quarter and has come back down to levels today that are probably closer to where we started the year. So that's one data point. The other data point is that, look, I think supply demand fundamentals were quite a bit tighter in the first half of the year due to the situation in the Middle East and as some supply chains were reorienting. So right now, what we're assuming is that there's a little bit more normalized kind of supply demand fundamental in the back half of the year. But I will admit we're watching this closely because obviously the situation in the Middle East hasn't gone away. So generally speaking, we're assuming that pricing kind of holds where it is today, but it is a live situation.

Our next question comes from Aaron is Nathan with RBC. Your line is now, Nathan.

Great. Thanks for taking my question. Hope you guys are well. I guess first off, just wanted to ask about the volume picture. So maybe we should get some initial expectations for volume for next year. I guess you will be facing maybe some limitations this year, just given the fire, but then that could be offset by watching extra production so do you expect to grow volumes next year um and maybe kind of in the low single digit range or how should we think about how volumes evolve from here for for energy storage yeah so i'll start with that but i i would say i mean this year is uh i think you know we'll get close to offsetting the uh fire at uh callison with uh extra performance at wajina so that's uh we were kind of tight there.

We kind of pulled back on our volume estimates a little bit, but we think we can cover that for the most part. And that'll make us kind of flat year over year just because of our capacity. We will have growth into next year as CTP3 ramps. We won't get a full year of it probably next year. I mean, close. And we're saying we'd get close to full production in the first quarter. Then you'd see that annualizing as we go forward. So we'll have room for growth next year, it will be, I mean, you can do the map on what that looks like. So it's high single digits, I would say.

Yeah, Arun, and maybe I can point you back to, this is a slide that we put out, gosh, I think it might have been two quarters ago. So I don't expect you to remember this, but if you follow our 15% CAGR volume growth that we've said we're doing from 22 to 27, That would put 2027 in the range of 240 to 260,000 tons LCE. And I would say now that CGP3 is back and ramping back up, we're back on that trajectory. So that's maybe a way to think about 2027.

Okay, great. Thanks for that. Appreciate it. And then just as a follow-up, just on the pricing outlook, you guys had mentioned that the market is relatively tight. Energy storage demand is very, very robust. But we have seen, you know, anticipatory – would you agree that we've seen anticipatory price declines ahead of new supply coming back online, specifically the leptolite as well as the Zimbabwe tons? Do you expect that decline, the recent price declines to kind of plateau and moderate as you go into the second half, or do you see, you know, continued, you know, price declines possible, you know, especially given the low inventory levels that you mentioned? So why have prices, I guess, been going down, and do you expect that to stop?

Yeah, so we're not going to tell you what we think the price is in the quarter. So we've not been very good at predicting that. But it's a very speculative market driven by traders in China for the most part. With the inventories tight, the demand that we've seen, you do have forecasting volumes coming back on. But, again, the growth rates we see, we need that. Otherwise, you're going to get into a more difficult problem. But price, it was up. It has come back. But it's kind of, I'd say, consolidating, right, around the price where it is right now, which is around $20 or so, which is not a bad price, as we've talked about. So you can't speculate as to what it's going to do. It's very heavily driven by trading and someone's view of volumes coming on. We do see those volumes coming on, but we need that with the growth rate, with a 45% growth. You're going to have to have supply coming on or it's going to get very, very tight.

Our next question comes from Lawrence Alexander with Jeffries.

Your line is now open.

So, given your progress with the DLE at the Atacama, can you give your perspective on the attractiveness or not of projects elsewhere in Chile? What would you need to see for those to move up your priority list?

Well, DLE, we've done a lot of work over time, and we've kind of prioritized the Salar and the Atacama for that. So, that's our focus. We've still got technology development work to do, but we feel pretty good about it, enough that we've submitted the permit and we've kind of built a plan around that. So, I think I want to execute on that project first and then see where that goes against other resources in Chile or in other places in South America or wherever. I think we're getting more confidence in DLE and brine resources, but we want to execute against the project in the Florida Atacama and then we'll be able to talk about that.

Thank you.

Our next question comes from Joel Jackson with BMO.

Your line is now open.

Hi, good morning. Thanks for getting the question. It's Evan on for Joel. Your cash buildup has been quite large recently and some of your peers have announced restarts and project go-aheads. When would we expect you to go ahead with some of your brownfield projects or shorter of that, how does the company want to use your extra cash?

Okay, so let me start with projects. So, I mean, we are kind of, we're executing against that now. So, you see CGP3, we would consider that one of those. It's online now and ramping up after we had some issues there. And then the other projects, we have not gone through an FID. We've not agreed those projects with our partners either, but there's potential for doing projects both in Wajna and at Taliesin additional, but we need to ramp CGP3 before we take that on. Again, we'll have to agree with our partners and get to FID, so that's going to take us a little bit of time, but that would be our next phase of growth. And then further out, the Salarda-Atacama project that we're talking about is another, and then we have Kings Mountain, and then further, further out, we have Antifaya. Those are all resources we own. So there's, you know, potential there could be other resources that become available. So we expect your cash question. So we want to have a strong balance sheet. So we've been doing that. We've used it for that. These growth projects are a big opportunity for us to invest. And we think, given brownfield nature in jurisdictions that we know, with partners that we know, with technology that we know, we feel that those are low-risk, good-return projects. But that said, we're always evaluating projects against all alternatives for the use of capital, and we do that every time we look at a big investment.

Great. Thanks. And would you mind providing an update on the ramp of CGP3? Just any color you could give on the re-ramp. Thank you.

Well, it's been up back on about five days now, and it's operating at reduced rates, but it's operating, I think, reasonably well as what we would have expected to be five days in from a restart.

Our next question comes from Vincent Andrews with Morgan Stanley.

Your line is now open.

Thank you, and good morning, everyone. Excuse me. Neil, can I ask you on specialties just to give us a little bit of help bridging things into 27, sort of all else equal? So, you know, how do we think about the normalization of the bromine price versus the incremental cost, the 70 to 90 million, which I assume is largely in specialties? It would seem like for the year that the higher price has offset the 70 to 90, but will that 70 to 90 go away in 2027, assuming, you know, there's resolution of the conflict by then? and then within the non-Chinese index business, has there been any benefit to you from the disruption caused by Iran in terms of have you gained any market share? Have your prices gone up in that part of the business, or is that we're really just talking about the Chinese index volume that we need to think about?

Okay. A lot in there, Vincent. Let me answer maybe the first half starting there, and then I'll pass it over to Eric to talk about the market piece of things in the back half of your question. Look, with regards to specialties and probably too early for me to say what's going to happen to that $70 to $90 million impact, I would just be guessing at the situation in the Middle East. Obviously, if things resolve there, certainly we would hope that some of that cost escalation would go away or some of those supply chains will get back to kind of a normal position. So that would be helpful to us. But, you know, I would say the team has done a really, really great job of managing through the situation in the Middle East so far in the front end of this year. And so that 70 to 90, we didn't really see a lot of that impact yet in the first half of the year. But again, the situation is still a live dynamic. And so that's why we continue to say we still think that there's this potential through the year. You know, with regards to margins in 2027, you're right that, you know, the bromine pricing has really increased here in the first half of the year due to some exogenous factors that has pushed our margin up pretty considerably. You know, we're using this moment right now to continue to focus on cost and productivity specifically in the in the specialties business to get the profitability of that business back into a better place than where it has been in the last year or two so i think even though you know you might have pricing kind of coming off maybe potentially as we go through 2027 certainly not as strong as we've seen in 2026. I do expect that some of the cost and productivity that we're working on is going to shine through. And so net-net, I think that's why we continue to say we're on this multi-year journey of improving margins in specialties. And we'll have more to say, I think, as we go through this year and start preparing for 2027. Maybe with that, I'll pass it over to Eric to talk about the market.

Vincent, you may or may not know this. It's a fairly diverse business. The upstream part of the business, which is elemental bromine and HBR, that's the part that is traded in the China market, or you see a price index, rather, I should say, in the China market, the Sun Sears Index. That's well less than a third of our business. And certainly that skyrocketed up. That provided some opportunities, and there was a benefit to that. but the vast majority of our business is downstream. It's the derivatives we sell downstream, and those have localized to their markets pricing dynamics, in some cases, limited competition where we have a differentiation play, and in other cases, a regional play where we have a regional ability to supply that others can't, particularly in a volatile market. We're able to take advantage of that, both from a volumetric basis and in a few cases, price-based, but the balloon, if you will, of pricing you're referring to is a pretty isolated part of our cost structure. The other thing we do across this business goes to the 70 to 90. It's a second pricing mechanism. It's the pass-through of higher raw material costs. That obviously ebbs and flows with what those raw material costs will do over a period of time. That's separate and apart from what you saw in the upstream part of the business in China. I don't know if that helps, but I think it's a more diverse business. And as we go forward, I just want to emphasize, we are looking at how we significantly improve the productivity and costs in this business and optimize some of those profitabilities in what is a pretty complex downstream set of derivatives. There's some good opportunities to do that that we expect to frame a more improved profitability going forward. Thank you for all the detail.

Very helpful. Very helpful. I'll pass it along.

Thank you.

Our next question comes from Joshua D. Spector with UBS. Your line is now open.

Yeah, hi. Good morning. I was wondering if you could share some of your thoughts around some of the China battery tax breaks and how that might impact lithium demand, if at all, and if that has any ability on an ability to pay for lithium into that market. Just curious how you'd see that play out.

I'm sorry. Could you repeat the question again? I'm sorry. With regard to China, could you repeat it?

China tax breaks specifically on batteries, how you see that impacting China demand, if at all, and how that potentially impacts the ability to pay for lithium.

Yeah, I would say what we are seeing in the market, particularly on the grid storage side is that any changes in tax, there's been a consumption tax change, there's been a rollback of VAT on exported batteries that's phased in, has been overwhelmed by demand. Yes, there have been moments of time where I think people are trying to get orders in before certain things expire, but the demand has been so strong that it has offset really any impacts we're seeing there that are of significance. And that's on the stationary storage side. There have been changes on the EV side as well, and that has led to a change in incentive regime. That has pushed actually towards higher energy density batteries, which has helped increase the gigawatt hours even as unit sales have been lower this year, although now recovering after a pull forward of demand into last year in that incentive regime.

Thanks. That's helpful. And if I could just ask on volume growth into next year, I mean, given that's out of Australia, should we assume that that's primarily spot volumes so your mix will shift that way? Or are there any other conversations happening on the rest of your volumes to perhaps get more of that back into a contract-type structure?

It's probably – well, it's kind of hard to say, but it's probably a mix across the portfolio, right? So there will be probably more spot, but some of our contract volume. So I wouldn't assume it all goes spot, but it's probably the same mix of our normal portfolio.

Well, I would say there are two things. I think that might be the answer to your immediate question. Maybe it gives an opportunity to make a broader point, which is there are two things that are driving our mix that are going to result in a higher proportion of volume. It's either spot or sold under shorter duration contracts. One is China's growing faster than the rest of the world, and the other is that generally Spodumene is done not on long-term contracts. It's done on a market base or a shorter term. We do have some longer term, but they are not done under this sort of floor-ceiling basis. They're done on a market basis. So as a result, that percentage of contracts that we have that are under – that we refer to as long-term agreements with floors and ceilings has become slightly smaller because of those two mixed phenomenon that's going on in the market.

Thank you very much. Thank you. Our next question comes from Matthew Day with Bank of America.

Your line is now working.

Morning. I have two. So first, Eric, you know, global with the on-demand tracking 45%, clearly very strong. And I know this is no easy task, but when you look at the initial range given on the year, particularly like the plus 15, I mean, where do you think you were most wrong or overly cautious and is that still like a looming threat as it relates to potential decelerations or do you think that has been debunked and then on the DLE plant just conceptually is the goal to increase concentrations of lithium before it hits the brine ponds or are you removing magnesium like can the DLE plants operate independent of the brine ponds or is it just an added part of the loop? And if it's the latter, what's the net economic benefit between added OPEX and added recovery?

I can answer the first question and I'll let Tanner answer the second one. So with regard to where we were most wrong, look, I think we're honest when we gave guides beginning year and told you where we think we could be wrong, which was the growth in grid storage. We'd come off a year that, frankly, surprised us in the prior year, 2025. We didn't, you know, the rate of growth, somewhat driven by AI, also driven by grid reliability, and finally driven by renewables growth, was incredibly strong last year. And we were redoubling our efforts to better get underneath the hood of that. This is a market that's new. It's supplied largely, as you know, LFP out of China. So there was some effort on our part to get our hands around that. And that put that range on that. The upper end of that range was, if you will, sort of a sustained momentum coming out of 25. And the lower end of the range was a pullback. The pullback didn't happen. And I think what another fact you have to remember is that policy plays a role here. Incentives, tariffs, geopolitical aspects, those were unknowns to us as well. And per the prior question about did any tax headwinds slow down demand, they did not. Those were things we needed to see in the market before we could get comfortable with the higher end of the range. You know, grid storage or stationary storage in general is at a point where it's going to start to become as big a part of this market potentially as light-duty vehicles, EVs. So we have a higher degree of confidence around that now, I would say. You want to answer the DLE question, Ken?

Yeah. So, I mean, you see from the chart we put out. So, it's a hybrid approach that we're taking. So, we're still trying to leverage the solar evaporation in the pond system and the assets that we have. But we'll take a sidestream. We'll take a sidestream from the normal pond system, run that through DLE, concentrate it, and then put it back into the pond system to kind of finish it. So, it's a hybrid system. It's a new approach. It's not full DLE. You could run full DLE technically, but we have those assets. And for the efficiency, I mean, the solar evaporation is a very efficient way of doing this. And we're kind of kicking that. We're trying to leverage both the solar evaporation and the technology to get us more volumes and lower pumping rates, which allows us to get those more volumes.

Our next question comes from Kevin McCarthy with Vertical Research Partners.

Your line is now open.

Yes, good morning. Thank you very much. My first question is on inventories. Can you provide an update on where your own inventories are on a unit basis relative to what you would consider to be optimal? And then externally, would welcome any thoughts that you have on inventory levels throughout the supply chain?

Yeah, good morning, Kevin. This is Neil. I'll start on the first part, and then I'll pass it over to Eric to talk about what he's seeing in the overall supply chain. Look, our inventories, we certainly ended the quarter lower than normal. You probably have done the calculation around our working capital. We tend to think about our working capital running at about 25% of sales. But we ended the second quarter more like 19% of sales. And a good bit of that is because we ran into our inventory or we consumed some of our inventory in the quarter. Part of that being because of the strong demand that we saw. Part of that being because of the CGP3 fire that happened at the beginning of June. And so we were able to pivot into our inventories to be able to supply the market. So where I would put our current inventories are probably historically on the low side, and we'll need to build that back up, obviously, to be able to navigate the back half of the year, but then also be prepared for 2027 as well. Maybe I'll pass it over to Eric then to talk about the market inventories.

This follows the, on the market side, follows the narrative that Kent said earlier in what is physically a very tight market. On the carbonate side in particular, it's under three weeks of inventory in the upstream sort of converter cathode arena. And in hydroxide, it's under a month. Those are levels that at a month we would, for both, either of those, we would have declared it a tight market. Now we're under that. So it's an illustration of a market that is quite tight at the moment. As you move downstream, we have indication. This is a little more opaque, but our take would be that battery inventories are also not that high either. That would make sense if you take that with the comments I made on stationary storage earlier where installations are exceeding battery production. Basically, the material, as soon as it's made, is going out into an installation. And similarly, while EVs has been weak, I mean, the main part of this market now, particularly out of China, has become the LFP market, and that's being driven very much by the stationary storage dynamic. So net-net at a very tight market.

That's very helpful, and maybe a good segue to my second question, Eric, on energy storage. I appreciate the detail you set forth on slides 13 and 14. You know, if I did my math correctly, the new 2030 range after the doubling, you know, let's say this year implies, I don't know, a mid-teens sort of a CAGR, which, you know, strikes me as relatively conservative. Just curious as to, you know, what kind of visibility or how conservative, you know, you think that medium to long-term glide path is on the energy storage side.

Look, I mean, I'll pair your question with an earlier question, Kevin, that focused on how we were cautious at the beginning of this year. I think we've gotten to a point where we're confident, we've gotten more comfortable with our demand projections for this market in the next couple of years. But as to the next five years, I think we're going to have to spend more time working on that. This is a market that the trend is favorable in that the market has proven stronger than we thought throughout. I don't know that that's going to be the case for sure. This is our best estimate at the moment.

Thanks very much.

Our next question comes from Chris Parkinson with Ruled Research. Your line is now open.

Great. Thanks. This is Harris Vinal for Chris. Just with the EBITDA bridge on slide six, it looks like COGS were, you know, about a $150 million headwind, and that includes the spodumene price flow through the Chilean royalties and the productivity. Are you able to parse out those three components, and how should we be thinking about the quantum of the sequential spodumene inventory impact into the second half?

Yeah, look, I won't give you exact numbers around what drove COGS around all three of those items, but you can imagine that the spodumene lag or the spodumene inventory impact is the largest portion of the COGS driver. That usually is the case for us. In terms of how to think about maybe the spodumine cost lag as you go into the third quarter, look, the average market spodumine price in the second quarter was about $2,500, somewhere around there per ton, thereabouts. And I think right now we're probably in the $2,000 range kind of case. So, and again, remember that it takes about four months for spodumine to move through our inventory system and eventually get into SALT and then to the customer. So, you know, take all of that into consideration that you will see this higher-priced spodumine rolling through our income statement in the third quarter. And that's just naturally because of where market prices were in the second quarter.

That's helpful. And I'll take another shot at a question someone asked earlier. Just, you know, CapEx is coming down, but it looks like the supply-demand gap is actually widening. You're generating a healthy amount of cash. The balance sheet's pretty clean. So in terms of incremental uses of cash, are we still thinking debt pay down? Is it more build cash and, you know, preserve optionality? How should we be thinking about that?

Yeah, I think it, I mean, I've said it before, so you're probably going to get the same answer. But we want to have a conservative balance sheet. We do at the moment. So it's not a whole lot of debt to pay down right now at the moment. We do have growth projects. So capital is coming down. I think of that more as capital efficiency. We're getting more and more focused and trying to drive efficiency in that. and we've been on that now for a couple of years and we're i think we're getting better at that but then there'll be growth projects that we layer we've talked about brownfield projects so there's there's a couple brownfield projects we've got we've talked about this larda atacama you know about king's mountain so we have a portfolio of growth projects uh in the queue we've we've just not really kicked off any of those at the moment so we're not spending heavily against that. But we do have good growth projects. Again, as I said before, in jurisdictions we know, in technology we know, and with partners that we know. So we feel pretty good about those projects going forward. So that's going to be where you see our focus. But again, we'll compare that against everything else, all the other alternatives, including our own chairs. And we We always look at that when we do a big investment, but that doesn't change.

Alec, our last question comes from Muzahim and Madly with Rothschild & Co. Your line is now open.

Thank you. I just wanted to ask about lithium production. The Wojana production surprise, should we take it as a bit of a one-off or is it a structural uplift in the production in oil quality? And on CGP3, basically the Q127 ramp-up timeline, it looks like it doesn't represent a massive slip versus the pre-fire expectations. Does that mean before the fire you were kind of running ahead of the schedule on the ramp-up?

Thank you.

Yeah, so, okay, Greenbush is first. You may have to remind me of other questions. But we were running a little bit ahead, and now this is our risk-adjusted view of that. So it's basically we just slipped the schedule from where we were by the outage. So the outage period, we've kind of shifted to that. That gets us to the first quarter. As we said, we've been up five days now. The restart, all that's going well. We're running at reduced rates, so we're back on a ramp schedule. And that's our best guess is that first quarter. So that's kind of all I can say. And sorry, can you remind me of your – oh, why'd you not? Yeah, look, that's – we were working toward better ore, and we – so that was in the plan. We just got there a little sooner. We're a little bit more efficient in getting there. We've still got to work through some of that, and we expect later to get even better quality ore. So it's – it was the plan. We got there a little early, and it's fortunate that it was at a time when it offset the fire at Greenbush.

All right. Thank you. And maybe if I could get your view on the supply-demand balance specifically, what's your thinking of the impact of production restarts? Projects such as Bold Hill that has been restarted recently. Do you think that's enough to make a dent in the supply-demand balance?

So you see that you've got 45% growth, right, in demand. So you need some supply to keep up with it. So what we see right now, we're behind that curve at this part of the year, which is why I think you see inventories being tight. Some of those coming on, lapidolite, the African stuff, will make a bit of a dent in that. But you need 45% to stand still, and it's hard to see getting 45%.

Thank you. That's all the time we have for questions. I will now pass it back to Kent Masters for closing remarks.

Thank you, Operator, and thank you, everyone, for joining us today. Let me leave you with this. We continue to execute with discipline. Our end markets are strong, growing, and increasingly diverse, and we are progressing growth options focused on our world-class, low-cost resources. We remain focused on operational excellence, disciplined capital allocation, and the durable, competitive strength that set Albemarle apart. I look forward to sharing more milestones and successes with you in the coming quarters.

Thank you.

This concludes today's conference call. Thank you for your participation. You may now disconnect.