Albemarle Corporation (ALB) Earnings Call Transcript & Summary

Hello, everybody, and welcome to Benchmark Week 2020. Derrick Allott here. I'll be giving you a brief overview of how viewers can access, order the materials seen in today's session before the session begins. Benchmark is the world's leading provider of market intelligence, data and price assessments. We cover the full supply chain from the raw material and the specialized chemicals, the cathode and anodes, the battery cells all the way to the end market. We cover this via our monthly market and price assessments, our quarterly forecasting, bespoke consultancy and also our events. This year, we have made Benchmark Week free to view online, but Benchmark members have full access to all of the sessions live and on-demand and can download today's presentations. Benchmark members also get rolling online news and analysis, the Benchmark quarterly review, our on-demand video streaming service and access to all of our presentation archive. The last 3 days are now available on-demand to all Benchmark members via the video streaming service. Benchmark Week will return in person between the 8th and 12th of November 2021 in California, and you can secure your place now at the early buy rate simply by scanning the QR code. I will now hand you over to today's Chair, Benchmark's Andrew Miller.

That's great. Thanks very much, Derrick, and good afternoon or good evening, everyone. I'm really excited to bring you the fourth and final session of today's Lithium Day. And it is our keynote session. We have a selection of expert speakers, actually industry-leading speakers, I should say, an industry-leading producer, an industry-leading consumer and an industry-leading commentator as well. So we have a great selection of keynote talks for you today. A quick reminder before we kick things off for today. We do have a media blackout on this session. We've selected the people that are -- that can join us for this private session. So please do respect those rules. And then we can obviously, hopefully, have an open and frank discussion. The format of today's session will be, our 3 presenters will speak back to back. And then we'll work into a joint Q&A panel at the end. So with that, I'd like to pass over to our first speaker of the afternoon. That is Eric Norris, President of Lithium at Albemarle. Over to you, Eric.

Thank you very much, Andrew, and good evening, good afternoon, and I assume it's possible we may have some people from Asia, so in which case, good morning, very early good morning. Pleasure to be here. Appreciate your support, Benchmark Minerals team, to having us join on this panel. So if you go to the next slide, Will. I do need to do a little housekeeping first. First off, this is our forward-looking statement around such forward-looking statements and making sure you understand the results could differ. Details about this can be found on our website as well as here stated on this page. And if you go to the next slide, another element of housekeeping. We may use some non-GAAP measures and the reconciliations for those is in this presentation and also on our website. So with that dispensed, let's jump to the Slide 4, please. Just to start really high level. We think of our business of powering potential, and it's really the potential of electric mobility and the role that Albemarle has played and will continue to play in that and making that a reality. And really 4 key sort of thoughts here around how we do that. First and foremost, by the high-quality products that we produce and sell. We have a broad range with leadership positions in lithium hydroxide, carbonate, metal, organometallics. Secondly, our vertical integration into both brine and spodumene resources. We have some of the largest reserves and most concentrated resource profiles in the world, which drive our long-term ability to serve the e-growth going forward and drive the cost position that we need to be able to continue to reinvest in the business. Thirdly, we're really focused on driving efficiency, costs, sustainability. And we do this as we move from the resource and convert into these high-value-added lithium chemicals. We also are going to continue, have been and continue to grow that asset base through disciplined capital expansion. And finally, this is why I think so many people are here today, we're playing in one of the most exciting transformations in the history, really, certainly, of energy, this green or clean energy transition. And we believe now more so than ever that, that 1 million metric ton target that we've talked about on an LCE basis, lithium carbonate equivalent basis, by 2025, is very real, and we're seeing that play out. I'll get into more details. So if we go to the next slide, please. We don't do this alone though. We don't -- we talked about Albemarle lithium, and we pursue the ambitious agenda that we have, not on our own, and we do it with the benefit of considerable financial resources and backing. We're part of Albemarle. It's a $3 billion highly profitable specialty chemicals firm, about 6,000 employees around the world operating in 75 different countries. We have 3 main businesses. The lithium business, of course, with a strong growth profile, but also market-leading positions in catalysts and in bromine as well. Lithium holds that growth potential, but we leverage the portfolio to realize that potential, that potential I was talking about on the prior slide. And that manifests itself or is driven through, I should say, a portfolio of strategy. And that is pretty simple. It's one based upon investing in the growth of lithium and optimizing the earnings and cash generation of our catalysts and bromine businesses to support that lithium growth strategy. And doing all of that in a very efficient way, deploying operational discipline and continuing to work on our cost structure. We, of course, have been and continue to look at the portfolio, making sure it's the right portfolio to drive the cash flows we need, the sustainability we need in those cash flows to support the lithium growth story. And we do all of that while maintaining a disciplined approach to capital allocation and preservation of our financial flexibility. So on the next slide, please, just a bit further detail about this business that I think some of you may know well. We are a $1.2 billion business, mid-30s EBITDA business that we see here at the current point of the cycle of the lithium market. Ideally kind of the characteristics already which makes us such a strong partner to the EV supply chain. And you probably wouldn't be here listening today if you didn't understand how strong a business opportunity we have for growth, the environment that is driven by technology, is supported by strong social and political and now regulatory forces around the world that are aimed at clear energy and vehicle electrification. What you may not appreciate is a bit of the background we've come from. Still today, 40% of our sales are not in that energy storage market. They are "legacy sales," if you will. Markets that serve there, markets like glass, ceramic, grease, polymers, pharmaceuticals, fine chemicals. They are GDP growth markets largely. And of course, as we continue to invest in the growth of that green wedge there, the 60% going forward, and if that continues to witness this 20% plus per annum growth, that's going to become an ever larger piece of our portfolio. The key to doing that is on the next slide, though. The foundation is our resources. Here are all of 7 resources that are in play for Albemarle that we have access to or ownership of. Only the top 3 are in operation currently. And in those top 3, we have geographic diversity, high-quality product, high-quality resource, large scale and low cost. And all of these 3 have significant unmet expansion capacity associated with them. Even Silver Peak, which is one of our smaller resources, we believe, has that potential. The other resources listed at the bottom quadrant here, bottom left quadrant, are not operating today, but represent significant additional conversion -- or excuse me, resource capacity to power our conversion, downstream conversion capacity. All told, you add these up, it's greater than 4x what we [Audio Gap] global customers, and particularly, the global EV customers. But this is not really the end of the story. This is just the beginning. So if you go to the next slide, please. What our customers are really buying from us are value-added lithium chemicals. So these resources that I just described are integrated into and serve a global conversion network that produces lithium salts. That's represented by the C in this chart, conversion capacity to battery or technical grade. By 2024 -- excuse me, 2021, with the Kemerton, Australia commissioning, which we expect late next year, we will have conversion assets on every continent of the world with the exception of Africa and Antarctica. Some of these conversion plants do further service some downstream specialty plants. These are plants that make lithium metal or lithium organometallic products. And those are represented with an S. And certain of those plants do both like Kings Mountain and Langelsheim. So all told, we have 3 plants in the U.S. and we're the only integrated supplier on the North American continent. I mean we're the only one that operates a resource today or produces from a resource today. We are one of the few producers in Europe and the largest in the EU and -- out of our Langelsheim operation, which is one of the most integrated and diverse in terms of its capabilities of plants we have in our entire network. We're the largest foreign national firm operating within China. We do have local Chinese competition, certainly, but among the foreign folks operating inside China, we're the largest. And kind of as I said earlier, late 2021, we'll become the first lithium chemicals producer in Australia. So really very globally diverse and well positioned. So that's the lithium business, but that's not what you think of Albemarle. That's only part maybe of what some of you came here to listen to. What you really came to listen to is maybe some discussion about what's going on in the market, what's going on in 2020. So for that, let's go to the next few slides before I wrap up. The story of 2020 and what happened to lithium demand. We see demand contracting slightly in 2020, due largely to the impacts of the pandemic, and this is mostly acute in that industrial sector. So that's that 40% in that chart I earlier showed you. Remarkably however, things are changing fast in the past few months. As I'm sure many of you are aware, EV sales are up already year-to-date, even with the significant closures we saw of automotive production during the second quarter. In fact, if you look at it, EV sales year-to-date October are up 25% with Europe leading the charge at 114% year-to-date. And this, of course, I think, is largely due to the CO2 regulations that have already been put in place in Europe and are unfolding, coupled with the recent demand stimulus efforts throughout the EU countries. So why does it look like it's down? Why do I say it's a down year? And the answer is pretty simple, inventory. Inventory for lithium chemicals remain elevated throughout the supply chain following a pretty big buildup of new capacity in the 2018 through '19 period and also a deceleration of demand broadly in 2019 for EVs. That twin event resulted in inventories rising in excess of 5 months above where they should be, which is certainly unhealthy and means that many of the consumers of the product have alternatives to draw down inventories that are elevated versus buying from them on demand. On our last earnings call, I said, we pegged that at about 5 months. And we'll give you an update of that excess which I hope will draw down during the fourth quarter. The demand growth I described or suggested should be, we'll give you an update on that as we move through the quarter as we get into the fourth quarter earnings call early next year, we'll provide an update. That said, I do believe with the growth that we're seeing, these inventories will come down. And one of the things that I look towards is how does 2021 look? Sarah, who is joining us from Tesla, can talk about Tesla's outlook if they shared publicly for 2021. I can tell you another source, external source, we could use is IHS, and this is an example. Estimates that they are putting forward for 2021 show EV production increasing by 2.3 million electric vehicles. Now to put that in perspective, that's equivalent to the entire market for EVs in 2019, just that growth. That's a massive increase. And we are, therefore, quite confident about that 1 million metric ton LCE in 2025 as we look at these positive signs going forward. So what's the downside? What's the challenge really of being in the lithium supply business? Let's go to the next slide, please, Slide 10. It's a decrease in prices is really the challenge that we're facing right now and the fact that, that has rendered economic expansion infeasible, really, for the majority of players in the industry today. In fact, during the pandemic, prices, which had already fallen quite a bit due to that excess that I talked about that has been built up in 2019, fell even further in the course of this year, well below marginal cash costs. Now these are spot prices. Most of the business is done under contracts. So we look to China and spot prices in China as an indicator of that. And we, as I said, did see that move below marginal cash cost, materially below. And that resulting pain has meant deferrals or delays of capacity by some producers and outright closures and bankruptcies of others. In fact, I don't think I can point to a supplier that hasn't taken some action of any time, including Albemarle. And let's remember also, as I've shared at other BMI conferences in the past, it's costly and time consuming to bring new supply to market. And the market demands are changing on top of that, right? We can talk about this, I'm sure, in this panel, but the ante is being raised as customers throughout the supply chain, automotive producers, are demanding improved sustainability in the lithium they are getting in the operations. Now I feel that the supply base can rise to that occasion. I'm also optimistic about being able to rise because we already have a very sustainable operation of doing great things. But that is a degree of difficulty for someone to bring on a new operation that's been added to what I said is already a time-consuming and costly process. So all of this, I think, is an important cautionary sign to the supply chain. The value of investments in the EV supply chain is, if you look at investments themselves beyond lithium, is getting closer to USD 0.5 trillion, if you add up all the numbers. I've seen various sources that suggest this. And none of that investment is going to play off -- pay off, if there isn't enough lithium to power it, right? And none of that works without lithium. Our stats indicate in fact that 700,000 metric ton per annum of capacity are going to be acquired in the next 5 years to meet our forecast. And as time goes on, there are forecasts I've seen that suggest even our forecast might be conservative, but we see at least 700,000 metric ton of capacity that needs to come on. And just doing the math, that's an investment of about $10 billion. That investment is just not there now for the -- or it's not attractive to be there now for the reasons I just summarized given where market pricing is. So my last slide is just then a little bit about how we've been dealing with this. Not everybody has the -- you really need a set of benefits here that can drive things. And for us, that is a combination of 2 things. One, we're on the left-hand side of the cost curve. We have low-cost resources. And two, we've taken a long-term approach to contracting with customers. That meant that in past years, we gave up some of the lofty high prices, but it's also meant more stability at the bottom of the cycle. And it's given us an ability to earn the proper incentive to keep expanding, and we are bringing on 2 plants next year. They will not be qualified for sale really until 2022. But both the La Negra III plan and Kemerton I/II plant will come on next year. That will bring us to that 175,000 metric tons by 2021, and we have plan to go further from there. That's going to bring us to a balanced capacity of about 50% carbonate, 50% hydroxide. It still means a very large position in Latin America because that's one of our bigger expansions, but it also means a very big position in Australia and a balanced position in China, a small position in the U.S. still with Silver Peak. Now remember those resources I told you. We are continuing to look at them. We're looking at the trends toward localization. We're looking very hard about how we can leverage our footprint and our resources in U.S. and the EU footprint going forward. So with that, I'll turn it over to our next speaker to go a little bit further in this dialogue. Thank you.

Great. Thanks very much, Eric. Much appreciated and a great overview of the way things stand from a supplier's perspective, and I'm sure there's lots to dig into in the Q&A there. So thank you very much. As I said before we started, we will be doing a joint Q&A at the end of the session. So please feel free to post your questions at the bottom of the screen, and we will try and answer as many of those at the end of the session. So with that, I'm going to move on to our second speaker who is Sarah Maryssael from Tesla. She's going to speak a bit about their view on the lithium market. So over to you, Sarah. I don't think we can hear you at the moment, Sarah. I'm not sure if you're on mute.

Can you hear me now?

Got you. Yes.

And let me just check with -- can you see my screen?

Yes, it's not in presentation mode, but we can see the...

Okay, great. Also having presentation right.

Thank you.

Great. Hi, everyone. Thank you, as always, to Benchmark for -- I think for bringing the industry together, especially during what's been a very sort of long and challenging year. It's always great to have the opportunity, I think, to discuss this topic. And again, thank you for the opportunity to allow Tesla to present. I guess I was finalizing my talking points for today, and I thought I wanted to -- in light of the recent announcement by the European Commission on the updated battery regulation, I thought that could probably be a good sort of topic to sort of talk about. But maybe before going to that, just to present myself, introduce myself, I am part of the battery supply chain team at Tesla and manage our procurement strategy for our critical battery metals of lithium, nickel and cobalt. I would like to start with this slide. Always important, I think, given the audience to sort of go back a little bit to the basics of how battery cell works and what are some of the key components. I'm sure many of you on this call have been in the industry for a number of years. So I'll go through this quickly, but there are really sort of 5 key sort of components in the battery. The 2 positive -- the 2 electrodes, the negative and the positive electrode, and the lithium ions, which are critical to ensuring the flow of charge between the 2 electrodes, the electrolyte, the separator and then obviously, the can. A lot of the discussion, I think, in the EV supply chain is focused very much on cathodes and anodes and really in terms of the materials that we focus on at Tesla in terms of critical metals. Lithium, nickel and cobalt are -- as you know, are key components going into the cathode. So why do we -- why, I guess, has the industry cared so much about these? And why do we -- why is it such a recurring theme to talk about the battery metals. Minerals and -- the minerals -- hold on a second. What we receive, if you go from left to right on this chart, starting from the far left and looking at sort of what the approximate sort of cost structure is for a battery. If you look at the overall cost of the battery, about 70% to 80% of these costs are just purely in the raw material costs. If you break that down even further, the cathode accounts for about 50% of those costs. And then if you break the cathode down even further, 80% of those costs is just the battery metals alone and 20% of that is the processing. So if you look at overall, the costs -- the raw material costs within the battery, and 80 -- 40% of those costs are just in the materials alone. And those are assuming at prices where they are -- they've been probably for the last 12 months or so. And why is the industry, as I said at the beginning, so focused on these critical minerals? And what are really the key challenges as we see it? Fundamentally, these minerals are geologically constrained. And there's only a finite amount of these materials in the ground. And therefore, this presents intrinsically the potential to limit the growth of EVs. We know that mining projects have very, very long lead times, often in excess of 10 years. They're extremely capital intensive, talking about billions of dollars worth of investments. The timing of when these projects come online is very, very critical, as Eric alluded to earlier. When you are operating in a market that has a lot of volatility and it has to go through cycles due to often macroeconomic factors, the timing of when these projects come online is absolutely critical to ensure that they are cash flow positive from the start. And then furthermore, the jurisdictions in which a lot of these projects can be located present challenges in their [ earning which chose ] to operate in. So when you combine sort of the technological constraints, the capital intensity and as well as the geopolitical factors when you think about mining together, these factors together present huge challenges to the industry as it tries to scale. And really what the industry needs, what the EV industry needs is consistent supply growth and consistent and stable and predictable supply growth, not only because that ensures security supply, but it enables the prices to be sustainable and reasonable because if prices are subject to wild and volatile swings, it makes the scale-up of this -- the transition to a low-carbon economy even more challenging, especially because the rate of adoption we know is very much tied to the cost of the batteries. Third point. What are the some of the other challenges? It's developing this cathode supply chain. It's very long. It's complex. It spans multiple geographies around the world. And together, the industry is trying to figure out how we build this supply chain from the ground up. So it's not just identifying where those resources are, where the refining capacity is, but it's building that whole infrastructure really that's required to support a relatively new and complex supply chain. And then lastly, mining has traditionally faced a range of challenges as it relates to sustainability. And I think that's become very, very apparent in the last 12 to 24 months. We've seen tailing dam failures in Brazil. We've seen oil spills this year. We've seen the Juukan Gorge incident in Australia. The -- we're beginning to, I think, get an understanding of the breadth and the scope of the ESG and concerns that face the mining industry and how do we reconcile that with the EV industry, which is very much positioned towards sustainability and transition to a low-carbon economy. So it's about reconciling, I think there's challenges between the mining industry and sustainability and what the EV industry is trying to achieve. How do we continue to extract mineral resources in the environment through a socially responsibly manner, especially knowing that these materials are fundamentally geologically constrained? So probably, I think an important point to -- a few points to make before we dive into the next part. Coming back to this idea of cost, and I'll walk through this chart because it might seem a little bit overwhelming at first. On the left-hand side, we have the forecast of what EV costs are going to be and when is the projected price parity between internal combustion engines and electric vehicles. And that's estimated to probably happen probably around halfway through the decade in the next few years. And this is really, a lot of these projections, when we talk about $100 per kilowatt hour benchmark for battery cost as being sort of the tipping point, often assumes that your -- the cost of your raw materials remains relatively stable. But, of course, as we know that's a somewhat misleading assumption. And as we -- as pointed out in the slide before, when your raw materials account -- when the battery metals account for 40% of your raw materials, it's hard -- it's a difficult assumption to make that these materials are going to remain stable over time. If we look to the right-hand side, we've just tried to capture here sort of the historical market prices for lithium, nickel and cobalt. And you can see these prices tend to be quite volatile over the past 4 years. What we see as well is there's been peaks and troughs in these prices. And if you sort of translate that to what this in dollar per kilowatt hour mean, you can see that even within the last 3 to 4 years, in the variation in prices we've seen in lithium, nickel and cobalt, we're seeing pricing differentials, which could equate to about $7 per kilowatt hour for lithium alone as well as for nickel alone and cobalt alone. And this is based on an NCM811 chemistry. So imagine if we took the cumulative effect of all these prices, imagine if we hit the peak of all these prices at a given time in the future, we could be seeing from the lowest prices to the highest prices, the cumulative impact of more than $20 per kilowatt hour. And that is just from the volatility of market prices that we've seen in the last 3 years. The takeaway from this really is that this type of volatility is actually quite -- is -- it makes it very difficult to manage from a supply chain point of view, but as well as from a growth of the EV industry. And again, to -- coming back to what Eric alluded to, a low price environment is very, very challenging for the industry to grow. But at the same time, the high price environment is very challenging for the EV industry to grow. So how do we ensure there is the right balance of supply and demand to ensure that these prices are stable and continue the industry to grow and develop? I guess coming back to the 3 sort of really principles when we think about the battery metals, which are important to note. We've talked a lot -- we've talked about security of supply. We've talked about the need for stable and transparent prices. But really, the last topic worth noting is sustainability. And I think coming back to some of the announcements that were made through the European battery regulation today. First of all, there was an announcement around a minimum content of recycled material to be imposed on batteries and as well as stricter standards for responsible sourcing. So I wanted to address a little bit about that and I think some of the things that Tesla is looking to achieve. First of all, the advantage of battery recycling is that 100% of these materials remain in the battery at the end of life unlike, obviously, fossil fuel that is burned and is consumed and doesn't remain at the end. Metals also have an infinite closed-loop recycling potential. And again, unlike -- which again presents, I think, huge opportunities for the growth of the recycling industry. Recycling technology will continue to enhance as the knowledge in battery materials processing will further fuel innovation. And what this is important to note is that there is just a continuous iteration of an R&D loop. The more we invest in battery technology, we can ensure a longer end of -- a longer lifetime for these batteries. And the longer that these batteries are on the road, the more we invest in battery recycling, means that we can really optimize the use of these materials so to as -- as to minimize the impact on the mining intensity of obtaining new materials. And this sort of iterative R&D will result in reduced costs, improve sustainability of the battery life cycle and, as I said, reduce the mining intensity of these resources. And really what Tesla is looking to -- what the industry, I think, is looking to put in place is this closed-loop recycling. So the materials from the cathode, the nickel, the cobalt, the aluminum, lithium, I know there's still a lot of research going into optimizing and improving the recoveries of lithium, really enable a closed loop to feed that back into the cathode, but as well as the opportunity to recover the aluminum, the copper and the steel as well. And your recycling doesn't just extend to a battery cell, it's really in the way that these factories are designed -- these battery factories are designed in a way to really improve the efficiencies. And there are examples of this in Tesla's Gigafactories with the -- I mean we'll recover the reagents which are used -- the organic reagents which are used in battery manufacturing, recover them, recycle them, refine them and reintroduce them into the system. Same with the recovery of waste heat through the factory in order to keep that as closed loop and minimizing our waste transfer. Really, when we think about circularity, we think about a closed-loop, it shouldn't just apply to battery recycling. It should really apply to the way in which we design the factories of the future. And then lastly, last slide. Responsible sourcing is again a theme that was very much discussed during the -- a theme that was very much discussed during -- as part of the European battery regulation. Again, where do we see the opportunities? It is really to the direct engagement and collaboration with the upstream of the supply chain, partnering with the mining companies. And it's not just about imposing, I think, standards on them. It's about really working with them to understand what, as an industry, what is the supply chain do we need to do together to ensure that we have a more responsible supply chain. And this as well has been demonstrated through our involvement in the Fair Cobalt Alliance, which really goes back to the idea that we need to be working really where the issues are. We need to be rolling up our sleeves and addressing the problems really as far upstream as we need to be. Another part is really leading by example, updating our existing supply code of conduct and ensuring that we have the right contractual obligations and incentives with our suppliers to ensure that we are driving towards a more sustainable supply chain. And again, while there is a lot of work to do, and certainly, we are continuing to improve on this, is to address those concerns and improving the transparency of what the supply chain is going through, through annual reporting as we do through our impact report. We also support, as most of the industry does, the OECD due diligence guidelines, renewing benchmark and certainly open to schemes restricted to battery material, supply chain standards and obviously continue willing to work and collaborate with the supply chain to implement that. And then lastly is this idea of building more regional supply chains, as we may have -- we've discussed during Battery Day, especially as it relates to lithium. We'd announced some plans around lithium mining and lithium refining within the U.S. The idea behind that is not to say that the world -- or the battery supply chain will evolve to have strictly regional supply chains. We're going to have global supply chains, but we also need regional supply chains. So it's really about striking the right balance between the 2. And these regional supply chains ensure developing resources locally. It helps us shorten the supply chain, reduce that supply chain risk and obviously reduce the carbon emissions associated with the flow of these materials. And so that is also becoming increasingly a bigger part of the way that we design the factory and we design the supply chain just thinking about how can we source as much of these materials locally? So that sort of brings me to the end of the formal part of the presentation and look forward to answering any questions later in the session.

Fantastic. Thanks very much, Sarah. That was a great overview. And great to see so many of the topics that have sort of driven a lot of discussion throughout the week in terms of sustainability, localization of the supply chain. So lots more to dig into in the Q&A panel there. So thank you very much. Moving on, and we'll go to our third and final speaker for the session before we go into our Q&A panel, who is our Managing Director, Simon Moores. Over to you, Simon.

Excellent. Thank you very much, Andy, and thank you to both Eric and Sarah for joining the keynotes discussion to really dig a little bit deeper into lithium and into the supply chain and opportunities on this Benchmark Lithium Day. It's one of the benefits, I think, of -- I mean, it's been obviously a very tough year in many ways, but there are a lot of positive things that have come out of it. And we had never done a webinar before this year. And it's just interesting. We always wanted to do face-for-face meetings. We did the world tour. We did our Benchmark Week in California. Obviously, it's online this week, and face-to-face was how we did it. But actually, now we've seen we can reach much wider audiences with these webinar series, and we're kind of evolving what we do for next year as what we always do. So very much appreciate Albemarle and Tesla joining us, the Benchmark team on this. So I'm just going to hit some high-level points that will probably then spark some questions, and we can talk a little bit deeper. But people -- firstly, people know, they've seen this slide before, but the one point I want to drive home about what Benchmark do. Obviously, we collect lithium prices. We do our price assessments, which are used by the industry in various different ways. But the reason we can do that to such a level is because we're focused on the supply chain. What we do is, the lithium-ion battery supply chain is our primary focus. And so for example, not just in lithium pricing collection but data collection such as capacity of certain plants around the world, usable production, knowing what parts of the chemical plant can go into a lithium-ion -- into the battery supply chain, knowing what battery customers can accept certain products. This is the detail that goes into all of our databases and products because we know the supply chain, and we spend our time improving that each year and growing our team and growing the network that we have. And so I'm very appreciative of how far Benchmark have come since the 1st of January 2015. And myself, I've been doing this since 2006. So Benchmark's lithium coverage isn't just prices, but of course, that's our like primary jewel in the crown of the data, if you like. But we take so many data points. So on lithium prices, we do 6 carbonate, 4 hydroxide, 1 spodumene. I'll explain a bit later. We collect all the data in the world from every single cathode plant, everything single cathode manufacturer in different formulations, capacity production and so on and so forth. We collect data on every single lithium-ion battery plant in the world. We call them Battery Megafactories assessment, but it's battery cell capacity, all these different chemistries. Then of course, we go and forecast this data in various products. And we forecast out to 2040, so we call that, I guess, a long-term forecast. And we do that for every stage, lithium, cathodes, lithium-ion battery cells, you kind of get the picture. Finally, we do a lot of -- I call this content. It's things like webinars. We have our Benchmark membership, which is a variety of different media that we can then communicate our thinking. It's not just news analysis. But it's -- I mean if you look on our Benchmark homepage right now, you'll see 2 articles on lithium-ion battery cell costs, one written by Andy Leyland, and then one written myself. And both of those give you this overview on the falling cost of lithium-ion batteries. And the point that Sarah was making about, well, the further these dollar per kilowatt hour prices come down to the $100 mark in and around, then the raw materials are kind of bigger proportion, battery costs aren't going to fall forever, especially if raw material prices start rising, especially lithium and nickel, something to consider. Okay. So lithium prices, I'm just going to a final point on this, is we collect grade-specific pricing. We do weighted averages and then we do a lithium index. So the point is, you can kind of cut this as detailed as you want. Some investors want one price. They want to say what's the price of lithium hydroxide. And then we do a weighted average of our 6 -- sorry, 4 lithium hydroxide grades into that, and we weight that by the traded volume in that month. So my point is, we collect the data at a granular level, and then we offer it in different ways. So this slide shows -- excuse me for that. This slide is there to show or to answer the question we get probably the most, what's the price for lithium? And it's probably a question that Eric will get a lot on investor calls and at conferences. And the reality is there's not one price for lithium, as I've tried to show in this chart. So this is our November assessed prices for lithium carbonate in the blue and lithium hydroxide in the yellow. And the point is that if you see one lithium price from us, for example, you might see the Lithium Carbonate CIF Asia price, you'll see one price. Well, it will be the midpoint of that range that you can see on the chart. But the point is that even though you see that one price from us, there's a range. And that range is assessed from all the data points we collect. So it's -- we do produce one lithium price in the weighted average which I think is useful for investors as a snapshot for industry. But this is the granular detail that represents the lithium industry, which is a specialty chemical space, not a commodity. And then the second thing I want to get across about pricing is that lithium's price is not an indicator of its growth. So there's very much this thinking that, well, lithium prices going down, that means the lithium market is in decline or the lithium market has collapsed or electric vehicles are not happening. The reality is, during this period, since prices have been in decline since probably, let's say, the early part of 2018, then even though they've been pretty flat this year, as you can see, during this declining price environment, lithium's demand has gone up 31%. So the market has grown by that much, even though the price has been going down. And so that kind of underscores my point that lithium's price is not an indicator of the market health. It's an indicator of the supply and demand dynamics at the time, but not the overall story of what's happening. Second part to kind of hammer home on this is there is a supply and demand disconnect. So I was looking at the forecast that Andy Miller and his team of analysts do every quarter. So they number crunch. They gather with Data Ring people, and they team up with the pricing team separately, and they assess every quarter all the supply developments, all the demand developments to then get our numbers. And if you look at the average compound growth rate of lithium demand over 10 years, the next 10 years up to 2030, the average growth at the moment in our latest forecast is about 22% a year. So that's how much the lithium wants to grow. Of course, lithium-ion batteries was driving that. That's kind of an no-brainer. Lithium wants to grow at 22%, but because of the reasons Eric was saying in the low price environment and the economics of this, the supply side is only able to grow at the moment unless something changes, which hasn't yet -- is only able to grow 11% to 12% a year. The huge disconnect and all the evidence that we're collecting, and I'll show you later on is pointing towards this wall of demand growing and increasing yet lithium -- new lithium supply is kind of stuck in the headlights. And this is an issue of capital, an issue of money coming into the space, and investing. There's a lot of -- too much risk-aversed money even though the story now is kind of a no-brainer. Okay. So this chart just shows our high-level numbers of what's happening. There's tons of lithium of -- what the lithium market looks like this year. What I want to put into this actually is also kind of a throwback to, I guess, Eric will remember in 2009 in Chile, when this lithium story was I guess just really starting, and we were having a conversation, and lithium -- the lithium-ion batteries share of the market there was probably 20%, 22%. It was always an argument of whether it was 20 -- between 20% or 25% of the market. Well, this year, lithium will be 57% of the entire demand, if you like. So it was 173,000 tons. And you can see -- and that is obviously growing a much quicker way than the other markets that lithium is going into. And what's driving this? This is what we call a benchmark, the rise of the battery mega factories. All the door dawn of the battery mega factories, I took my -- these titles from the Planets of the Apes movies. I thought they fit quite well -- and well, that kind of sticks, I guess. But we've been collecting this state of individual battery plants in 2014 actually when Elon Musk announced the gigafactory. But as you can see, '15. These are individual battery mega factories. So mega factory is a super-sized battery plant that's building batteries, battery cells for EVs. And as you can see, individually, we ended last year at just under 120. And this year, we're going to about 180. At the moment, we're 174 mega factories in the pipeline for 2030. It will be probably when we assess December. 113 of the 180 -- 113 of the 180 battery mega factories are in production, that's battery plants that are consuming lithium. And that's something to consider. This isn't just a fad of plant being said they're going to be built and they're not going to be the built. Of course, all of these aren't going to come to reality, but 113 are actors. So that's something to consider. Then where are these clients coming from? As you can see on that slide, actually, is -- there's been a lot of growth this year. 2019 was a big year and 2020 was a big year, and most of this growth has come since the pandemic started. So it's almost like the pandemic has turbocharged the long-term picture and even though it's had its short-term challenges. And where are these battery mega factories being established, these new ones this year alone? U.S. is 3, EU 2 and China is 38. So really, Tesla with the gigafactory is the biggest battery plant in the world in Nevada. Tesla started -- Tesla in China started this trend of building super-sized battery plants. Then kind of Europe really took over in 2017, 2018. The U.S. has kind of just been taking along. But China has really surged back in this pandemic year. And so that's, I would say, the trend of -- the mega factory trend of this year. But we can't just look at battery plants individually. You have to look at the capacity because obviously, you can have the gigafactory at just 37 gigawatt hours. That's like 550,000 model 3s, but you can have the same gigafactory at 3 gigawatt hours. So you get my picture. But we will -- and this is in the pipeline for 20 -- end of 2029, so you can say, 2030. We will break -- or Tesla has explained to me, again, Tesla can collect this data. He's explained to me that we will crack 3 terawatt hours most likely at the end of December when we publish our numbers. 3 terawatt hours. That's a growth of this pipeline by about 32%, 33% this year alone. So this is all -- it's a long-term view that the world needs lithium-ion batteries. And then on the cathode side, we will just quickly touch on this, which is something we might want to discuss in the Q&A, something that might pop questions up is this shift to lithium hydroxide-dependent cathodes. I mean the one thing that we're -- one of the measures that we're trying to get across is -- another question we get is 811, NCM811. It's here. It's going to be big. It already was supposed to be big and so on and so forth. It is here as part of our lives. But it's a tiny portion of the market. And the question is when it will become a much larger portion. And the reality is with the emergence of next-generation LFP NCM 523, 622 cathodes. Those 3 were 3 big boys and are these next generation -- Their anchors, I view them as anchors in the ground, is LFP next-gen, NCM 523, 622, which can be blended. I see those are the anchors that have to be pushed by -- pushed out the market by NCM 811. And of course, when you're making 811, you need to build different battery plants, different loan lines. It's a big investment. So there's a lot of slowing factors on that, but the industry is trending that way. That's something to discuss. And then finally, what Sarah was mentioning is I thought I put it in my final slide. And that's today, the European Union decided to announce that they were turning the screw on lithium ESG or lithium-ion battery ESG. And the 3 things I picked out were Tier 1 batteries as how I read it. And these batteries placed on the EU market should become sustainable, high-performing and safe for portable along their entire cycle life. So long-lasting, high-performing sustainable, really. That's Tier 1 lithium-ion batteries, and that's something that -- if you Google lithium-ion battery Benchmark, lithium battery peer Benchmark, there's quite a lot to Google now, but you'll get our clearing system for lithium-ion batteries. You'll get the idea that you can't use or lift your ion batteries in an easy -- just like you can't use all lithium in an EV battery. There are quality tiers and quality levels. Again, we're dealing with the specialty industry, not commodity. Second one is, let's move that screen, is a CO2 footprint. And I was looking for an image to try and get across the fact it was carbon footprint, and I found a footprint with CO2 in it. So I was quite happy with that. And -- but overall, you can see the carbon footprint. That's probably the top thing in ESG right now. And really, that comes down to not just -- it's not as where the raw materials are coming from but it's the -- it's the energy that's used to make these things, especially the cathode. So that's underbaked scrutiny now. And then finally, the final thing I will say before we go into Q&A is recycling. So people are -- the industry and governments, especially are hooked on battery recycling as the proper emerging trend of this year in a big way. It was kind of just discussed last year, but this year, it's really come to the fore. And again, Sarah mentioned there's -- percentages of recycled content, that by 2013, that's a long way away. So you can see that -- the EU are guiding what they want here. They're not really dictating it, but it's interesting. So the same 10 years' time, these lithium ion batteries will have to have a recycled content of 12% cobalt, 4% lithium, 4% nickel, and then obviously, lead from that acid batteries. The question here is using lithium back in the lithium-ion battery from the cycle material as probably the biggest challenge the recycling industry faces right now. So that challenge is yet to be cracked on a big commercial scale, but the challenge has been set. And on that note, I will pass it back to Andrew Miller to emcee and get involved with the Q&A.

And yes, as Simon says, we'll move into the Q&A now. If I could just ask Sarah and Eric to turn back on your screens and microphones. And we'll hopefully move things over to discussion. Tons of pretty good questions. I'm going to try and get through as many as I possibly can. I think maybe just picking up on where Simon left things on the issue of recycling. We've had a lot of questions about that. I suppose for everyone, how do you see the role of recycling from Eric's point of view? How do you factor in recycling as a source of competition, I suppose, to primary supply? And Sarah, how do you see -- and particularly, I suppose, actually a question about some of your plans and what -- how you expect the recycling landscape to evolve regionally, whether it'll be more so in certain locations or whether you expect on areas of the world to move faster than others? Can we kick off there? Anyone want to pick that one on up.

Well, I could...

I'm happy to...

But you want to go ahead, Sarah, you can set the tone for the expectations from the industry, that would be great.

Sure. I think the -- thanks, Eric. Appreciate it. I think that the -- it's going to evolve really regionally, and I think we've seen that already in China, right? I mean what we know today, China has the largest recycling capacity in the world. I think the way that China has set it up is actually quite -- is conducive to that closed-loop supply chain in the sense that it's the -- often, this idea of being integrated, you've got those who are the cobalt refiners, nickel refiners making precursor and also recycling the battery pack. So that in itself is set up that they put -- that they have in China is already conducive to closing that loop. And we have some, to an extent, implemented that in giga Shanghai, the recycle -- the cell recycle that we're working with in China as well is a precursor producer, which then allows us to reintroduce that material into the supply chain. Obviously, today, that percentage is very, very small because we're not dealing with end-of-life batteries. We're only dealing with manufacturing scrap. So it's a very, very tiny fraction. But what's encouraging is that infrastructure and the design of the supply chain is already in place to enable that much scale up. I think what we're seeing maybe in the U.S. is maybe slightly different. We don't have that same sort of ecosystem, integrated ecosystem, in the U.S. Certainly, Tesla has ambitions for doing recycling in-house to the extent that we've talked a little bit about it in the presentation. But certainly, I think Europe as well. We'll probably be moving potentially to a model a little bit more like China. We've seen some of the major precursor producers in Europe sort of signal their intent to recycle. So yes, it will really develop, I think, by region. That's certainly -- it's a very, very promising space to watch.

Yes. So I would add from someone who's in the business of producing virgin, if you will, just put a term on lithium. We view this as a very exciting and necessary development, right? If you look at what we all believe, many of us, I think, on this call, believe will be the future vehicles over the next 10 and 20 years. This is going to be a requirement. [indiscernible].

Eric, sorry to interrupt you. I think your microphone -- something just went a bit funny with your microphone, now we're struggling -- now to go back. I think that has gone now.

Okay. [indiscernible].

Yes, sorry. There's some real buzzy background noise going on.

Is it okay now?

That's much better doing now.

[indiscernible] Thank you for that. Try again. Important from the standpoint of the sustainability of the resources, right, so that we're not wasting material, but it's also an important source of supply going forward to create the vision we want all I can see for electric vehicles. So we don't use this source of competition. We view it as a future resource. And we spent a lot of time looking at various processes. There is a thermal process and a hydro process by which are being tracked today to attract lithium. We're partnering and doing some work currently, eventually in Europe, but we're very keen in looking at the U.S. and look -- but it takes a partnership approach to do that. And what's interesting about it is that the resource investment we'll have in convergent capacity is a great -- it can be a deployable resource for that purpose. Because the processes, once you get to that step, if you take the battery, you remove the other minerals, you come out with something that has a lithium stream, the product form of that lends itself to some of the conversion facet, because I right? So I think you can repurpose capacity and even split stream and blend it in production. So I think it takes a -- and Sarah said, it takes a partnership approach, because we're not going to be the ones collecting the batteries. That's not a competency, but we can play a key role in the recovery of lithium and hope to make that happen.

Great. And on the concept of this sort of closed loop and like you say partnerships and needing the industry to sort of work together. We've had quite a few questions for both you and Sarah to come in about where potential new plants might be located and in terms of localizing that supply chain a little bit. Do you -- how do you see that localization playing out? You mentioned, Eric, in your presentation that you have plants every continent now effectively for the lithium production, but some smaller scale than others, of course. How do you see the build-out going in future? Where do you see the appetite for those new facilities to be located? And I guess, in Sarah's case, you're obviously developing the plants. Do you have any more -- I think one recurring question here is do you have any more plans with what you discussed at Battery Day? Or what tests are discussed at Battery Day in terms of doing in North America? Are there already plans to do that elsewhere as well?

Yes. I think the first thing that's really important from a supply standpoint is understanding where the demand is going to be. Just because you have a gigafactory doesn't mean you have actually lithium consumption. Lithium consumption is triggered by cathode production. And if you look even at Europe with the significant step-up of investment in the recent past, more of that's on the battery assembly and cell production side that is on cathode. The last thing you want to do is build a 50,000 metric ton plant in Kings Mountain, North Carolina and then export 90% of the production to Asia to get -- convert the cathode, right? That flies in pace of sustainability, right? It's driving a CO2 footprint that doesn't really make sense. So it's understanding that -- and I'm not saying it won't happen, but it's understanding the pacing of it -- and when demand really materializes, so you can put your assets in the right place. And secondly, it's twofold for us. It's where we have resources, it's developing them, and in some cases, deploying some process technology to do so. Because as we know, it may not be the new resources that are deployed today, may not be as cost-effective as the existing, because the existing resources are the larger ones that are lower-cost resources. So there's some investment that's going in there and quite a good example is North America. If they are not economic as conventionally processed, but they might -- they might have a shot with some technology development. So I think that's an important way of thinking about resources in various parts of the world. And then finally, you can go partway there, right? You can find ways to -- you won't completely eliminate the movement of materials, but you can reduce the movement of materials in a number of continents it hits before it lands, for example, on a Tesla gigafactory. As an example, you can process carbonate from South America, in our case, [indiscernible] and ship it to a shore in Europe and convert it to hydroxide in Europe, right? So there are ways to take advantage while the raw material may not be located in the region. You can streamline a single shipment line to that region and then invest regionally for that production. So those are all the things that we're currently looking at.

Great. Sarah, you might not be able to say anything, too, directly, but do you see the general direction of things? Obviously, with -- it was a big statement of intent to make that move to have your own hydroxide facility into -- to be working upstream in -- and leading the template for OEMs, I suppose. Do you see that as something that if you can go off the ground successfully in the U.S. will quickly be partnered with what you're doing in Europe, partnered with what you're doing in China?

Yes. Absolutely. As we said, it certainly is a template. I think, we were successful in doing it in North America. Could we replicate this model elsewhere? I think like I said earlier, and I approve very much, I think, what Eric said, it has to come down -- it has to make sense from a cost perspective as well. It's all well to say we're localizing the supply chain, but it still need to make financial sense. And secondly, we are going to continue relying on a global supply chain. We're not going to go to 100% localized supply chain for Europe or for U.S. and that's all not necessarily intent. The intent is really to provide diversification and have some of that lithium being produced domestically as close to the factory as possible, but also recognizing that a lot of the major asset sources of the lithium and then for these other materials are located in countries like Australia, like Chile, like the DRC and so forth. And it is important that we continue that the industry has -- enable sustainable mining from these countries. These countries depend very much on those resources. And they stand to benefit a lot economically. The people tend to benefit economically from these resources. And it is in such -- we want to build a supply chain in such a way that they can as well thrive from them, and we can develop sustainable mining practices and mining codes to ensure that would -- no matter where we source that material from, it's done so responsibly. So it's not, I would say, one or the other. It's really -- the entire industry needs to blend, I think, of both type of supply chain to be successful.

Great. Just on the -- going back to what you said about the costs have to make sense, of course, that aren't going to do any of this push upstream, or, Eric, expanding into different parts of the world. I think it was in your presentation, Eric, where you quoted a sort of $10 billion figure, which is sort of in line with the number we say that needs to be invested at the sort of raw material level. But it's a huge number. And I think the big question we often get is where is this going to come from? One, but where is it going to come from in the time frame we needed, right? Because the lead time to getting this lithium up and running, as you all know, it isn't a quick time frame, right? It's not like you can turn on the tap, and when the money is there, the lithium is available. There's a lead time that people, quite often, I think, neglect to take into account. Where is the money coming from? How -- and another question that came in. I thought a quite an interesting take on this is, how do -- with the battery specifications -- I mean, constantly hear about new battery specifications. Obviously, the quality is a big issue particularly with this lithium going into EVs. Does that just increase that $10 billion figure, because the capital intensity of these projects is even more so than it was in the past?

Sure. I mean we can alternate. Do you want to start, Sarah? I mean I don't know how relevant that question is if you have any thoughts, and I'll follow on.

You go for it, Eric.

Okay. So look, I mean, where did the $10 billion come from? It's going to come from -- in our case, it's like why we're darn happy, we're part of a larger company, right? It's not a massive company by sort of global standards, but it's a large enough company that we can spend several times our earnings, our cash earnings, back in investment. And well, we've got to be able to continue to do that in an attractive way, right? That gives us the return we need, so that our shareholders continue to support us doing that. So that's how Albemarle does it. I think what it's going to take is that it is going to take a certainly a great job of just talking about -- it's almost a not too hot, not too cold sort of -- I don't need it to mean it, but it's really -- that's what she was saying sort of approach to price, so that it's just right to incentivize investment. Right now, I mean, we could argue the capital markets are warming up to the idea given that all listing stocks have gotten -- gone up significantly on this very strong expectation of demand growth. You still have the reality that earnings aren't there yet. And so that's -- we need to see some pricing recovery. I think that will improve the bottom lines of these companies and make them more financeable. And I'm not just talking about Albemarle, I'm talking about people who rely on the capital markets to drive their expansion, be that equity or debt financing. They need to see better returns. It might lead to some -- in the long term, some consolidation. It might lead to newer players coming in. We haven't seen that yet. We'll have to see. To the last question you had around the technology. Look, we -- it is true the demands increase. The demand on sustainability and reducing carbon, water, chemical, by-product footprint is there's investments that go into that. And there's investments in the consistency of the product and the quality of the product to meet ever-discriminating performance needs for some of these high-energy density batteries. My view is that the bigger driver for capital intensity is the scale of building these plants than it is, so technology. Because once you get to a point where you're able to do that, and I'm talking about people who are -- like in Albemarle who already have capacity, the incremental investment to improve is more technology-intensive and know-how intensive than it is capital-intensive. It's not as if there's kit out there you can go buy that sort of just fixes the problem. Now if you start talking about going to some alternative resources where you inherently have higher impurities in them, then yes, the process -- there might be additional capital investment required for those newer resources that aren't as economic. But again, that relates to the resource and the resource scale more so than it does to the refinement of product at the back end, which is more know-how and some expertise than anything else.

Yes. And perhaps picking up on what you said, going back to that point of not too hot, not too cold. And maybe here I think Simon has some comment on this. I've never seen Simon unmute, so this is a first. We have to put it in at some point. How do you rationalize that? Of course, the push on the one hand that you really do need to bring these costs down, you can't have the price volatility, and you need to have that -- you can't have those high levels of pricing if you're hoping to continue to bring down the battery cost overall with, like you say, the obvious need for an incentive price to continue to see the expansion. Do -- is one of the key ways around that going to be some form of integration? I'm sure not every automotive company is going to go down the Tesla route. But I think it's sort of set at better precedent, and you've already seen this year. You've seen OEMs make some investments at the battery cell level, at the cathode level. How do you see that integration playing out on an industry-wide rather than just the Tesla-focused. So -- how do you see it building out in the wider industry?

I'm going to try it. Somebody else go first, please.

I can give my -- as Andy said, again, me being muted, I can give my kind of opinion on that. It was really, really interesting actually. As we -- on Monday, we had the Western Australian government. And Honorable Bill Johnson, he opened and discussed how now they're pushing towards making cathode or wanting to make cathode in Western Australia. So obviously, you're going from just mining the raw materials, making the lithium chemicals and then going to the cathode, right? So it's kind of mining downwards. And then, of course, you see Tesla in Texas building not only is an absolutely huge battery plant, it's actually a car plant, then a huge battery plant, then a cathode plant, then down the line, a nickel chemical facility of some kind or sulfide I imagine and then hydroxide coming from the opposite way. It's kind of a raise from both ends, I would say. And I guess it logically makes sense. I mean, the one thing that I always get across to people or try to is that you won't be able to ship lithium-ion batteries long distances. The batteries have to be made where the cars are made, and that really will dictate that part of the business. But then everything's kind of just not floating around. Because you can't move the mines. You can't move the battery plant. You kind of build your business around everything else after that. And it's interesting to see the way it's playing out at present and like the examples I've given. Over to you guys. I don't know what you think of that.

I mean, Sarah, maybe you want to comment. There's a lot that Tesla has shared about its strategy that I think speaks to this. Just maybe you've have some thoughts.

Sure. I mean, I think, look, it has to make sense. I think, look, in the U.S. where there is just a distinct lack of cathode capacity, right? I mean I think that we -- as Simon and I have spoken a number of times. What's missing, I think, in the U.S. is the ecosystem, right? In China, that ecosystem sort of develops very quickly, and you have sort of different players step in to play those different parts within the supply chain, whether it be precursor producers and refiners or cathode producers, cell producers, right, that, that whole ecosystem sort of came together. I think in the U.S., we started with the Reno gigafactory, which was absolutely a battery cell only. And then obviously, those batteries coming built by kind of -- a lot of these materials coming from Asia. And I think it was a recognition that in order to build out that ecosystem, Tesla really had to sort of step in and take charge. And to an extent, I think that, that's why we've attempted to do it. In a way, it's not -- it's really, in a way, I think, to encourage, I think, more investment -- it's a way to signal if we can do this, then other players can do this. And there is, I think, an attractive landscape in which you do this here in the U.S. So it's really think about encouraging the growth of the supply chain. It's not binding me in saying I think lithium is a good example of that. I know that maybe it was a fairly polarizing reaction to some of the things that were announced at Battery Day as it relates to lithium. The message certainly was in well with Tesla, things that can do lithium, and it's not good for the rest of the industry, and it's not good -- no, for the other producers. But I think what the message really was, well, look, we're trying to help the industry. We recognize that there is a gap PL. We recognize that it's all hands on deck really. We all need to roll up our sleeves and try and solve this problem. And if Tesla can contribute in some way, then that's exactly what we're going to do. We're going to do this alongside Albemarle. We're going to do this alongside every other lithium producer in the U.S. and the world. So it's really desire here building vertically integrating. It's not about competition. It's not about I can do this better than you can, and I'm putting you out of business. It's really not about that. It's about saying how can we -- the mission is on about accelerating the transition of sustainable energy. And that means that we need to step in and help the supply chain grow. That's exactly what we'll do. So it's really, again, going back to this idea that this has to be -- this is a collaborative partnership effort between the entire supply chain. It's not one against the other trying to win market share.

Yes. And frankly, in my opinion, that's how the entire industry took the message at Battery Day other than equity investors who later sorted it out, right? The reality is we don't have the ecosystem in the U.S. It's -- there's maybe a bit of a head start in Europe, although I would argue U.S. has a better, from a lithium perspective, has a better set of resources and is already more commercially advanced. So it has an opportunity to leverage resources, strategic resources, in the country. So if you look at a lot of where costs are coming out to get down to $100 a kilowatt hour or less, it's not coming from raw materials, right? It's coming from integration, in some cases, scale, technology and know-how. And so I think the point is, yes, you could take an approach of everybody needs to just go down to not making any money, and we can get our costs down. But that's not a sustainable way for this industry to survive, right? Everybody has to go and make a return. Their investors won't bankroll them, if the investors are going to bankroll them, then the product doesn't appear. The product doesn't appear, then the next stage of the value chain can't -- cannot take advantage of it. So I think we've tested with lithium prices today, just where that is, and we've gone below it. And now it seems that prices are starting to rise and maybe some rationality starting to return. And really, the way forward is reasonable pricing, so that people can earn economics and continue investment technology, because it's not just Tesla who's doing a lot of investment in technology, it's other places in the value chain, including mall and other places, to continue to improve the quality and the availability of the product. So I think it's not consensus. It's about how -- it's about collaboration to drive a future that we all want to see happen.

Really good to here. So we are coming close to the end of the session. We've had so many questions, and thank you, everyone, for posting it. There's just a couple of more topics that I wanted to touch upon because there've been recurring questions about very briefly. First of which is ESG, which I know we've touched on a bit in the presentations. Perhaps firstly, Sarah, there's a question here. What do you see as the biggest risk on the lithium side of things from an ESG perspective whether it be regionally part of the process? Is there anything that really stands out as an area of concern that you think could be a bottleneck for the industry? Or I think lithium sometimes gets big headlines because it's used so much. But in the ESG framework of things, we're not talking about a cobalt here, that there's slightly different issues and things that could arguably be addressed. But how do you see things from the Tesla standpoint?

Yes. I mean, I think lithium phase is very similar challenges to other mines and minerals, right? I mean it's about some of the things that, again, that Eric alluded to. It's about carbon footprint. It's about water usage. It's about biodiversity, conservation and preservation. It's about coexisting with the local communities, whether they be indigenous communities or even just local communities. I think mining as a whole is going through a day of reckoning, right? And then I think a lot of -- as soon as you're touching sort of a natural resource. I think it's very much the same issues. I wouldn't say lithium is particularly higher risk or lower risk on any front. I think it faces the same challenges that any other material is going to face. So I think we like to take a holistic view of the supply chain, not just kind of single out. We talked about lithium sustainably. We have to talk about cobalt sustainability, and we have to out nickel sustainability. We have to do about sustainability with all the materials. And I think -- so it's really -- I don't think there's anything specific to -- we know there's a lot of press potentially around water in the Atacama. I mean but -- you can say -- could be said there are potentially carbon emission issues, more concerns around with the hard rock resources in Australia. So which one is better on the balance of things? It's very difficult to make a fair assessment of which one is better, which one is worth. They all come with a broad set of ESG issues, which each have complexities, each have nuances and they each need to be addressed. So probably not a very satisfactory answer, but it's a complex topic and certainly want to think that there is one type of lithium that that's certainly better than the other. They need to, I think, be balanced against the various issues with which they deal with.

Yes. I appreciate. 100% agree as well. It's such a complex area. And from our perspective of Benchmark, the more we dig into this area and trying to provide, like you say, not just one better than the other, but provide the complexity in terms of what are the issues or what needs to be looked at. Very briefly for you, Eric, and off the back of that, there's been a couple of questions just about whether you see any of the water. Obviously, the water issue is the headline sometimes in Chile, maybe delaying some of your expansions. Any -- do you see that as a risk? Or do you think this is just part of the process in terms of getting these expansions off the ground?

Yes. I was looking at some of the questions as Sarah was speaking and saw them. And I think the first thing you have to say is when you're operating in the Atacama, that driest place on Earth, of course, you have to be concerned about water. That's always a consideration. That's a fundamental premise of how you must operate to conserving water. So let me just jump to the question that you asked, and I can maybe reflect a bit. The water issues aren't necessarily what's slowing us down on expansion. We actually slowed down our expansion because of the uncertainty at the beginning of the year on the pandemic, just on cash flows. We had no idea as most -- every company didn't have any idea of how their cash flows and business would respond to the crisis. And so we slowed down capital a bit. And that's what pushed out the start-up of the project. Actually, the plant is 90% plus complete, right? And so we're going into the final stages of it, and we'll start going into commissioning in the middle -- through the second quarter next year and bring it up in the middle of the year and start customer qualifications, right? So that's -- it's going according to plan. It wasn't delayed by water. But maybe one other point, because I think this question is still around water, I mean there are 3 things that I think are important that we do. We keep it at the center of our focus. And first thing is hydrogeological models, right? We spend a lot of time. We have wells that are designed to pump and monitor as we do that are producing wells, right? And so there's an effort to continue to understand exactly what's going on between the fresh water reservoirs and the brine water reservoirs. And brine is not a potable water. It's saltier than seawater. It's not useful for any agricultural or human purpose. But making sure that by pumping that brine, you're not negatively impacting freshwater areas, lagoons or [indiscernible]. That's fundamental, and we do that transparently, collaboratively and with a lot of investment to make sure we're doing that correct. And I think we're doing a great job in that regard. When you think about freshwater at the cellar, which basically is used for human purposes. There is no freshwater that is used in the cellar for lithium production. In fact, more water is used in tourism, to be honest with you. And it's -- if you've not been -- it's a great place to visit from a tourism standpoint, but we, as for us, have a bigger impact going down than we do as an industrial operator. And then we do make lithium carbonate, and you do -- and that is not at the cellar. That's on the coast, and you do use water for that operation. And as part of our expansion. We spent over $100 million on the thermal evaporator which we're bringing up later this year. And that means that just short of 6% of water we'll use at that combined site now. The extended site will be recycled water, right? So I mean, there's a lot we do to address the water issue. It hasn't slowed us down, but it's a fundamental way in how we have to operate.

I really appreciate that. And I think it's a type of clarity like you and Sarah both said. This is a -- it's a really complex issue, and you can't really look at things through one lens. You really have to look by the details of what's going on to make that raw material into a battery-grade chemical. Thanks for that explanation, Eric. I know we're coming towards the end of our time. I've been told to have to wrap things up. I mean Simon has only spoken once. Is there any closing statements to anyone -- you've looked through some of the questions, Eric, is there anything else you wanted to address urgently on that toward the end or anyone else wants to make some comments?

I would just say thank you for the dialogue. It's not typical. You can see elements of our presentation are sort of like the equity presentation we give for the banks that follow us and and now they're single one-offs, and then your competitor roles and speaks after you. This is an opportunity to speak with an organization that knows the space very well and with an end user that's leading away. And that I think provides for a rich discussion. So thank you for that. Really appreciate it.

Thank you, Eric. It's been great, happy to be involved. Really appreciate your time. And of course, your time as well as Sarah. It's been a great discussion. Thank you. And hopefully, we can all do it again, maybe in person sometime soon. Yes. Thank you to all of our speakers. Thank you to everyone who tuned in for this session. Just a reminder that we have our final day of Benchmark Week tomorrow, starting tomorrow at 8 A.M. U.K. time. And off the back of a lot of the topics we discussed now, that is a day focused on sustainability. So please do tune in, if you want to learn more about ESG issues, recycling. We have sessions dedicated to all of that. So with that, thanks, everyone, for tuning in. Thanks again to our speakers, and we'll speak to you soon. Thanks, everyone.

Thank you very much.

Thank you.

Excellent. Thanks.