Albemarle Corporation (ALB) Earnings Call Transcript & Summary

All right. Good morning. Welcome to Albemarle's 2021 Investor Day, making the world safe and sustainable. My name is Meredith Bandy. I'm the Vice President of Investor Relations and Sustainability. I'm joined today by my team, David Burke, Director of Investor Relations; and Katie Pyfer, Manager of Investor Relations. Today, we're going to go through a deep dive on Albemarle. We have a lot of material to get through. As you're working through these slides in the coming days and don't hesitate to reach out to us to ask us any questions. We certainly welcome your feedback. As usual today, we will be discussing some forward-looking statements. The safe harbor language you can see here on this slide also applies to this webcast. We'll also discuss some non-GAAP financial measures today. You'll find reconciliations of these measures to GAAP financial measures in the appendix of these slides. Finally, the heart of the matter, our agenda for this morning. We'll begin with Kent Masters, our CEO. Kent will give a high-level strategic overview of Albemarle and he'll also discuss how we're implementing our new operating model, the Albemarle Way of Excellence, to ensure strategic execution. Next, we'll begin our business unit presentations. Netha Johnson, President, Bromine, will discuss how we're growing with our existing core markets but also some exciting new opportunities we have in the bromine markets. Raphael Crawford, President, Catalyst, will discuss how we're pivoting in that business to ensure long-term value creation in light of today's changing energy markets. After Raphael speaks, we'll have the first of 2 Q&A sessions today. I'll ask that you please hold your lithium questions for the second Q&A session. There are 2 options for asking questions today. First, we can take questions via the web chat. You'll see a chat functionality in the console of your screen. We'll also take questions via the phone lines just as we would do during a regular earnings call. Following our first Q&A session, we'll take a brief break. And when we come back, we'll hear from Eric Norris, President, Lithium. Eric will discuss how we're accelerating growth to enable the EV revolution. Ellen Lenny-Pessagno, Vice President of Lithium Sustainability, will talk about how we're able to produce lithium sustainably all around the world. Jac Fourie, our Chief Capital Projects Officer, will speak next. Jac will explain how we've built the capabilities required to deliver our growth projects on time and on budget. And finally, Scott Tozier, our CFO, will talk about how we have the financial flexibility we need to accelerate growth. We'll finish our Investor Day with a final Q&A session and remarks from Kent Masters. And with that, I'll turn it over to Kent to begin our presentations this morning.

Thank you, Meredith, and good morning, everyone, and thanks for joining our 2021 Investor Day. We're excited to be here to share the Albemarle story, our strengths and our strategy for growth, where we see opportunities ahead and how we intend to capture them to drive shareholder value today and well into the future. So let's get started. We believe Albemarle has the right elements for a very strong future. We are a global market leader with solid competitive advantages. We have a resilient and reliable track record of performance over time. We have a long runway of growth prospects driven by global advancement of electrification and digitization, which we expect will more than double our revenues and triple our EBITDA by 2026. We have a clear strategy that has served us well and will continue to fuel our business and our sustainability ambitions. And we have a focused operating model, what we call the Albemarle Way of Excellence. This model helps ensure our execution is aligned with our strategy to create long-term value. You'll hear these recurring themes throughout the presentations today. Last Investor Day, I was sitting in the audience with you as lead independent Director. Today, what a time it is to be leading Albemarle. Like everyone, over the past 18 months, we faced a great deal of uncertainty and change with the pandemic. But our resilience saw us through, and now we face great opportunity, and our strengths will lead the way. Since 2015, I've been actively engaged with my Board colleagues to establish Albemarle's purpose and values, which are core to our identity. What excites me about Albemarle is the innovation and leadership we bring to our markets and the growth prospects ahead. Lithium, for example, is an industry that is developing quickly. Albemarle is playing a critical role in shaping that development. We have earned an enviable position in our market, and with a strong strategy and values, we will build on that legacy for years to come. We are focusing our efforts in key areas to create a formidable company. By continuing to champion safety and progressing towards zero harm, by advancing sustainability goals and those of our customers, and Ellen will talk about this in more detail. And by using the Albemarle way, to establish clear goals and ensure focus and alignment for profitable growth and by globalizing our structure to move smarter and faster as an industry leader. For those who may not be as familiar with Albemarle, I want to take a step back and provide a quick overview. Albemarle has a strong legacy of leading, executing and adapting. We are a dividend aristocrat, growing our dividend for 27 consecutive years. We have a diverse portfolio of high-return businesses, serving customers around the world with quality products that help drive secular trends. Each business has opportunities for growth, which you'll hear more about from our business leaders this morning. And we generate significant operating cash. As we implement our operating model, we'll build on the sustainable cost savings, which we've captured to date. So that's who we are. Let's shift now to what sets us apart. As I mentioned at the start, we possess a solid competitive edge, anchored by our best-in-class global resources and assets. Our industry-leading safety performance and our thoughtful and active portfolio management and our strong balance sheet that gives us financial flexibility. We differentiate and lead in the markets we serve with great minds, technological know-how and strong customer partnerships. And we intend to differentiate further with a focus on sustainable goals and practices, which you'll hear about from all of our presenters. Albemarle's global footprint is also an advantage. We have access to a large and diverse set of world-class material resources to support our customers' growth. This includes brine and hard rock lithium resources to produce our lithium products. In addition, we In addition, we are the only bromine producer with access to 2 world-class resources, in Jordan and in Arkansas. Resources are critical for our success, but resources alone are not enough to meet customer demand. We also have a diverse asset base of conversion and production facilities. These plants are in major markets around the world and produce a wide array of products. And we are relentlessly focused on managing our resources and assets in -- as efficiently and effectively as possible. All of this helps ensure reliable and quality supply, and it puts us on the left-hand side of the industry cost curve. Our strengths extend to our leadership team. Our executive leadership team includes long-tenured employees and those who have recently joined us. Our new Chief Human Resources Officer, Melissa Anderson, joined us at the start of this year. She previously held long tenured senior HR roles with global leaders like IBM and Duke Power. You can see that this is a seasoned team that brings a diverse set of backgrounds and experiences. They also successfully managed through business cycles. I encourage you to read their CVs in the appendix of materials to see the diversity of business experiences this leadership team offers. Our strength extend to our Board of Directors as well. We have a diverse, engaged and accountable Board of 9 members, of which 8, excluding myself, are independent. At our 2019 Investor Day, we were in the process of completing a Board refresh. At the time, we had several planned retirements. We elected to use that opportunity to increase the diversity of our Board. We're proud of our Board's low average tenure and diversity in terms of not only race and gender, but also experience and perspective. Collectively, our Board has the skill set and experiences to oversee the execution of our growth strategy. These global experiences include financial expertise and knowledge of emerging markets, geopolitics, manufacturing and operations, supply chain, R&D and innovation and managing P&L for many years. Now let's see how those strengths translate into meeting our long-term goals. At Investor Day in 2019, we laid out our performance targets for 2024. Today, we'll give you an update on where we stand against those targets to date. For our corporate targets at the top of the table, despite all the challenges of the global COVID-19 pandemic, we remain on track to meet or exceed those targets. This success is due in part to the highly successful cost savings program we announced in 2019. It has exceeded our expectations. We do expect to fall short of our 2024 free cash flow target but only because we made the decision to accelerate investments to capture growth. These investments will be largely funded by cash flow from operations and our highly successful equity offering earlier this year. In terms of the GBU progress since our last Investor Day, we now expect to achieve total lithium capacity of 175,000 metric tons early next year and have fast track our expansion efforts to meet the rapid increase in demand ahead. Bromine was the least impacted by the pandemic, thanks to diverse existing end markets and growing new markets. Catalyst is the exception. -- due to a material impact from COVID and the accelerating energy transition. The team is charting a path to navigate that transition, which Raphael will detail in his presentation this morning. Let's turn now to the next slide. Now if you've been with us for a while, this will look familiar. We rolled out our long-term strategy in 2017, and the overall strategy remains intact. However, in 2020, we shifted our focus to clearly drive sustainable value for our customers and shareholders. Our strategy has 4 primary pillars. First, we will grow profitably. We have identified and planned a profile, a portfolio of low capital intensity, high-return projects. Over the past 5 years, we have built the team and capabilities to execute these projects on time and on budget. Jac will go over this capability in more detail in his discussion. We have long-term commercial relationships with our key customers, and these projects align with our customers' strategic requirements while achieving appropriate returns for our shareholders. Second, we will maximize productivity. Over the past year, we have optimized earnings and cash flow generation across our business. We have streamlined our business and processes to create an effective and efficient platform for growth. Operational discipline is essential for generating cash flow and supporting growth, and we will not take our eyes off the ball even as we move into an accelerated growth phase. Third, we will invest with discipline. We are allocating capital to our highest return opportunities. We will also continue to maintain our investment-grade credit rating and support our dividend. Scott will talk about our disciplined approach to investing in more detail in his presentation. And fourth, we will advance sustainability across our businesses, which is not only strategic but core to our values. We aim to increase sustainability throughout the value chain from the resource to the end use of our products. Our lithium products enable the reduction of greenhouse gas emissions through the adoption of battery electric vehicles. Our bromine products contribute to consumer safety by predicting fires in electronic equipment. And our catalyst products help refiners produce cleaner transportation fuels. Now let me spend a minute more on investment discipline and talk about portfolio management. Over the years, we have proven that we are thoughtful in our approach to portfolio management. We have generated more than $4 billion in gross proceeds from recent divestitures. We have invested more than $2 billion to build our lithium business. and have reduced our net debt by more than $2 billion over the last 5 years. Our portfolio decisions have served us well to create the company we are today. We actively evaluate our portfolio and review this with our Board of Directors on a regular basis. You will see in Raphael's presentation that our catalyst business is pivoting its strategy for growth in response to the accelerating energy transition. Our catalyst business is fundamentally strong, and there are exciting opportunities for catalyst but it will require meaningful resources and focus to realize its potential. We have to ask the question. Is this the right priority for Albemarle's capital at this time? We are assessing the best way to support the catalyst business in this pivot. This has prompted us to initiate a strategic review of the business. We will be thoughtful in our approach, as we always have. And I believe our track record of portfolio management demonstrates this point. It is too early to see the path for the catalyst business at this time, but we will consider all options available to us. From a strategic standpoint, we are building assets for lithium, which you'll hear more about from Eric; and for bromine, which Netha will detail in his presentation. We are pursuing significant organic growth opportunities. We may also seek acquisitions, if those acquisitions allow us to accelerate growth or complement our portfolio with additional specialized technology and materials, high-caliber resources or partnerships that help us compete and deliver for our customers. We will pursue inorganic growth only when the economics are strong. And as you can see at the bottom of the slide, we have defined a set of financial criteria to maximize returns and ensure value creation. Let's shift now and talk about our approach to strategy execution. For our strategy to be successful, we must execute well. To do this, every employee needs to be aligned to our values, our goals and our approach to execution. This approach is the Albemarle way of excellence. This structured operating model will help us see where we need to pursue excellence now so we can run our enterprise better as we grow, set and communicate objectives that we know will change as we grow. We'll keep employee goals and work aligned to our strategy for growth. So this model includes 3 performance priorities: our overarching objectives for our performance shown along the outer band; 4 operating pillars, the key competency areas to optimize our execution excellence and 12 execution principles, the channels of execution that strengthen our key competencies. We'll use this model for objective setting, KPI reporting and as a blueprint to continually focus our attention to better execute our strategy and build a stronger company. On the next slide, I'll take you through the Albemarle way in a bit more detail. High-performance culture ensures that we keep our -- help our employees be safe value-centered, focused and empowered to be the best they can be. We'll do this through health, safety and environmental excellence to ensure safety is always our top priority. Continued focus on our purpose and values and an agile and engaged organization with diverse and empowered teams for responsive action. Competitive capabilities defines how we differentiate and build advantage to remain a leader in our markets. We will do this with best global talent -- best-in-class resources with a low-cost position. Technology and partnerships that differentiate our products and services and a robust IT backbone that standardizes global processes, analytics, governance and security. Operational discipline reduces cost and increases customer satisfaction and loyalty. We accomplished this through manufacturing excellence, implementing lean principles and embracing smart technology to improve HSE, cost, reliability, quality and efficiency. Through business excellence, where we are focused on an effective and efficient back office and advantaged supply chain and differentiated customer service. And through capital projects excellence, where we'll pursue an optimized and standardized design approach to improve capital intensity and enable benefits in product cost, quality and sustainability. You'll hear more from Jac on how we're advancing this work. Most importantly, our sustainable approach gives us our license to operate and creates long-term value for our stakeholders. We'll do this through responsible management of our resources and materials, sound product stewardship and responsible sourcing, legal and regulatory compliance and advocacy for fair and science-based regulation; a safe, inclusive and diverse workplace; and close engagement with the communities where we operate. Staying on the topic of our sustainable approach for a little longer. Our sustainability targets were disclosed in June as part of our annual sustainability report. In that report, we committed to reduce the carbon intensity of our catalyst and bromine businesses by a combined 35% by 2030 in line with science-based targets. To reduce the intensity of our fresh water usage by 25% by 2030 in areas of high and extremely high water risk. To grow our lithium business in a carbon intensity neutral manner through 2030 and aim for net zero carbon emissions by 2050. This morning, each GBU will discuss some of the projects that are currently underway to help us meet these targets. We are working hard to achieve these goals and plan to evolve our thinking and targets over time. We've talked about how we'll use our Albemarle way of excellence to accelerate our sustainable approach. We are taking similar deliberate actions in the operating discipline and high-performance culture pillars as well. As we were finalizing our operating model late last year, we knew that operational discipline was a pressing challenge with significant opportunity for improvement. And with the uncertainty of the pandemic, we knew our work culture would change. So in late 2020, we created our Journey to Excellence initiative. This initiative launched 6 diverse cross-functional teams who spent 100 days brainstorming and vetting ideas to solve the most complex problems we face. These are challenging problems to solve and the teams did a great job. Their plans encouraged us to be bold in our approach for great gain. We've assigned implementation leaders for each project, and the work is on an accelerated path. You'll hear more about these projects and the presentations that follow, but let me give you a couple of examples. Customer excellence is about enhancing the customer journey from an initial request to final product delivery. We are aligning cross-functional teams around customer segmentation to improve customer value and retention. The Future of Work project is about attracting and retaining a skilled and diverse workforce. We have established a remotability framework that guides our approach to hybrid work. This framework allows us to manage cost while also meeting employee needs for flexibility, collaboration and development. Our goal is to create a stronger, advantaged position that we can build on as we scale to deliver our strategy for growth. And now we'll begin with an in-depth view of our global business units. I'll hand over to Netha Johnson, President of our Bromine business. But first, we'll begin with a short video introduction to our bromine business. [Presentation]

Good morning. My name is Netha Johnson. And over the next 20 minutes, I plan to talk about the strong performance of the bromine business, our pivot of this business to a growth business and the numerous opportunities we have to execute against growth over the next 5 years. The bromine business within Albemarle plans to build upon our strong foundation of financial performance. We are a global market leader with value-added services and a growing customer base. The combined CAGR of the markets that we participate in over the next 5 years to 3.5%. What this means for us is that the global volume of equivalent bromine will grow from the 550 kilotons that it is today to over 740 kilotons over the next 5 years. We will execute against multiple capital projects to participate in this growth. But even with those capital projects, we fully expect the bromine market to be undersupplied for the next 5 years. The bromine business expects to deliver greater than GDP growth rates while maintaining best-in-class margins and cash flow performance. This is a snapshot of our business today, but I'm only going to focus on 3 points in this whole slide. The first is our diversification. If you look on the right-hand side of the chart, you can see how diversified our business is. In fact, our business has never been more diversified than it is today. What this does for us, it provides us numerous opportunities to grow as well as protect us in case of a market downturn. This was evidenced in 2020 during the coronavirus. This business was able to grow EBITDA double GDP even doing those difficult market conditions. The next area of the slide I want to focus on is our business characteristics. We have access to world-class natural resources with a low cost position. This positions us well as a low-cost producer in our industry. We also have a plant that's able to deliver more than 16 products from the same value stream and same plant cost structure. This allows us to efficiently transition from product to capture growth in markets and insulate ourselves against markets that are down. The last piece I want to emphasize is our environment. We could not be more excited about the opportunities we have in this business in our markets. If you look at the macro trends of the future from digitization, electrification, Internet of Things, increased health and safety increased environmental remediation and work from home and hybrid work, the bromine business is absolutely well positioned to take advantage of these. We have the right business and the right environment. to grow going forward. With our -- with the exception of our ability to forecast oil and gas prices, we have far exceeded every financial and performance metric I illustrated to you when I was last year in 2019. In terms of operational excellence, in 2019, 1% of OEE improvement represents $1.6 million. In 2020, we increased that to where 1% of OEE improvement equals $2 million to $3 million of EBITDA, which translates to us right to the bottom line and margin enhancement. By 2023, this business will have executed over $54 million of annualized productivity and cost avoidance projects well ahead of the target we set for ourselves. In terms of financial performance, we beat every metric that we wanted to and listed in 2019 in the areas of growth, margins and cash flow. One of the fundamental tenets of the bromine business is our access to highly concentrated bromides, and what that gives us is a low-cost position. Our business model is simple, and straightforward, and we've been executing this model for over 2 decades. In fact, it's very similar to the lithium business model. We extract bromine raw materials from either a well or the sea. And we transformed that raw material into higher value-added products via chemical processing. We then sell those prime value products and to global key account customers via a direct sales model, a very basic operating model that we know how to execute very well. We get our bromine from 2 places, the Dead Sea in Jordan and Arkansas within the United States. And if you can see from the top right-hand slide -- part of the slide, excuse me, the concentration of bromine in the Dead Sea and Arkansas is the largest in the world. And this also translates if you look at the bottom left, and to the industrial cost curve for elemental bromine. As you can see from that chart in the bottom right, the Dead Sea in Arkansas are the lowest cost sources of bromine in the world, and we are the only company that has access to both. This is a snapshot of which the markets in which we have an opportunity to play. The total addressable market and the growth rates only represent the bromine opportunity within these much larger vertical markets. When I see these markets, I see opportunity. If you look at the visuals around telecom, electronics, energy and consumer polymers, these are great opportunities for us to grow. And in the next 3 slides, I'll cover 3 of these markets to give you insights into where we plan to grow. The first will be consumer polymers. This is where we have an existing product with existing customers and operate from a position of strength. The next will be telecom, where that we have opportunity to get new additional opportunities as we transition to 5G. And the last one I'll talk about is the EV market, which is a new market for us, but a market in which we could not be more excited to participate in. If we look in the consumer polymer business, our HBR product is a catalyst that is necessary in the production of PET. We are well established in this market and we have lots of customers that we're very successful with. The expansion of PET plants is well documented all around the world with a particular high number located in China. This is aligned with the new -- new mega trend of increasing consumer disposable income, which translate to an increasing demand for consumer polymer products. This is a great opportunity for us to build on a position of strength and grow with this market growth. Simply for us, if there's more PET, we grow as a bromine business. The next market I'd like to talk about is actually the telecom market but, more particularly, we have 5G application within that market. 5G is a capacity and communications protocol which allows for the increased connections of multiple of millions of devices. These devices are focused on virtual reality, autonomous vehicles and IoT devices. If you think about the opportunity that this presents for bromine, this is a tremendous opportunity for our flame retardant business to provide fire protection for all these devices executing within the 5G protocol. In fact, if you look at our growth by product, Albemarle is experiencing surge in demand in our products that are associated with the 5G communication protocol. The final market I want to discuss today is the EV market, and this is the new market for us that I've never discussed with you in relevance to bromine. The EV market gives us a lot of opportunities to play. We have applications in the EV market, which are the same as an industrial combustion engine market, such as displays, wiring harnesses, sensors and tires. But the EV market also gives us additional applications in which we can participate, such as high-voltage wiring, battery casing and charging stations. Albemarle's bromine products are absolutely on multiple EV platforms that are in the market today, and we look forward to expanding on that going forward. If you fundamentally believe in the transition to EVs, you have to be excited about the bromine business going forward for Albemarle. Kent talked about the company's strategy. Albemarle's strategy is bromine strategy. We will grow profitably and capitalize on growth in existing, new and expanding applications. We plan to maximize our productivity by introducing 21st century manufacturing principles to reduce costs through asset efficiency and productivity. We invest with discipline. And for us, that means executing high-return, short payback opportunities in areas where we've been in business for over 50 years with products and processes we've known for 50 years and in communities, we have great relationships. A new piece of our strategy is sustainability. Sustainability is the cornerstone for our strategy as well as our value proposition, not only for our customers but also for our employees and our investors. And we look forward to making improvements in safety, greenhouse gas reduction, air emission reductions, water and waste reductions. Now I'd like to pivot to the Albemarle way of excellence. This is a new operating model that will transform this company and transform the bromine business, and it is absolutely embedded in everything we do in the bromine business. When Kent talks about the pillar of competitive capability of research and technology, for us, that means new product innovation. We've worked extremely hard over the last 3 years to revitalize our new product portfolio. And now we have a new product portfolio that's based on true market research, has very strong IP position, has a platform approach, and this enables us to roll out multiple new product launches every year. We have over 50 ideas that have been through our funnel, vetted and approved for action. And in the next 5 years in 2026, 12% of our revenue will come from these new products that we launched in the last 5 years. I'd like to talk about 2 specific examples. The first is SAYTEX ALERO. That's our next-generation flame retardant product. It is really creating a new large and stable molecule that has favorable mechanical properties for our customers and a superior environmental profile. The next product I'd like to highlight is our MercLok product. And this is used to remediate mercury in contaminated soils and sediments and super -- sites. Typically, mercury leaches through the ports and the soil and goes back and forth and it leaches out and creates a greater area where its contamination expands. Our bromine molecule through a chemical process actually locks on to the mercury and creates a molecule that's too large to come back through these pores as well as trapping the mercury that's on the surface of the ground. This is a great opportunity for us and one of the most exciting sustainable new product launches that we have in the company. Our portfolio is diverse and healthy, and these new products will be a foundation of our growth. The next pillar of the Albemarle wave of excellence that I'd like to cover is around operational discipline. As Kent mentioned, this is fundamental to all the things that we do. And for us, it's all about using 21st century manufacturing principles, really focused on maintenance and reliability, which in turn drives OE, which in turn drives EBITDA for delivery to our bottom line results. We have a strong record of delivering on capital projects in bromine. We like to do these projects and I like to think that we do them very well. I'll give you 2 examples of just those that we delivered this year that are adding to the growth of this business. The first is our new well in Magnolia. Right after the approval of the equity raise earlier this year, our Board and Kent and Scott authorized us to drill a new well in Magnolia. This well was delivered on budget and started up early in July. Because of our intimate knowledge of our brine resources in Magnolia and knowing where and how to drill, this is the best producing well we've ever had in the history of the company. And it's the highest bromine concentration in our brine field by over 20%. We are absolutely sold out of Tetrabrom for JDC. We've also executed a project there to debottleneck our Tetrabrom production. And again, this project was completed on budget and started up on time in August of this year. The result of this project as we have the highest yield and production rates that we've ever had in the history of our Jordan joint venture. We have the capability and we have the commitment to deliver outstanding capital projects, which is the foundation for our growth over the next 5 years. The last Albemarle way of excellence principle I want to highlight is really around our sustainable approach. As I mentioned before, sustainability is the cornerstone of our strategy and value proposition. And by executing some of the projects you see on the right-hand side, bromine company, we will reduce our water usage by 41%, our greenhouse gas emissions by 14% and our waste by 59%. In Magnolia, we will reduce our water usage by 20% and our greenhouse gases by 30%. These are material reduction targets that we will deliver by 2025. Finally, I'd like to move to our outlook. When we look at our revenue, we expect to grow from our current base of $1 billion to $1.1 billion at a rate of 5% CAGR over the next 5 years. In terms of our margins, we expect to expand our margins from the 32% to 33% we have today to 32% to 36% over the next 5 years. We'll execute against 3 brownfield projects in Magnolia over this time frame to deliver this revenue growth, and we will also be implementing 21st century manufacturing principles to drive the margin expansion. We expect to deliver strong financial performance for the company moving forward. So in conclusion, I'd like to leave you with a few points. The first bromine is a global market leader with access to world-class resources. We are a growth business, and we have upside to generate attractive returns. Our markets are exciting, and we have the ability to grow in new applications, in new areas as well as execute low capital intensity projects on time and on budget to feed this growth. We have a deep technical understanding of our products and are able to use this understanding to deliver new products that, again, add fuel to our growth. And finally, we create value-added solutions to help our customers be the absolute best they could be in their business. So thank you for your time this morning, and I'd like to transition to Raphael Crawford. [Presentation]

And growth. And the focus for my team, for me and my team, is really on safe operations, efficiency and never losing sight of the importance of our customers in meeting their commitments. So I'd like to turn to what underpins our confidence in the catalyst business. Fundamentally, we are a strong business with many growth opportunities. We have a diverse technology portfolio and strong customer intimacy. It's that customer intimacy and value creation which is really core to what we do. Within the catalyst business, we have a network of global assets, a direct sales force in emerging markets, and we have strategic joint ventures, which give us global reach to all the refiners around the world. I'd like to highlight one of those joint ventures right now. That's FCCSA. That's our Brazilian joint venture with Petrobras. That joint venture for FCC catalysts and additives doesn't only give us access to South America and Brazil for sales and production of refining catalysts. It also serves as a global sourcing point that helps Albemarle extend its reach around the world. And I do want to take this moment, I'm going to pause for just a moment. and I would like to congratulate the FCCSA team for their safety record. Like the rest of Albemarle, all of our joint ventures focus on safety. FCCSA as of today is at 1,454 days without a recordable incident. September 16 will be exactly 4 years. So I think that team is doing a great job especially on safety. So to that team. [indiscernible] Also within our core competencies is really our product and application expertise. That's something that is core to what we do and creates value for our customers. And I think what's really exciting, so what we're going to talk to you about today, is how we're going to leverage our core competencies into new geographies, new applications and in alignment with renewables markets. So with that, let me tell you about how we see catalysts as a leader in refining and petrochemicals. First, it's a high-quality business. mean the scale is very meaningful. We have 3 large-scale assets which service the world. And we have seen an acute impact from the pandemic. But what I'm very proud of is how the catalyst team has stuck with it, focused on reliability, safety, operability and never lost sight of what's really important, and that's our customers. That's enabled us to continue to drive strong margins and solid cash flow for Albemarle. We expect to continue to see sequential recovery in this business. We'll see it in FCC. The FCC business will grow as fuel demand increases as well as in the production of light olefins. Light olefins production has held up very well through the pandemic and will continue to grow at above GDP rates. The CFT business, which we also call hydroprocessing, is expected to continue to recover through 2022 through 2024, back to 2019 levels. And the PCS business continues to perform very well. It grows in alignment with trends in consumer purchases, a growing middle class, electronics and consumption of plastics. So let's look back at 2019 and the expectations we set then and how we're progressing. We're very pleased with our overall progress given the challenging macroeconomic conditions we faced. We have seen an unprecedented impact from the pandemic and its impact on fuel demand and on low oil prices. But through all of this, we've delivered on low-cost manufacturing, innovation and building on our customer relationships. We've taken the necessary actions as it relates to cost, asset decisions and innovation to continue to perform during the storm. And as I said before, we're poised for recovery. As the market recovers, we'll recover. And we see that as one pillar of our growth. And additionally, we're focused on new opportunities to continue to grow this business beyond our core markets. We expect margins to recover to the mid-20% EBITDA margins. And while the PCS business was a business we were considering for strategic alternatives at Investor Day in 2019, it continues to perform above expectations. So now let me turn to some descriptions of our 3 businesses. And I'm going to start with the FCC business. If you're not familiar with the FCC business, FCC catalysts are used to crack oil into various end products from a refinery. That's fuels, chemicals, the array that comes from a refining operation. It's integral to the core function of refineries around the world. I want to be clear, this is a recurring revenue business. And while that's important is we'll talk about CFT on a future slide, but this is a recurring revenue business, meaning the catalysts are continuously added every day into an FCC unit, and that enables our customers to tailor their yields and their product slate as time goes on and almost do that on a daily basis, if need be. Our particular strengths in this market for FCC are in bottoms cracking, that's really the heavier feed going into an FCC unit, as well as in olefins output. Olefins, whether it be propylene or butylene are -- come from an FCC unit. C3 or propylene is used in durable plastics and C4s are often used to produce alkylate. Alkylate is a blending component for octane-enhancing in gasoline. As I said before, the olefins segment through the pandemic and now continues to perform very well, given the macroeconomic trends that drive that. Overall, for this business, as well as what we'll talk about in CFT, the key drivers are around transportation fuel and petrochemical demand. We see the largest growth in this business in Southeast Asia and India. That being said, we're a global business. All of our customers are important around the world, and we continue to serve those customers now and into the future. And I'm very proud of the team we have. It's -- when I reflect back, when I go back to like, oh, well, when I joined this business, everybody told me that catalyst is a different business. It's different than bromine. It's different than lithium. I see it. Look, I really see it. The team of experts, what they know about how to service our customers and generate value, it's a different kind of an expertise. And I'm very proud of the team we have. They generate value for our customers, and I'm proud to be part of this business. So if I turn to our hydroprocessing segment, we often call this our clean fuels technology business. This is all about contaminant removal, namely sulfur from fuels. We often think of this, and we've referred to it on earnings calls in the past as being a lumpy business. Actually, if you have a better word, somebody sent me a better word. But we use lumpy because of like the cycle in which rebeds happen within this business. Catalysts in hydroprocessing are sold in discrete loads on a 1- to 4-year cycle. So it's difficult to make comparisons on this business in any 1 quarter. It's easier to look at it more on an 18-month basis because it takes out the variability often of that customer order timing. As I said, it's used to purify -- the hydroprocessing catalysts are used to purify the streams in a refinery, whether it be the intermediate products, so the feed going into a hydrocracker or an FCC unit, or the outputs being gasoline, diesel, jet fuel, bunker fuel. Again, primary drivers are around transportation fuel, but also the added effect of increasing sulfur specifications around the world the regulations that drive cleaner transportation fuels. Our technical team are experts in this field. We have high-performance catalysts and a key point that I want to emphasize, which we're going to talk about in more detail, is the role that hydroprocessing is going to have in new applications in this business. It plays a critical role in the purification of renewable fuels and plastics recycling and we're going to cover that in more detail. But before we get there, let's turn to the PCS business. The PCS business is comprised of 2 operating divisions. That's the organometallics business and the curatives business, Organometallics are used in the manufacturing of polyolefins, linear alpha olefins as well as electronic materials, whereas curatives are used in construction, furniture and automotive markets. Both of these businesses are growing at above GDP rates. We create value for our customers specifically through the service that we provide, that service relates to safe use and applications use and the reliability of supply. So now I'd like to highlight some of the macroeconomic trends in this business that underpin our strategy. So on the top left, you'll see the demand outlook over the next few years for transportation fuels. And over the next decade, we will see some leveling out of overall global demand in transportation fuels. But what I think is exciting and exciting for our business, specifically, is that the growth will continue in India and Southeast Asia as those economies grow. As they start to import less fuel and produce more of their own fuel, it's a tailwind for our business. Most of the new refineries that are being built are east of Suez and include significant petrochemical operations. Those new refineries are highly complex, and they fit very well with our strategy on enhancing olefin production as well as our go-to-market strategy in emerging markets. And to remind you, that go-to-market strategy is to have direct sales and technical service individuals in region that are close to the customer. And I do want to highlight that the new refineries being built as well as many of the existing refineries in India and Southeast Asia are just bigger. The average refinery size in India, for example, is 1/3 larger than the average in the rest of the world. So you can see the opportunity present for us to continue to strengthen our position in those markets. I also want to highlight on the bottom left the growing demand for propylene. Propylene demand is largely driven by the end market demand for polypropylene, which is a durable plastic, and that is growing at above GDP rates. And as you look at demand for polyurethanes on the bottom right, you can see that because of growth in construction, automotive and furniture applications, that's also growing, and that's a large part of the demand for curatives. Now it's our focus to leverage the strength that I've talked about to drive sustainable growth. So first, we're definitely looking at how do we expand geographic presence. So we've covered that talking about Southeast Asia and India. We also want to grow in new applications like crude to chemicals and renewable space. That's really an exciting place for us. And to be very clear, that's very exciting for our customers. We are all in this together. So how the refining market goes and how we adjust to the changes in refining, that's a driver of our success, and we are here for our customers to help them succeed. As they're pivoting, we pivot with them. We're going to continue to maximize our productivity and efficiency. A little bit later, we'll talk about an example of operating efficiency with artificial intelligence. The applications that we have are sustainable applications. As Kent had mentioned, we're focused on using catalytic processes for higher resource efficiency, so getting more out of a barrel of crude oil, as well as catalytic processes to purify fuel. But it doesn't stop there because the things that we're working on are also new applications that adjust to a new energy economy, more renewables and recycling. So in summary, like our catalyst strategy is twofold. It's expansion in our core markets, and it's building on new platforms in emerging sustainable applications. So when we look at growing our core business, as I mentioned before, Southeast Asia and India are critical. But I do want to talk about the crude to chemicals opportunity. So as you can see on the chart, wanted to give you a sense of like what's the differential value in chemicals versus fuels from a refinery. And if you go back, I know that everybody on this call, everybody went back and reread the 2019 Investor Day script before they got to this. So this is a new news for you, but I want to let you know that I did that, too. And when I went back and looked at the same chart in 2019, the difference is $100 per met ton of value, which is greater now for chemicals versus fuels than back then. So as much of an opportunity as it was 2 years ago, it's a growing opportunity for refiners today. Again, we're going to align our refining customers in this space, helping them with new builds, retrofits to be able to capitalize on the chemicals opportunity. To put in context, a traditional refinery today is somewhere between 10% to 12% chemicals output, namely in olefins. Refineries being built are somewhere in the neighborhood of 25% to 45%, and the aspiration is to get to 70% conversion of crude to chemicals. Albemarle is a leader in this space. In high-severity FCC units, which are really designed for max propylene output, we have the highest demonstrated yields with our customers in generating olefins output. Working on all this requires that we have good partners. Those partners be technology licensers and that we continue to innovate. And the good news is that the technologies for crude to chemicals are FCC like. So the technical support that we provide, the innovation that we know we can do are very transferable to the opportunity. And so now let me pivot to biofuels and pyrolysis oils. And I want to give you a glimpse of the things that we're working on. Two major markets that are exciting for us are really in renewables hydrogenated vegetable oil as well as pyrolysis. Hydrogenated vegetable oil is going to grow at a 33% CAGR over the next 5 years. Pyrolysis oil represents an opportunity to participate in the purification of a feedstock. For those who aren't familiar with pyrolysis, it's the use of thermal or catalytic decomposition of waste plastics into a usable oil. It enables Albemarle to participate in this space related to the circularity of waste plastic, which is a growing opportunity for the industry and for our customers. Our strengths in hydroprocessing directly relate to this. Both of these markets are about using hydroprocessing technology to purify the inputs and outputs in those processes, and the demand is certain to grow and we are aligned to participate. And I do want to highlight that Neste is our key partner. They've been a partner for us for 20 years in the renewable fuel space. They're a key partner for us in the past and one in the future. And we've partnered with them on next BTL and other technology platforms to enable their success and to participate in that success with them. So while growth is the overall key priority, business priority for the catalyst GBU, we continue to focus on operational efficiency. And I want to give you a case study from Bayport. So at the Bayport site, we're using artificial intelligence and machine learning to advance our use of data for the operating performance of the site. It's enabled us to automate Six Sigma. We're able to focus in on the highest impact data to enable our engineers to make good decisions real time. And I want to share my own personal experience with this, I am not -- first of all, in fair disclosure, I am not an expert on artificial intelligence. I'm very thankful that people in our company are. But every Monday morning, we get on a call, it's actually a tradition that's been in Albemarle, predates me probably by a decade, of getting on the call with our manufacturing sites to talk about the performance of the sites. And it's amazing how often now on Monday mornings, we hear of examples at our sites of use of data to run the plants better, and we have a stage amount of data that we now can distill to the highest impact themes to enable the engineers to run the plants. And while that's really exciting for catalyst, and we're just giving you one example. It's -- it represents an opportunity for all in Albemarle. Really, for the lithium and bromine businesses, which are in a sold-out position, you can imagine what the higher uptime, higher efficiency means to a sold-out business. So it's a great opportunity that we're learning at Bayport, rolling out through our catalysts and learning to implement throughout the Albemarle network. So now pivoting to sustainability. I want to give you some highlights of what we're working on as it relates to contributing to a more sustainable world through our catalyst business aligned to Albemarle. As I mentioned, the products we have, they contribute, the existing portfolio contributes to cleaner fuels and higher resource utilization. The innovations we're working on in pyrolysis, hydrogenated vegetable oil, catalyst circularity and biomass co-feed, all of them are new opportunities to be part of the new energy economy. And then within our own operations, as Kent mentioned, we're very proud of our plans to get to a 35% reduction in greenhouse gases, carbon intensity by 2030 and net zero by 2050. The teams at Amsterdam, Bayport and Pasadena have spent a tremendous amount of effort and have detailed plans on which projects to execute to be able to run the plants differently and have identified green sources of energy, which enable us to do that. So now let's turn to our financial outlook. As I mentioned upfront, we see recovery coming. We see it in our markets as transportation fuel demand increases. We feel like 2021 is a low point and that will be coming off that low point into future years. And as we grow, we'll see that drop through to the bottom line in margins that return to the mid-20 -- to the mid-20s. So in conclusion, I'm very excited about the future of the catalyst business. I am proud to be part of this business. We see a strong rebound coming in our core markets. We're leveraging our strengths into adjacent areas and we're aligning what we do operationally and innovation-wise with Albemarle's sustainability priorities. But above all, we're here for our customers in the petrochemical space, in the refining space. We are here to help them be successful in our existing fuels markets that enable them to have a long future. So with that, I want to thank you for tuning in, and I'm going to welcome our panel to the stage.

All right. Great. So we'll begin our first Q&A session. [Operator Instructions] And I'll also ask you to please hold your lithium questions just until the next session when Eric Norris joins us. We do have a number of questions both from the chat and from the phone lines. So we'll start with the chat, just a few questions. The first question comes from Kevin McCarthy, Vertical Research Partners. Regarding our new strategic review for catalyst, can you comment on the impetus for that decision, where you are in the process today and the potential timing of any decision?

Yes. So I guess the driver for that, I mean, you heard that in Raphael's presentation. We've been -- the strategy, there's a requirement for investment and to shift in the market. So that has asked the question. Is that where Albemarle should be putting our capital today? So we'll review that. I mean it is a -- and we wanted to do that strategic plan first to understand the opportunity. And the timing, we're on the strategic review. So the strategy of the business is one thing, but now the strategic review from a portfolio standpoint, we're just getting started. So I'm not ready to give you a time line for that. So we'll take the time that is necessary, but it's something that we're focused on and actively working on.

All right. Great. So the next question also from the chat, Mike Harrison at Seaport Research Partners asked for Netha. The key markets that you list on Slide 27. Where does Albemarle see the largest share of total addressable market? And what markets do you see as the most profitable for Albemarle?

Yes. I think if we think about your question, the opportunities for us are really, really biggest in electronics and the consumer polymers. And those are our traditional markets that we've been in a long time. We just know them best. We have customer relationships there that give us great insight, and we have great products that fit what our customers' needs. So those are the ones we are probably most confident in going forward.

All right. Great. One more from Kevin McCarthy at Vertical Research Partners. Kevin asked again regarding bromine. How much capacity have you added? Are you able to run at full rates given various supply chain constraints evident in today's global market? And perhaps you can also address any inputs, EG chlorine as well as make constraints among customers' abilities to operate that may be referring to Hurricane Ida, which people have asked about a little bit recently?

Yes, Kevin. We typically don't disclose the capacities, but we are definitely adding volume for the market. I think our plants are ready to go. And what I mean by that, we've done the things we need to do on our side to execute. But what you're saying is absolutely true. Ida has really put a challenge in our supply chain we had challenges before Ida in BPA and chlorine. And to be quite honest, we're living day-to-day with force majeure notices from our suppliers, especially those in the region hit by Ida. So we're trying to get and understand exactly how this would impact us. But from a production standpoint, we're ready. We're ready to go. So as these supply chains get fixed, which we know they will, we'll be ready to deliver that additional capacity to our markets and to our customers.

Right. Thank you. So we'll take one more from the chat, and then we'll go to the phone lines. Seth Goldstein at Morningstar asked, again, 2 questions on bromine. What is the total addressable market for SAYTEX ALERO? And will this cannibalize existing products? Walk us through that scenario.

Yes. The service addressable market, which means we have opportunity for SAYTEX ALERO is around $300 million. And we don't see this as a cannibalization. The market growth fundamentally supports both products -- And now we have that opportunity to offer multiple products depending on the customers' choices and they're in application. That's the ideal scenario we want to be. So there's definitely room for growth for both products over the next 5 years, and we feel just as good about both of them going forward.

All right. Great. Operator, let's go to the phone lines for a few questions.

The first question comes from Joel Jackson with BMO Capital Markets. .

On the bromine, tell me if I'm wrong here, bromine has grown kind of the GP light kind of growth rate. Maybe you have a couple of good years, a couple of bad years. As you're looking at over the next 5 years, you're talking -- growing earnings come to higher levels, [indiscernible] level, how you're projecting like another $100 million in earnings. Is there something fundamentally changing in the bromine market despite some of return some of your company specific things that you're looking at, but do you think the GDP right history, I mentioned, is there? Do you think it's changing going forward? Maybe you can comment on that thing.

Yes. So let me start -- I'll start on that, and then Netha can give a little more detail. But -- and we've been talking about this a bit for the last almost year, 6 months, I would say. -- that the market is changing. I mean -- and I think it's really driven by digitization and electrification. I mean it's across a lot of our markets, but you saw the slides that Netha showed. There are more chips in everything. There's more -- your doorbell has chips, EVs have more chips than ICEs. Everything has more electronics in it, and a lot of -- and that's just a fundamental driver. We were surprised at how well bromine held up during the COVID-19 pandemic but it really it held up well. And since then, we've kind of seen that transition. And I think that's something that has been building over time. And it's really kind of come into our visibility in the last, I would say, year or just at the end -- maybe 6 months ago, we started really forming the view that the market had changed, and it just wasn't something unique to the pandemic.

Kent, you're absolutely right. And to expand a little deeper, our diversification has been stronger than it's ever been. So we have more opportunities to grow than maybe traditionally we had in this market. And then the company's management and leadership has put us in a financial position where we can invest capital in this business. For us, capital equals growth. We've been sold out for a number of years. And now with the capital raise and equity investment and the allocation of 10% of that to the bromine business and the way the company has positioned itself with this capital structure, we have an opportunity to expand and grow with the markets we serve.

If I could follow up on that. You were -- this is not a trick question, but your partner is enjoying seems to be required to look at now over the next couple of years, trying to quantify a lithium resource in the Dead Sea -- there and seeing that can maybe expand into lift in there? Is that something you'd be involved in?

So I mean we have access rights to the minerals from the Dead Sea on the Jordan side. So -- and we could look at that. We've not spent a lot of detail. There's a lot of resources from a lithium standpoint that would probably be more attractive than the Dead Sea. But we have rights to that with our agreement with the Jordanian government.

The next question comes from John Roberts with UBS. The next question comes from Matt DeYoe with Bank of America.

Question for Raphael. You talked a bit about expansion in Southeast Asia and India, and this maybe goes hand-in-hand with some of the investment requisites comments made earlier by Kent, but would you need to expand footprint and capacity in the region? And what kind of capital outlay might that look like?

Matt, thanks for the question. I think over the next 5 years, you won't see a demand for capital outlies for expansion from our business in Southeast Asia or India. But when we get to the point of need in the expansion, and I would say likely for anybody doing an expansion, that's the target market for adding capacity. Right now, we're fortunate that we have the sufficient capacity to serve the market and our key customers. We also have debottlenecking projects for our existing plants to enable greater output, which can help us serve those markets in the near future, but it's certainly a longer-term opportunity to put assets on the ground closer to where the markets are growing.

The next question comes from David Begleiter with Deutsche Bank.

Kent, back to the portfolio. What makes bromine core for Albemarle and catalyst potentially not core? Is it just a matter of how much capital is required for the catalyst going forward? Or is there something else behind that potential?

Well, I think between bromine and lithium, there's a lot of similarities. The resource base, you convert that and derivatize it into special products. So there is a link there. And so I think that is the bromine business kind of fundamental. And then don't forget, there's lithium in the smackover formation, which we have rights to. And then we just talked a little bit about the dead see, same thing. So there is a kind of a fundamental link between bromine and lithium from a resource standpoint.

And Kent, I would add that some of the macro trends for both of those businesses, the digitization and electrification of the economy square for both of them in that. So I think that's what one of the separations as well with catalyst.

Very good. And then just on the potential margin expansion in your business. Can you give more details on the drivers of that margin expansion in the next few years?

Is that a bromine?

Bromine, yes, bromine.

Netha, do you want to take that?

Yes. I think it's really a combination of 2 things. The first is we're always driving operational excellence. As you mentioned, it's part of the Albemarle Way of Excellence. It's what Kent focused on, and it's what we're doing every day. So we think we have a chance to lower our cost as we continue to go out into the future. And we think that the market is going to be fundamentally undersupplied, which will allow us to have some pricing opportunities in particular products, in particular markets going forward. And those 2 things will drive our margin expansion.

Yes, David, if I could add, the bromine business has a contribution margin of somewhere in the 60% to 65% range. So when they're able to expand with these brownfield expansions that comes at a very nice premium to what we've been doing in the past. And I think that's some of what you're seeing in the margin expansion as well.

The next question comes from Chris Kapsch with Loop Capital Markets.

Yes. Thank you. So question on bromine. First of all, the revised outlook from the 2019 investor event. On the top line, you had talked about 2% CAGR. Now you're talking 350 basis point entire 5% to 6%. Can you parse that out by the contributors from market growth versus market share growth versus the anticipated -- sounds like more favorable pricing given the constraints of the supply in the industry?

Maybe I can start with that and then Netha can jump in with some details. But as we look at that growth, it is primarily driven by volumetric growth. We -- there's a little bit of price in there as we see the continued need for bromine in the short market, but it is primarily a volume story and one that we'll need to invest in order to get at it. But Netha, maybe you can provide some additional detail.

Yes. And as we talk about the capacity projects we are going to execute on over the next 5 years, we see opportunity to place that product in multiple markets, right? So we're really diversified. All of our markets are growing, and we have a great opportunity to place products in all of them, and that's also driving the growth that we see coming. So we're going to have product from the capacity expansion and the markets that get placed, those products are also growing, which is a great combination for us going forward.

Is there another question from the phone line? Go ahead.

The next question is from John Roberts with UBS.

I'm sorry for the earlier. [indiscernible] upgrades generated primarily in -- a strategic review and very little strategic interest. Is there any significant differences for your business that you might generate different interest as you go through your strategic review?

Yes. So we -- I mean, we'll look at that. We think there will be strategic as well as interest from financial sponsors, but we've got to go through the process. Again, I don't want to jump ahead of it and anticipate what will happen. But I think we'll go through that. We think there'll be interest from a variety of those. And we think there are a lot of options. We have to really work out what we want to do. So that's part of the process.

Okay. And then on the bromine business, you had a chlorine issue last quarter. And I assume you have maybe exacerbated that a little bit. But do you need to do anything longer term to see with some of the more recent issues?

Yes. I think -- and Netha can jump in on this, but I mean we'll have to look at chlorine. And we've had issues around that. That market is changing, particularly in North America. We've got agreements with kind of the key suppliers, and we've just got to -- we've got to think through that. Whether we have to do something from an investment standpoint, I don't know. We have to look at that. That market has changed quickly and we weren't -- we didn't see it coming as probably as well as we should have.

The next question comes from Jeffrey Zekauskas with JPMorgan.

So a question for Raphael. Is the growing demand for electric vehicles something that will impact diesel fuel demand, their gasoline for longer periods of time? That as a change to lower growth rate and -- for hydrogen in [ truck ] [indiscernible]. Has that changed before?

Jeff, thanks for the question. I mean it's certainly the electric vehicle demand, I mean, though it's small today. I mean it's a growing piece of the transportation network, so that will have an impact. Fuel efficiency, probably even more will have an impact on overall fuel demand. Most of the electrification right now is in light passenger vehicles. So it's probably more on the gasoline side than on the diesel, but I think you'll start to see it in both places. We would see that there's still -- while that's happening, there's still large pieces of the world population that don't have access to an electrical grid that would support that or the disposable income to have an electric vehicle. So there's certainly going to be growing demand in places in the world for some time for transportation fuels. So that's why we see if we do the right things, then we have a good business. So we have to execute well on our strategy, in order to do that.

Yes. Let me just add to that. Sorry, just I'll add to that. The -- I mean, the strategy that Raphael laid out was really in response to that transition, right? So we're moving to the east, where there is still demand in transportation fuels and then moving to a more renewable fuels. So we recognize that electric vehicle will have an impact. But in the long term, in the near term, there's still a growth opportunity. And the new applications for us and opportunities to use kind of the expertise that we have on traditional transportation fuels and apply that to the new ones.

Is there any way to quantify the effect of [indiscernible] on the business?

Well, I mean, certainly, that's something that can be quantified just based on the estimates on what are the miles driven that will be in the future based on those trends, and then how much of the fleet will be in electric vehicle, and how much of that is passenger vehicle versus otherwise. It's not number that I have -- like an exact number for you right now, Jeff, that's certainly something that we sort of built into our forward-looking forecast. When we forecast our business, we look at Eric's forecast for what he's estimating for electric vehicles, and what's that balance of electric vehicles, other transportation sources and traditional fuels. And that's what we build into our view. And again, as Kent said, that's why we're looking to pivot in some ways to other markets so we can continue to have a growth business.

The next question comes from David Begleiter with Deutsche Bank.

Raphael, on catalyst, how do you expect the recovery to occur both from earnings as well as from a margin recovery? Do you expect to return to prior margin level fairly quickly? Or is it [indiscernible]?

Well, I think we'll get into more of that guidance like when we get closer to next year. I mean, certainly, we see strong sequential recovery, David, in FCC. FCC is very ratable to miles driven. And our business is -- specifically just given our focus on bottoms cracking, resid -- FCC resid processing, as utilization rates increase, we -- our business recovers then like at an accelerated pace. At low levels of recovery, low utilization, we probably feel it more than maybe some of our competitors, but then we really benefited higher utilization. So if utilization continues to increase, which it has been into 2022, you'll see a pretty strong recovery in FCC. Hydroprocessing, as I said, a little bit lumpy. There's some turnarounds that have -- they're delayed into 2023 and beyond. So I think it'll take a little bit longer to see it in hydroprocessing, but sequentially, you'll still see improvement.

That concludes the Q&A questions on the phone. I will turn it back to Meredith Bandy.

All right. Great. Thank you. We do still have a number of questions on the chat, and we'll go back to the chat questions. First off, Vincent Andrews at Morgan Stanley asked, "Your bromine growth outlook is much stronger today than it was at the 2019 event. The growth drivers such as 5G or EV are not necessarily new. What are you seeing that's different today versus 2019 that's allowed you to increase your growth forecast? Was 2019 a conservative forecast? Or has something changed structurally?"

Yes, again, Netha, let me start and then you can add in the details. But I think when we talked about it a little before, coming out of the pandemic, we didn't drop as much as we had anticipated, as much of our other business had turned down. And I think that is about digitization, electrification that's happening across the industry, and that was when we first noticed it. And then it has continued to build. So it is -- I mean, 5G is an element of it, Internet of Things, but it is about electrification everywhere and then the breadth that Netha talked about, the diversification we have in the applications. And it surprised us, too. In '19, we didn't see it that way, and we kind of really picked up on it out of the pandemic because it didn't drop as much as we'd anticipated.

And it's just, as Kent mentioned, we're learning more. These markets are more mature now than they were in 2019. And our customers are putting more products in there that they're asking for us to have a retardant solutions around. And then on the last piece, we have capital now to capitalize on that and expand it and capture that growth. So it's a combination really of all those things that make us much more bullish on those markets than we were in 2019.

All right. Great. Another question from Laurence Alexander at Jefferies. "For bromine, can you sketch the capacity expansion you would need to undertake in terms of size and cost? And I know, Netha, you already said that you're not going to give the exact size, but maybe you can just give us a little more color."

Yes. I think Scott and Kent were very clear when we raised capital that 10% of that will be allocated for bromine. I think that's our plan. We have 3 defined projects, 2 of which have already started, and those are in Magnolia. Again, brownfield projects in places where we've been in business for over 50 years with processes we've known for 50 years in the communities that are very supportive of us, so we feel really good about our execution opportunity around that. And those are -- that's really where we're putting the capital right away. But we have other capital projects, too, that will continue to get funded throughout the planning period, and all of those will be in the total plan that enables us to grow at the 5% to 6% that we said.

Okay. Let's see. And P.J. Juvekar at Citi asked, "How big is the pyrolysis opportunity? What's the market today? What growth do you see? And what's the catalyst used in that process?"

Thanks, P.J. We're probably in the last year. Our understanding of pyrolysis has expanded exponentially, but we're still at the start of building out the portfolio of catalysts that we think we need for that. And so to be clear, P.J., the -- there's multiple catalyst applications in pyrolysis. What we're specifically talking about is on hydroprocessing. That's like the cleaning up of pyrolysis oil, so it can be fed back into making virgin plastics or fed into a refinery as a feedstock, and that's somewhere in the neighborhood of a catalyst opportunity by 2035. it's somewhere between like $200 million, $400 million in value of hydroprocessing catalyst. It depends on how the market plays out and what technologies are used, but that's what we're looking at. It will build slowly. But as pyrolysis oil use becomes mainstream -- and as you know, P.J., like that's the key mode for getting -- recycling plastic into something usable. Like as that builds steam, as folks need to purify that to blend it into making new plastic, that demand is going to increase. So we're excited about the opportunity. And I personally know -- like our team is working on it from a technology standpoint, and it fits very well with our expertise in hydroprocessing.

Okay. Great. So let's see. The next question, there's one from John Roberts at UBS. Does bromine make it harder to recycle the plastics and textile that they're -- that bromine is used in?

John, on the recycling side, I think we're still learning about the opportunities to do that. I don't think bromine makes it harder. I think there's a lot of things in plastic in which bromine is just one component, and all of those multiple components make things challenging on the recycling side. But I think as we move forward in the future and we all get better at that, the plastic industry knows that's part of the go-forward way. And everyone is looking at opportunities to do that.

Okay. Another one from Laurence Alexander at Jefferies. A question for bromine. What do Albemarle's longer-term EV outlook imply for total bromine demand for electrification and charging stations to support that infrastructure? In other words, what could EVs represent as a share of the bromine market, say, in 5 years?

Yes. I think we're learning, right? For us, this is the new market, right? And then we're capitalizing on every learning that Eric's group gets in lithium. We have an opportunity to go back and look at vehicle platforms today and deconstruct them and see which of our products are in there, particularly in a high-voltage cable. So I think as the planning period goes on, we'll be able to quantify that more. As I mentioned, this is a new market, and it's the first time I ever talked about it to investors. But I think as the time goes on, we'll learn a lot more and provide a lot more clarity about the specific bromine opportunity in EVs.

Okay. Ann Gurkin at Davenport & Company asked, "With increased recent government regulations in China, what does that change? How does that change your forecast for economic growth and/or market demand in China over the next few years, i.e., the demand for PET or other products?"

Yes. So let me start, and we can talk -- I'm sure everybody's got a view on the regulation in China as it impacts the different businesses. But as far as us doing business there, I mean, we don't see it stopping us from doing business there at all, and I'm not sure it's changing the demand for the product. So in lithium, as an example, where -- probably our biggest opportunity, that's still the largest EV market in the world and a big driver for lithium growth in that -- in China, so we see opportunities to invest there. And the regulation that we see have not impacted our view on our ability to invest there or participate in the markets. So Netha, you may want to talk about bromine.

Yes. When I look and just take China and slice it to a very, very small slice, which is bromine, the market opportunity is growing. What's changing with the regulation is where that bromine is going to come from. And maybe it's changing a little bit from a self-sourced market to an import market. We have an opportunity to import bromine into that market to capitalize on that domestic growth. So that's a little bit of the dynamics of China in our business. But as Kent said, we're continuing to think it's a very positive place to do business and will be right with Albemarle as Albemarle grows in China.

Netha, I think it's fair to say that our customer base continues to be an Asian-focused customer base in bromine, particularly with the flame retardants and the electronics manufacturing that happens in Asia.

Okay. Michael Sison from Wells Fargo asked, "Bromine is now considered a growth business. Growth was raised or almost doubled. Is there upside to margin in the updated goals? Are there any synergies for selling bromine to EV customers with lithium?"

Yes. So again, I'll start and Netha, you give the real information. But I think we talked about the margin -- Netha talked about that. So there is a margin expansion in there, mainly about kind of scaling and the efficiencies we're driving through manufacturing excellence and productivity improvements. And I don't think we've gotten -- I mean, there should be synergies as we do this through EVs, but -- in the EV market between lithium and bromine, but we haven't gotten to that yet. So we're still pretty early from a bromine standpoint, selling into that supply chain. And we sell down a couple of levels below the OEMs traditionally from a bromine standpoint. So we'll -- but we would look for those synergies and hopefully optimize those over time, but we really haven't gotten to that yet. Netha?

Yes. And I think about the bromine business, just in the history from when I've been here, we went from a GDP-light to GDP, now GDP plus. And I think we feel really good about the guidance that we provided, and that there's fundamental opportunities in our market growth and our capacity expansion plans to deliver that. So I think we're always going to try and do the best we can. We're very prideful of our results and proud of our results, and that's just what Albemarle does. We do our best to outperform, but we feel very confident with the guidance that we gave, going forward, over the next 5 years.

Okay. We'll close with a couple of catalyst questions here. Christopher Perrella from Bloomberg Intelligence asked, "What is the sustainable capital spending for the catalyst business over the next 5 years?"

Christopher, thanks for your question. The business does need capital. It certainly needs somewhere in the 3% to 5% per year of just maintenance capital to make sure we maintain the safety and operability of the sites. It's hard to pinpoint exactly how much on average amount, and then there's a specific amount. As we look at the new areas of growth for our business, it will require some investment in capacity to be able to service the needs of growing olefins demand. That's a specific type of FCC catalyst. There's an investment that we're anticipating in additional capacity for those catalysts. There's investments in our PCS business to meet the needs of electronics customers within that space. So it's hard to pinpoint it. It certainly doesn't look like as much as what the lithium business needs or even the bromine business needs in order to be able to meet those demands in our business so it's variable. But all the projects that we look at have high returns and would justify the investment.

All right. Great. I think the final question of this session will be from Emily Kech from Goldman Sachs. "Can you talk through the main drivers of how Albemarle plans to return to margins in its catalyst business in the mid-20s?"

Yes. Thanks, Emily. I really think it's about drop-through, meaning like as volume recovers -- we have fixed costs at our assets, and that leverage creates higher EBITDA margin. So as we get incremental business -- of course, our contribution margins don't look like Netha and Eric's, but they're very good. It's still a very profitable business with good margins. As you get higher volumes, higher utilization at the plant drops through, and that increases the earnings quality of the business going forward, back to what we were accustomed to 2019 and before.

All right. Great. Well, that concludes our first Q&A session of the day. Now we're going to take probably about a 15-minute break, and then we'll come back and Eric Norris will tell us more about the lithium business. Thanks so much. [Break]

[Presentation] Good morning, and welcome back from the break. I'm Eric Norris, President of Albemarle Lithium. I've been with Albemarle since 2018, and I've been in the specialty chemicals industry for almost 30 years now. The second half of today will focus largely on the lithium business, and I look forward to sharing what is really an exciting time in the industry and an even more exciting time at Albemarle as we enable the EV revolution. And as I talk about that strategy today, I'm going to hit several key points: one, the strength of the franchise we have in the lithium space; two, the acceleration of growth and the increasing and stronger outlook that we have for our business; and finally, I'm going to get into the details of our strategy of how we're going to sustain our leadership position in this market while increasing and driving significant shareholder value. I have never been more confident in the growth prospects for this business. Today, you'll hear us use a word, you've already heard it a couple of times: acceleration, probably a very appropriate word for the end markets we serve. And what we're talking about is an acceleration of our strategy to meet increasing needs in the EV space, and we do this from a position of strength. We're diversified across geographies, products and resources, low-cost, world-class resources. We're playing in a market whose growth is now stronger than we thought just a few years ago. Right now, we see in 2025, for instance, 1.14 million metric tons on a lithium carbonate equivalent basis, a 30% growth from where we stand today based on increasing EV sales. And we have a proven track record that we have honed in building world-class, high-quality, battery-grade lithium plants, and we're taking that forward in this strategy. From a base of 175,000 metric tons next year, we plan to more than double our capacity over the plan period that I'm going to be talking about today through 2026. And importantly, we're doing that in partnership with our customers, driving quality, technology and sustainability and helping them set the standard for what's to come and enabling the sustainability ambitions of these customers and of, indeed, the world itself. We are well positioned to accelerate growth and nearly triple our sales over the next 5 years. As a leader in the space, we stand on a foundation of high quality, differentiation and low cost in a market with attractive characteristics and a favorable business environment. The starting position is depicted on this slide, $1.2 billion in sales and 36% EBITDA margin. That is comprised of a full range of products that are sold everywhere from lithium salts, high-grade and industrial-grade quality salts, all the way through derivatized organometallic materials served in specialty chemical markets; vertically integrated, as I indicated earlier, for all of our production, back to low-cost resources that drives a low-cost position; and importantly, developing industry-leading standards for sustainability, which our customers are pushing us towards. And we are well positioned to lead in. And Ellen Lenny-Pessagno later will talk in detail about that with you. We're playing in an environment that is very favorable. I don't think I have to recount what's going on, but let me just say that it's a remarkable environment in which every major region in the world is driving incentives towards EVs for -- from consumer incentives to incentives on the supply side to incentivize building capacity for electric vehicles. And if you look at the pie chart on this page, you can see today our starting position is 60% of sales into energy storage. Things like electric vehicles, grid storage, consumer electronics, that will be over 85% through this strategy that we're executing by 2026, a significant transformation of our franchise. A lot has changed since 2019, a mere 2 years ago when we were talking with you last when I spoke about our targets. And despite the challenges of the pandemic, and there were some indeed in the recent past, I am proud to say that the execution of our strategy remains on track. Let me break it down. Firstly, we are executing on our capacity growth. We will bring, as we said, 175,000 metric tons of capacity online for sale next year, a month or 2 late, several months late, based upon difficulties from the pandemic, particularly in Western Australia. More importantly, our path forward from there is a more than doubling versus what we told you last in 2019 of that capacity by mid-decade. Secondly, market is -- the outlook is better than it was in 2019. Technological improvements in the battery, investments by EV producers, incentives from governments, consumer preferences broadly are all stimulating a stronger growth environment for us. And while the pandemic did set us back in the last year or 2, our growth actually -- our outlook actually looks better than it ever has. And it's stronger than we thought a mere 2 years ago, as I'll describe through this presentation. While energy storage is at the core of our strategy, we participate in a broader addressable market, as depicted here. Certainly, energy storage is the biggest and the fastest growing with expected growth rates of 35% to 40% over this period. We gather this data from a variety of sources and data analytics techniques that I'll describe later when we get into the details of that demand. Other important markets, though, for us are the industrial markets, markets where we, for decades, have served this specialty glass, ceramics, lubricants participants. And importantly, a third market we play in, a specialty market, a niche market where we have highly derivatized products, a very strong competitive advantage to play in with differentiation in attractive GDP-plus growth markets in the life sciences space. Our aim: sustained leadership across all of these markets. That's going to take a significant investment in driving our capabilities, and it's going to be based upon our strengths historically and going forward of quality, low cost and technical differentiation. At the heart of this is an integrated conversion network, as you see depicted on this slide. From the lowest-cost resources noted on the left, all the way through the production of high-quality material lithium chemicals on the right, 2 key streams for you to appreciate that we are driving our strategy from: one, largely -- spodumene supply chain, hard rock supply chain, largely enabling the significant growth we see in hydroxide. We are operating at a low-cost resources in Australia and driving that into plants and production in China currently and soon in Australia. The second stream is the world's lowest-cost resource, the Salar de Atacama, leveraging that to produce carbonate in Chile and what is the low-cost operation. We do the same at a smaller scale giving us a domestic presence, which are going to be increasing in Silver Peak, Nevada. And we can take that into the market for carbonate, and that's a very big market for us, has been, or we can take it -- process it further through hydroxide as we do in at least one plant today at Kings Mountain here in North Carolina. Our conversion network provides low-cost, leveraging world-class resources. And I'm excited. I'm excited by the scale and global diversity that we uniquely are able to bring to our customers who are around the world. We operate in multiple resource sites, as I've described. We're operator of 2 sites in China, making us one of the largest producers in China today. We're the only producer in the EU operating out of Germany now for over 100 years, and we're the only multi-site operator in the U.S. integrated to the resource, and we've done that since the 1950s. Full vertical integration, 3 resources, 4 additional possible resources I'll talk about that for the future that we look to develop, operating in 6 conversion sites and 3 specialty chemical plants positioned strategically around the world. With this diversity and scale, we are creating value-added products and security of supply that helps our customers sleep well at night, gives them peace of mind in what is a rapidly growing market. And that growth is even stronger than we had anticipated just 2 years ago driven by EV penetration and driven by light-duty vehicle -- in the light-duty vehicle fleet and increasing battery size. As a reminder, we have built a world-class data science and analytics capability to generate the data that you see here and that we've shared with you consistently over the past years. We leverage hundreds of data sources, our own unique insights. We employ modern techniques, sophistication around Monte Carlo simulation, historical training models and statistical modeling to come up with this model. And what it's showing us today, and we've been, I would have to say, very consistent in leading the way and showing where this growth is coming from is that demand is even stronger than we thought from a base of 300,000 metric tons in 2020 growth to 1.14 million by 2025. And we're introducing here today a growth of 2.5 million metric tons by 2030. And the driver of all this, the biggest driver, on the left-hand panel of this chart, the blue bar, EV battery-grade lithium. And what's underneath that is the accelerating shift to higher-energy density towards larger battery sizes and fully 1/3, as depicted in the middle, of all vehicles produced in the world by 2030 or more being electric vehicles. What's important also to understand is energy density is what unlocks this. So we see growth for both carbonate and hydroxide, but the growth for hydroxide over this period, we expect to be stronger. And what's exciting about it all in the end when you put it together is not only is this a 5-year growth story. It is a at least a decade-or-more story in the making from a growth standpoint, strong growth clearly through the end as far as we can see through 2030. As a consequence, there's going to be a great demand on the supply side. And it's -- we expect more supply needed in this market. We are accelerating our strategy at our own capacity to this market. And we, in fact, expect that hydroxide could very well be at a deficit, a structural deficit. Let's break these cost curves down between hydrocarbonate and hydroxide, some key differences. First, on carbonate. It's -- we expect that capacity to nearly double over this period of time. It is largely from low-cost brine resources, as depicted here. And as a consequence, the marginal cost that comes in outside of that is at a significantly higher cost, a very steep cost curve in carbonate. Contrasting that to hydroxide, this is a capacity because of demand I just described that's going to need to quadruple over this period of time. And even at that, if you look at the demand curves with the sensitivities we have on this chart, we'll be short of what is needed as best we can see it here today with what we know. And overall, hydroxide comes at a higher cost profile. It's processed more often from rock. And when it's processed from brine, it requires 2 steps that adds cost to it, tends to be a more level cost curve. Although there is a difference. There are low-cost producers. And that's my second point in looking at this chart. Albemarle's position, as Kent earlier said, at the left-hand side of the cost curve. And we have operational flexibility to operate from different resources and make different products from either resource sourcing. We can make carbonate or hydroxide. We choose [ this step ] as we do to optimize our cost structure. And then finally, I referenced the demand curves, you can see the tightness in the market. It's tight for both product lines but tighter and indeed short for hydroxide. And as a result, we expect the need for more capacity to come into this market that has been announced to date. We are going to accelerate our strategy to sustain our share of that growth. And we expect that on the hydroxide side, some carbonate may need to be transitioned over to support the hydroxide side. So we come at this with strong margins, a low-cost position and an ability to really accelerate our growth strategy. And so let's talk about that strategy. A similar format to how everybody else before me, Kent, Netha and Raphael, have described their strategy. Our strategy is all about growth with a strong wing around driving productivity, innovation, and most importantly, sustainability. Near term, it's about expanding conversion capacity that we can fully leverage and utilize the resource base we have. We're also working with our customers to innovate and to drive sustainability to meet their ambitions and needs. Ellen will talk more about that in a moment, but one of the important programs we're looking at as a future resource source for us is recycling. We're, as Kent talked about, implementing the Albemarle Way of Excellence. For us, that's about manufacturing excellence. I'll give you a case study in a bit about how we're driving that. And we're also looking at commercial excellence, how we drive greater partnership with our customers through our contracting and the customer experience we'll create, and I'll talk about that as well. M&A. M&A is important for the long haul. It's important to either accelerate our strategy and pick up -- and being able to acquire conversion assets near term to give us future resources as we exhaust the very strong set of resources we have over the coming decade, what comes next from a resource standpoint; and technology partnerships, looking for partnerships that can help accelerate our customers' value proposition. Sustainability is the bottom line. It's foundational. And as I said, we'll talk more about what we're doing to drive a more sustainable product and supply chain for our customers. This strategy all starts -- the whole business starts at the resource level. And while there are a number of large-scale resources, small and large, depicted on this slide, few are of the size and scale to support the rapid growth from a low-cost position that Albemarle has. Albemarle sits on 3 of the world's best resources. And for the better part of the last decade, we continue to look at what else we should -- or other resources we should add to our portfolio. We've studied the landscape. We've assessed the key criteria of what makes a resource successful. And this slide, this graph depicts 2 of the 3 characteristics we think is important. The one, scale, the x-axis. That's the size of the resource that support a continuous investment stream, such as the one we are pursuing in our conversion strategy. The vertical, the y-axis, is the concentration. The higher up that curve -- that line you are, the richer the source of lithium and the less expense and the better sustainability profile generally because you don't have to deploy as much energy or water or by-product to get to that product. You can see, as you look at Albemarle's resources noted in gold, we tend to be in the top-right corner. That is what I mean by world-class resources. We have access to those. Another characteristic, though, is extremely important in this puzzle of what makes a resource successful, and it's the chemistry, the process know-how to take that resource to a high-quality product. And that's know-how that Albemarle has built over decades in this period of time. And as we look at that, we look at building that conversion capacity from that 175,000 met tons I talked about early next year, we actually have 2x the available resource in this resource base to keep expanding. And that is what's depicted on the right-hand side of this chart is that substantial resource base that we can leverage. On the left and a key part of the narrative is how we have done that, a proven track record of adding capacity through acquisitions, through organic activities to debottleneck, through capacity additions. What's exciting about this is that if you look here, fully half of what's coming in this trajectory comes online in the next 6-plus months: the expansion at La Negra III/IV for carbonate and the greenfield plant, Kemerton I/II, for lithium hydroxide through our MARBL joint venture. We have a proven track record to build capacity, which I'll talk a bit more about here in a moment, and Jac will talk a bit more -- in a lot more detail later about how we're executing that progressively. I consider our capability we're building one of the best in the world at doing this today. All of this sets the stage for what's to come. And what's to come is exciting and depicted here. We're investing to align our capacity with that strong demand I was telling you about. Few in the industry are planning to build the capacity at the scope, scale and diversity that Albemarle is, and our aim is to accelerate that investment in order to keep pace with our customers' needs. There are 2 key waves that are here as we leverage off of this base of 175,000 metric tons. Both of these waves have 2 important characteristics. They're geographically diverse, helping us to enable localization over time of our supply chain as our customers start to move increasingly around the world from where they're generally based today, which is in Asia; and a repeat skill that I talked about and Jac will describe, of being able to drive down the capital intensity over time. Wave 3, the first step, is a very good example of this. At the start of Wave 3, where we are today is doubling our capacity in Silver Peak. That's giving us a first step towards increased localization in North America. However, most of Wave 3 is about a single plant design repeated, perfected and accelerated. What we're talking about doing is building repeat spodumene to hydroxide plants in Asia using Australian resources. Both plants will be in China and in Australia, leveraging the know-how in that region to build 150,000 tons of capacity over a 3- to 5-year period at $1.5 billion. Wave 4 is the next step, and it's different. Wave 4 is more diverse. We -- in Wave 4, we anticipate needing to look to other sources to get hydroxide. We may need to build plants that our carbonate to hydroxide. We have the capability today. We do it in Kings Mountain. We could increase that in North America. We could bring that to Europe. That's a localization strategy. We're also talking about completing Kemerton V. That will make 125,000 metric tons on a single site. That's almost half of last year's demand. That is a massive site which will have incredible scale and be world-class and all kinds of characteristics, including sustainability, which Ellen 1will get into in a moment. And then finally, we can continue to localize our production in North America by looking at North American resources, such as Kings Mountain and Magnolia. As we refine the execution capabilities, we're also looking at our operating capabilities. We're honing our playbook so that we can repeatedly, consistently, effectively and efficiently bring on plants one after the next. And I want to talk a little bit about that as a case study. It's part of the operational discipline that Kent talked about in the Albemarle Way of Excellence. When I came to Albemarle 3 years ago, I felt we had a huge opportunity to build a manufacturing excellence competency. And what that would mean in practice is improved safety, lower costs, greater yields, higher quality, greater reliability out of our production. And we, today, have become very skilled at that. It's becoming a differentiator for us, and it's a journey still. We have a ways to go to be the best in the marketplace, and we expect to really have some exciting programs to deploy. So let me describe that here in this case study. First, we're building a manufacturing excellence management system that's key pillar; second, we're building a predictive maintenance capability; and third, a continuous improvement mindset. We started a number of years ago by building a team from -- throughout Albemarle. Albemarle had a lot of world-class -- has a lot of world-class manufacturing excellence in our other GBUs. You've heard Netha and Raphael talk about that. We pulled that into this GBU to build that scale. Then we went out and hired some of the best people in the industry in terms of their knowledge of Lean Six Sigma manufacturing. And finally, we have brought in external consultants to accelerate programs at our largest plants, from La Negra to Langelsheim, to the Salar. We're going to be doing Xinyu next year and building Kemerton from the ground up with this capability. And the results to date are impressive. We have cut our injury rate by 75% since 2018. We have taken operating rates at legacy units and pushed them to levels that are 10% to 15% higher and are top of class in the lithium industry in terms of their capabilities and cost profile. And going forward, we're talking about taking $70 million or greater in cost cumulatively out of our supply chain. And perhaps more importantly than anything, we're going to be driving effectively a train out of our network through this effort of 20,000 to 25,000 metric tons. That's real value to our customers. What's also important to this case study is what we do from a technology standpoint. Extraction and process technology are essential to drive productivity, reliability and quality. I look to extraction technology to increase the quality of our product, to improve our sustainability and to make less economic resources more competitive. This is our process map of what we're up to. And I appreciate it's complex, so let me just try to break it down. Again, move left to right. From left, mine source of spodumene, brine or clay within the industry. Albemarle's denoted in gold, but these are -- what's in blue here is what's commercial. And as you move from left to right, you move from concentration to conversion to lithium hydroxide in this particular example. So let me draw your attention away from what's commercial, away from what Albemarle is doing to what's in gray here. This is where we're investing in know-how. One example: in spodumene, we're looking at crystallization technologies. The crystal structure of high-quality, battery-grade product is essential to higher-energy density in batteries. We're investing in this to drive higher quality for our customers and improving that continuously for them. A second example, also in the spodumene supply chain across the top, is leaching. We're looking at alternative leaching chemistries. Why? They -- in order to drive better cost and better sustainability of the by-products that come from making lithium. A third example on this page is important. Now looking at brine, we are looking at direct lithium extraction technologies to improve the cost competitiveness of less economic resources, resources where on that y-axis, they weren't as high in the lithium concentration. Magnolia is an example of that. We are looking to develop technology to improve the cost effectiveness and sustainability of processing lithium from Magnolia. Together, all of this helps us drive, as I said a moment ago, quality, sustainability and cost effectiveness. And while technology is important to how we manufacture, it's also important to our customers. We are developing novel materials to enable next-generation batteries, and this slide here depicts that. And everywhere you see an A is where there's an opportunity or a product for Albemarle today. Let me digress for just a moment. From my experience in specialty chemicals, I find it very valuable. And I am pushing our organization to know our -- how our product is used in our customers' application as well as or better than the customer does themselves. That's a very powerful value-creation mechanism in specialty chemicals. It's something that Raphael talked about as a skill in his business, what makes our catalyst business special. For us, it's something about how we're going to develop to be an innovator, to be differentiated and to enable the ambitions of our customers. We are building this capability today at Albemarle. We have been for the past number of years recruiting world-class talent in technology. We just, earlier this year, completed a battery materials, both metal and materials, innovation center in Kings Mountain. And we are now adding people now, world-class talent around the world to partner with and develop new products with our customers. And this is that field that you see in this chart here. This is the field development. There's a lot here, but let me break it down. Again, you move from left to right. Left is the legacy technologies. Right is the next frontier. The middle is state-of-the-art today. What's being used in technology today. What you generally see as you move from left to right is higher energy density and lower cost per kilowatt hour. What you also see is decreasing use of cobalt, increasing use of nickel in terms of the metal oxides used in the cathode and the shift from more carbonate use to increased hydroxide use that's giving us that higher growth profile. Finally what you see is an opportunity for product development. As you look particularly to the far right, to the next frontier, you will see multiple lithium opportunities, opportunities for lithium now in the anode as well as in the cathode as well as in the separator. The amount of lithium in these cells would increase, the amount of energy density would increase and the cost per kilowatt hour, therefore, would drop. This is exciting stuff that will really enable the EV revolution, and it's very important to our customers. And so speaking about our customers. Let's talk about the approach we want to take. We are taking a very, in some regards, similar approach as we have. Our long-term agreements, we'll continue to partner with our customers in that way. But the specific approach underneath that is changing. We are changing to be more segmented, to be more differentiated, to enable what Kent described as that customer experience and a journey to excellence. Let me say, let's just get into details of what's not going to change. We're going to continue to have a majority of our business under contract, 70% or more. We are going to have 3 to 4 years in average duration generally, and there'll be a staggered expiration. But the approach is going to be different. We are evolving that approach. That's because our customers, among other reasons, well, there are a lot of reasons for doing this, but among that is our customers are changing. And that's depicted at the bottom of this slide. They're becoming more global. They are becoming more varied in the supply chain. They have different needs. And among them, yes, there will continue to be price buyers. And so some component of this approach is going to be price-driven, purely price-driven, where we're exposed to what's going on in the market and our mix will move as a result of that. But that will be a minority of our portfolio. Because of the needs I just described and the trends we see with our customers around sustainability, around product needs, around innovation, around quality of product, security of supply to underwrite the investments they're making, we are seeing more customers who want to do different kinds of price or contract arrangements. Some may be a high fixed price. Others may be a fixed price with a movement around a collar. We are developing that portfolio. One thing I can tell you, as we take this approach forward and look into next year, considering particularly the expiration of pricing concessions that we offered during the hardship of the pandemic, we see at least a 15% increase or more in our selling prices year-over-year. And again, certainly, the strength of the market, the market fundamentals are part of that scenario and what's driving that as well. Our segmented approach, what it's aiming to do is to preserve the opportunity for upside while providing strong minimal returns to keep investing and grow aggressively in this market. I'm excited about the outlook this all affords for us and is described on this page, the value creation we're going to bring. We've talked about an accelerating market. We've talked about our efforts to move our strategy forward. And what that means is 24% to 28% growth over this period of time and an EBITDA margin into the mid-40s based upon the scale, cost reduction, differentiation and customer contracts we have in our business. An exciting growth profile that I hope you share with me. And just to recap, we are enabling an EV revolution, accelerating our strategy of investing capacity while driving quality and innovation and helping our customers achieve their sustainability ambitions. We have a diversified and broad range of products. We're playing in this accelerating market that's an exciting place to be. We've got 3 of the world-class resources required to drive this revolution and a proven track record to build capacity to support them. Most importantly, as Raphael said, the customer. In the end, it's about serving the customer with quality, innovation and helping them achieve sustainability. This is a business about a sustainability value proposition for the consumer in the end for our customers, and we're here to help enable that. And so I'm very pleased and excited next to introduce Ellen Lenny-Pessagno, who heads up our sustainability efforts. She's a partner of mine on the leadership team and turn it over to her for a discussion of that topic. Thank you.

Great. Thank you so much, Eric. My name is Ellen Lenny-Pessagno. I'm the Vice President of Lithium Sustainability, and I've been with Albemarle for 3 years. Prior to that, I was a U.S. diplomat for 26 years. And during my service, I lived overseas for almost 2 decades, helping U.S. companies grow their businesses globally. As Kent outlined, sustainability is not only strategic, it is also core to our values. It really is an honor for me to be able to present the lithium GBU strategy, their achievements and our future plans. And I'm doing this in representation not only of the lithium GBU, but the entire company. We see an overwhelming support and commitment within the company to drive sustainability. And it really begins, of course, at the corporate level with Meredith Bandy, who leads the sustainability strategy. And in the lithium GBU, everyone is proudly aligned with the concept that how we produce lithium is as important as how much lithium we produce. So we are focusing on 3 principal pillars regarding how we produce lithium. First, we have committed to growing our lithium business in a carbon intensity neutral manner through 2030. Now while this may not seem like an ambitious goal, it is. Without this goal, our carbon footprint would actually increase during this time frame due to our product mix. So to meet this goal, we will have to reduce our hydroxide carbon footprint by approximately 30% in this time frame, and we have a plan to achieve this. We have also committed to responsible water stewardship by reducing our freshwater intensity by 25% in Chile. Today, we are the only lithium conversion plant that recycles water and we're doing that in Chile in the desert. This significant investment will allow us to reduce our freshwater intensity by approximately 30%. So we're at our goal with this, just this innovation, but yet our team wants to do even more. And so there's a team today in Chile studying the possibility of bringing desalinated water to our conversion plant in 2026. Finally, we drive sustainability by contributing to the well-being of the communities in which we operate. And I will talk about that in a few minutes. So you can see that in Albemarle, we believe sustainability is not an option. It is an obligation. So let's do a further deep dive on how we manage our carbon footprint and are reducing our greenhouse gas emissions. Our brine resource extraction technology utilizes the power of the sun to concentrate the brine. And today, this is the most cost-effective and most sustainable way to produce lithium. We're quickly moving to greening our energy mix as well. Our plants in China use natural gas rather than coal, which truly sets us apart from our competitors there. And we have ambitious plans to convert our plants in Australia and Chile to renewable energy. Finally, we are integrating electric vehicles into our operations, not only to reduce our carbon footprint, but also to showcase how our lithium products enable the EV revolution. So let's turn to some specific examples of how we sustainably produce lithium by taking a look at how we produce lithium in the Salar de Atacama. First, let's look at the facts. We have less than 1% of the freshwater rights in the Salar Basin, and we only use a fraction of those rights because our production processes do not require water. Our brine resource is 10x saltier than seawater, which means that it cannot be used for human consumption or for agricultural consumption. So if you turn to the drawing of the Salar on the right-hand side of the page, you'll see that our brine is located at the bottom of a closed basin. The freshwater enters from the mountains. Our brine extraction does not affect the upstream groundwater for 2 reasons. The first is because the saline interface acts as a barrier between the groundwater and the brine. And the second reason is because there is actually a chemical barrier as well because brine is denser than water. So let's think about oil and water in a glass. You've seen it before. You know that the oil and the water don't mix because water is denser than oil. Well, that is the exact same situation between brine and freshwater. So I'll now focus on how our environmental management is unique. We developed a model of the Salar that is recognized by Chilean authorities as one of the most sophisticated hydrogeological models of the Salar. And yet another thing that makes our natural resource stewardship unique is our voluntary agreement with the 18 indigenous communities who've lived around the Salar for more than 12,000 years. 3/4 of this agreement outlines how we will work together to be good stewards of the environmental sustainability of the Salar. Every month, we jointly monitor more than 150 points in the Salar to understand the impact of our brine pumping to the ecosystem. And we recalibrate our model with this data to understand the evolution of the resources as well as our potential impact to the surrounding environment. This data, which we share with the authorities and communities shows that our brine pumping does not affect the environmentally sensitive areas. While all of our monitoring points are important, I'd like you to take a look at the graph on the right, and I'd like to explain why this point is very critical. It represents one of the freshwater monitoring points that is closest to the community that's closest to our site. We're talking about over 15 miles to give you a sense of scale of the Salar. So what you see in this graph is that the green dots represent the monitoring results. And the dotted orange line indicates the trend. And you can see that the orange line is actually moving up. And so that means that the freshwater level is rising in that point. Also, our measurement of the lagoon close to that same site give us the same results, that the size of the lagoon is actually getting bigger. So this data confirms that our brine pumping does not impact environmentally sensitive areas of the Salar. So I'd like to turn to how we create social value in the communities where we operate. And I want to continue talking about what we're doing in the Salar and then I'll talk about what we're doing globally. We have this unique agreement with the Likan Antai people, and we share 3.5% of our sales, of our Chilean sales with them. Our agreement is based on the UN Declaration of Rights of Indigenous Peoples. And as such, these communities choose which projects they would like to fund. The community's stewardship of these funds has been remarkable, and it really makes us feel really proud to witness how the projects that they are funding and implementing are truly improving the daily lives of residents of the Salar. But rather than hear it from me, if you look in the Investor Day page, you will see a video of one of the leaders of one of the communities. And she does an amazing job in terms of talking about how our funding has improved the lives of residents from her community. So my guess is you probably haven't looked at it yet. So I'm going to ask you to raise your hand and say, I commit to viewing this video. So thank you very much for doing that. You can put your hand down now. And I really hope that you'll follow through with your commitment. And we are equally as proud of the positive impact that we have on our communities globally, whether it be in the U.S., Germany, China or Australia. So today, it's not enough to say that we operate in a sustainable way. You have to prove it. And in Albemarle, we have taken a leadership role in the lithium industry by being the first lithium company to commit to assessing our sites through IRMA. IRMA, the Initiative for Responsible Mining Assurance, is the most holistic and rigorous mining standard out there. And since our announcement, a number of our current and potential customers have announced they will require IRMA certification for their minerals purchases. Earlier this year, we also hit another first. We became the first lithium mine site to finish our IRMA self-assessment. NGOs, civil society, unions and companies who buy minerals develop the over 800 IRMA standards, which we must meet. And IRMA considers all aspects of our operation, environmental and social responsibility, business integrity and ensuring the site is managed to deliver positive impacts for our workers, communities and companies. And just last week, we became the first lithium site to begin our third-party audit. We're really proud of that. And it has been so rewarding to see how leaders in Chile, including HR, environmental community management, finance and of course, plant management have already driven improvements in our sustainability, in our operations, thanks to these rigorous standards. And we are committed to carrying out IRMA audit in our joint ventures as well because we want to drive the same positive changes in those operations. So I'll conclude my presentation by addressing recycling, which is another important pillar of sustainability. Recycling will allow us to meet the growing demand for lithium with less lithium extraction. We are well positioned to leverage our existing assets to utilize recycled lithium as a sustainable feedstock. And we are doing this by developing partnerships across the value chain. The EU recycling regulations combined with the availability of end-of-life batteries will accelerate the market for recycled lithium in the last half of this decade. And Albemarle is planning to have a significant and strategic role in this new market. So to sum it all up, we are the global leader in sustainability because our leadership and our employees passionately believe that how we produce lithium is as important as how much lithium we produce. And now I'll turn it over to Jac, who will talk about how we are developing a world-class capability to execute projects. Thank you.

Thank you, Ellen. Good morning. My name is Jac Fourie. First, let me apologize for the neck brace I'm wearing. I'm still recovering from a small back surgery. And for now, the neck brace is helping accelerate my recovery. I'm responsible for Albemarle's global project function. I joined the company at the beginning of 2019. And before then, I worked for 20 years in the mining and minerals industry. I've covered roles in operations, M&A, marketing and of course, very importantly, major capital projects. As Netha and Eric have spoken about, Albemarle has an exciting growth program ahead. Today, I'd like to tell you about the journey we are on to improve our capital projects capability to successfully deliver the projects that underpin this growth. Our improvement journey started approximately 4 years ago when we saw that organic growth through capital projects would form a bigger part of our growth strategy going forward. Since then, we have made significant progress towards building a world-class project delivery capability. We have launched a Board-level Capital Investment Committee to provide strategic oversight of our projects. We have created a single global capital project function to build deep functional expertise and discipline. We have launched the first version of our Albemarle Project Process, a standardized way to develop and execute projects. We strengthened support from other business functions for our projects, for example, support from finance and procurement. And we've bought expert major project teams in Chile, Australia and China. These improvement efforts are already delivering results. Over the last 2 years, our teams in Chile and Australia have overcome tremendous challenges to deal with COVID-19 disruptions, disruptions in the global supply chain and labor shortages to keep our projects on track. And both of these projects at La Negra III and IV is now in the commissioning stage and nearing mechanical completion and at Kemerton I and II, we are also in the commissioning stage and nearing mechanical completion towards the end of the year for Train 1. Going forward, we have structured our improvement journey in 3 areas: processes, people and technology. And these areas directly link to the Albemarle Way of Excellence. I will cover each of these 3 areas, starting with the Albemarle Project Process because it is so fundamental to how we deliver projects and how we improve over time. The Albemarle Project Process is a standardized phase-gate process for developing and planning projects, and it's based on industry best practice. It drives consistency in how we develop projects to ensure that our projects are optimized and delivered predictably on time and within budget. The Albemarle Project Process creates a common language for the company, whether we are doing projects in Santiago or in Shanghai, we speak the same projects language. This allows us to accelerate the cycle time of our projects and to quickly share lessons learned from one project to all our other projects. A strong project process is important, but not sufficient to be successful. We also need great project teams. And this is the part of our improvement journey I am personally most excited about. In each country where we operate, we built strong and experienced local teams, and we support them with a small network of global experts. But we have taken this a step further. We have created growth pipelines which allow us to transition key team members from one project to the next, thereby retaining knowledge and capturing efficiency improvements. Let me tell a quick story of how this is working in Chile. In 2017 and '18, we implemented the La Negra II project, which was hard because we were inexperienced. When we started the La Negra III and IV projects, key team members from La Negra II transitioned to La Negra III and IV. Over the last 3 years, I've had the privilege to walk the improvement journey with the La Negra III and IV project team on the ground in Antofagasta and through the weekly review cadence which we use. While the project has not been perfect, it has already been significantly better than the La Negra II project. And over time, we have become even better at solving difficult problems, capturing improvements and honing our project delivery skills. With this higher level of capability, key team members from La Negra III and IV are now transitioning to senior project roles on other projects, including the Salar Yield Improvement Project, which is the next stage in our lithium carbonate expansion program. This gives the Salar Yield Improvement Project a massive head start. And it shows because of all the projects we have started, it is definitely the fastest start we've had. We are following the same growth pipeline approach in Australia, in the United States and in China. Together with the 2 capability building blocks of the Albemarle Project Process and expert project teams, we are leveraging our deep technical expertise to deliver high-return projects. This is a unique and important part of our work. As Eric has said, Albemarle has a long history and extensive expertise in chemical processing technology. Recently, we have added to that so that we have expertise from the mine to the final product. On top of this expertise, we are leveraging the capability of world-class project delivery companies. We have formed partnerships with 2 leading multinational engineering, procurement and construction companies, and in China, with 2 local design institutes who are world leaders in lithium processing technology. Over many years of operating and improving our plants, we have developed best-in-class engineering standards, which we use to make our plants safer and more sustainable. At the same time, we have flexibility to apply local codes when we design projects to capture the benefits of low-cost local supply chains. Lastly, and most importantly, we have combined our deep process expertise with the know-how of our partners to develop standardized, optimized designs for our lithium plants, which we can repeat rapidly and at lower capital intensity with each iteration. When we replicate a design, we save time and money in the design phase. We save time with permitting because we already have most of the information. We save time and money with procurement because we buy the same equipment from the same suppliers. We save time and money with construction because we already know the best sequence for constructing the plant. And of course, we are able to ramp up the plant faster because we are already familiar with how it operates. All of these benefits reduce risk, reduce capital and accelerate the speed at which we can build new plants and bring new capacity online. This combination of processes, people and technology is a multilayered and differentiated capability that translates into lower capital intensity and higher return projects. Let me illustrate this with a final example. By replicating proven designs, leveraging the continuity of our teams and building in low-cost jurisdictions, we are able to reduce the capital intensity of our lithium projects by 40% when we compare Wave 3 to Wave 2. And by up to another 20% when we compare Wave 4 to Wave 3. The journey we are on to improve our capital projects capability gives us the confidence that we can keep on investing in profitable growth in our lithium and bromine conversion assets and that we can achieve attractive returns at all points in the price cycle. In short, Albemarle's capital projects capability is a core part of our growth strategy. And on that note, I'd like to hand it over to Scott for an overview of our financial outlook.

Thanks, Jac, and good morning, everyone. I'm going to close our prepared remarks today by focusing on a critical part of our strategy, investing with discipline. At its heart, this part of the strategy is to maintain our financial flexibility to be able to invest in growth in both lithium and bromine. It is having the discipline to say no when the returns are too low or the risk is too high. And as Kent highlighted earlier, it is about generating shareholder value by assessing the portfolio and acting when the time is right. I will share with you our history of execution and investment in high-return projects that lead us to the great outlook that we have today. We are reaffirming our 2021 outlook and more importantly, sharing our long-term outlook to 2026 that reflects the acceleration of our growth investments in lithium and bromine. I will talk about how the Albemarle Way of Excellence will impact our results and ultimately allows us to demonstrate our low-cost position in the market through low-cost resources and low-cost operations. I will show the significant cash generation of this business and reaffirm our capital allocation priorities. Ultimately, I believe our financial position gives Albemarle a competitive advantage in 3 key ways. First, it allows us to accelerate our investments in high-growth, high-return opportunities. With our strong balance sheet and cash generation, we demonstrated that we could continue to invest even in the depths of the pandemic in 2020. Second, our financial position allows us to invest in innovation to support our customers' product road maps and create new advanced technologies as you heard both from Netha as well as Eric. And finally, our financial flexibility allows us to invest in sustainability that are so important to our customers, the communities that we operate in as well as our investors. Albemarle has demonstrated time and time again the great revenue generation and EBITDA margins that we deliver. We have taken deliberate transformative steps to position us for the substantial growth that you see in our projections. First, we have invested in world-class resources and chemical conversion plants over the past several years. We will start benefiting from those investments as we go into 2022 and can start to sell that volume to our customers. Second, we have deliberately divested lower margin and lower growth businesses, and this has resulted in a portfolio that will generate significant cash flow and a portfolio that can withstand market shocks. In 2020, in the heat of the pandemic and at a low point in lithium pricing, we generated EBITDA margins of 25%. That allowed us to continue to invest through that challenging year, unlike many of our competitors who had to shut down their investments. And third, we are leveraging our focus on operational excellence. As you have heard today, the Albemarle Way of Excellence is a key lever for us to keep the organization focused on the priorities that will lead to our success. And you have heard some excellent examples of this in action during today's discussion. I am very excited about our long-term outlook. But as you know, it all starts with short-term execution. We are reaffirming our 2021 full year guidance with sales growth of 9% to 11% versus 2020 on a pro forma basis. That is excluding the Fine Chemistry Services business that we divested in June of this year. Our current order patterns point to a strong Q3 and a weaker Q4 with lithium and catalysts having their strongest quarters of the year in Q3 on an EBITDA basis. Increased costs from the start-up of the new plants, inflation in raw material, energy and logistics mean our fourth quarter sales will grow, but our EBITDA will not. 2022 will start to reflect the benefit of our investments over the past several years. We expect our EBITDA to grow between 25% and 35% on a reported basis. And if you remove Fine Chemistry Services from the results, that growth is expected to be between 30% and 40%. This is driven in part by lithium, where we expect EBITDA growth of 40% to 50% as the La Negra III/IV and Kemerton plants come online and start to generate sales. At this point, we're expecting lithium volume growth of between 10% and 15%. And further, we expect the pricing environment to remain favorable and expect that favorability to translate into Albemarle's pricing of an increase of at least 15% to 20%. Catalysts is expected to grow EBITDA by 50% to 60% as their markets continue to improve. This is off a very low 2021 that was impacted by the winter storm costs as well as a U.S. customer changing their buying patterns. Lastly, we expect bromine to grow between 4% and 10% on continued strong end markets. However, they do remain constrained on volumes. We expect the chlorine shortage to resolve itself going into next year, and that will give us a bit of volume tailwind. Ultimately, we'll have to see how the inflationary environment shapes up between now and year-end and make some decisions around how we move that forward. On CapEx, we're expecting to spend between $1 billion and $1.3 billion as we ramp up our Wave 3 investments in lithium and initiate those investments in bromine that Netha detailed. As always, we'll give you a more definitive view on 2022 when we do our fourth quarter earnings call. We have benefited from our focus on operational excellence in 2021 by about $75 million of gross productivity and a key outcome of the Albemarle Way of Excellence is to make continuous improvement a permanent part of our culture. Our supply chain is a critical part of how we serve our customers' needs and continues to be an area of opportunity going forward. With this year's focus on journey to excellence, we have reorganized our supply chain teams into a single global team with best-in-class professionals to achieve that mission. They are supported by leading-edge systems such as SAP's Ariba procurement suite and SAP's transportation management and logistics module. This team now has a portfolio of actions that they are working on right now that will result in $80 million of run rate savings by the end of 2022 and a vision to continue to find opportunities by negotiating better terms, but perhaps even more importantly, finding opportunities to buy in different, more effective ways. For example, we are in the middle of changing how we buy operational supplies and equipment, such as safety gear. By partnering with a third-party distributor, we are not only reducing our purchasing cost as we leverage their buying power, we are also increasing the quality and reducing the administrative burden on Albemarle. The last area of focus that we'll touch on in our journey to excellence in the Albemarle way are our efforts in the back office. Our back office activities include finance, human resources and other administrative functions. And our journey to excellence focus this year has been on leveraging our investment in a single SAP system that went live at the beginning of 2020, and our investment in the Workday human resources platform. We are building on these investments with a focus of both efficiency but also effectiveness. We are nearly complete also with our initial pilots with more advanced technologies, such as data process mining and robotic process automation. Maybe more important than the back-office process focus is building a continuous improvement engine that can support all of our nonmanufacturing functions. The business process excellence team will support the company with Lean Six Sigma, program management and change management capabilities. They will also run the Excellence Academy. That academy will support and train the organization in these important continuous improvement skills so that it becomes a natural way of doing business. A great example of this in action is where we have implemented Lean visual management boards in our shared service centers in China, Hungary and here in North Carolina. Used by over 300 employees, these boards provide a real-time look at performance and allow teams to set priorities each and every day. One result is that we've reduced the time that it takes to issue an invoice to our customer by over 50%. We have seen some quick results from the introduction of the Albemarle Way of Excellence and the focus on the journey to excellence priorities, but our expectation is that these efforts would deliver value well into the future. Ultimately, we want to be an efficient and effective company that can claim it is the low-cost benchmark in operations, not just resources. This will allow us to weather the economic cycles that our company will go through, continue to invest in our future growth and generate excellent shareholder value. The most impactful examples in my mind are the focus on customer excellence, getting our company focused on improving the customer experience and reducing the friction that can be created with ineffective business processes. The focus on operational uptime in our manufacturing and the use of advanced analytics to drive increased volumes from our existing plants and a world-class supply chain organization supported by leading-edge systems and processes. You will see the results not only in our ongoing productivity, but also in our operational metrics such as OEE, raw material yield, customer churn and increased value-add services to our customers. I look forward to sharing with you our progress as we continue the Albemarle Way of Excellence. Our high margins and high operating cash flow mean that we have excellent financial flexibility. And it's important to understand our priorities for using that flexibility. Our capital allocation is prioritized to support the growth strategy that we have and ensure we maintain optionality as we work to meet our customer needs through all economic cycles. Our priorities have not changed. Our first priority is to invest in our highest return growth opportunities. Second, we continue to commit to our investment-grade credit rating. This offers the best balance sheet flexibility to handle the ups and downs of the market. Third, we continue to support a growing dividend and are proud of our track record here. Fourth, we continue to look to M&A and joint ventures to support delivering long-term shareholder value. And lastly, while we have the authorization to do share repurchases, our organic and inorganic growth opportunities are so great, you should not expect us to use that authorization in the near term. A key source of our capital comes from our operations. And the next chart is my favorite one in the whole deck. This chart shows the tremendous operating cash flow power that we generate as a company and the impact of the significant growth going forward. You can see the several years of investments that we have made, and you can expect another 2 years of negative free cash flow as we accelerate our investment plans. We prepared for these investments at the beginning of the year with the equity raise. Using those proceeds, we delevered the balance sheet and now my expectation is that we'll re-lever by about $1.5 billion over the next 2 to 3 years to support the growth investments. And with an expectation of about $1 billion in CapEx in 2024, we would start generating free cash flow in that year. Finally, I would point out the massive $2 billion to $2.2 billion of operating cash flow that is projected for 2026. That is 3x greater than our 2021 outlook. That is a significant opportunity for us to increase our rate of investment if the right projects are presented to us or generate cash returns to our shareholders. The outcome of this cash power is a balance sheet that has significant flexibility. We have a long history of taking the right actions to maintain our financial flexibility and expect that flexibility to pay off with growth. Our long-term leverage target remains at 2 to 2.5x and is set to keep us in that sweet spot of the investment-grade credit. Our current leverage ratio at the end of Q2 was 1.5x, and I expect by the end of the year that we will grow into the bottom end of that range. That's really driven by the completion of the Kemerton and the La Negra projects and as we start to ramp up our Wave 3 lithium projects and the bromine expansion projects. You can also see on this chart that our projection for 2026 is that, that ratio will drop to around 1x, another demonstration of the options that we have to accelerate our growth investments. We have excellent liquidity, and the next page shows the flexibility of our debt capital structure. We have excellent support from the credit rating agencies and our bank group and debt investors have been strategic partners supporting our growth. Our current debt maturities are well staggered and I would expect to maintain a good balance between shorter-term and longer-term maturities as we increase our leverage in the next couple of years. We remain committed to supporting our dividend, and you can see our payout ratios today are pretty well in line with our specialty chemical peers. However, as we prioritize organic and inorganic investments, the dividend growth will be slower than history and our expected net income and cash from operations will grow. And as a result of that, I expect those metrics to lag over time. Today, you've seen all the components of our 2026 outlook, but this slide pulls it all together for you to show our exciting future. Our expectation is that our revenue will grow between 2021 and 2026 by 13% and 17%. That means 2026 revenue will be double what it was in 2021. Our EBITDA margins have the potential to approach 40% at a total company level, which would put our adjusted EBITDA between $2.2 billion and $2.6 billion, a growth of 25% per year, 3x what we were in 2021. And as we talked about, our free cash flow will be around $1 billion. This growth is coming through volumetric growth of between 10% and 13% per year across the company in all 3 businesses with lithium and bromine growing with capacity expansions and strong end markets. Catalysts is growing off a weaker 2021 with improving end markets, but also with the pivot and strategy starting to benefit in that year. The pricing environment in lithium and bromine are both considered to be modestly favorable, approaching mid-cycle prices from the last cycle. We are modeling about 2% to 4% of pricing improvement per year across the total company. As you know, this assumption is the most difficult to predict, and we could see periods of overheating or trough as the supply/demand fluctuations change. We have included $100 million of gross productivity through 2024. So there is potential for upside as we see the long-term benefits of our operating model take shape. One big unknown is the tax environment. We have pegged the tax rate at 20%, but with the U.S. and global tax environment in flux, we'll have to see as the various proposals make it through the legislatures and into law. These projections are very exciting for Albemarle. We have a dedicated, enthusiastic employee base that is fully aligned through the Albemarle Way of Excellence on delivering these results. Before we turn to the Q&A session and we get a chance to hear from you, and Kent closes our session with some high-level comments, I want to reiterate the importance of financial flexibility in our strategy and the competitive advantage that gives us. We are well positioned with that financial flexibility to deliver the growth projections that you've seen over the next 5 years. With the continued growth in electric vehicles and the advancement of electrification and digitization through the global economy, there is every opportunity for us to continue that growth well past 2030. Meredith, let's go ahead and start with the last Q&A session.

All right. Great. Thanks, Scott. I can clearly see that we do have a lot of questions in the queue, both from the chat and the phones. [Operator Instructions] So first, I'd like to start with a couple of the webcast, web chat questions. And these are ones that sort of came in, in the last session that we held to the lithium session here. The first one is from Tim Hoff with Canaccord. Tim asks, investment in lithium production is rising globally. Given Albemarle's leading position and latent capacity, how do you view your role in protecting your market share and preventing external overinvestment in production, which may adversely impact lithium pricing?

So let me start with that. And then, Eric, you can add a little bit. But I think, I mean, we are investing and we're investing to maintain our share, grow with the market and satisfy customer demand with the relationships that we have. So I'm not sure we have a role in protecting the market and stopping other people from investing. We're investing while we see the market and capturing that share and making sure that we're doing it efficiently and effectively. And we can preempt others with investing to sure that we're investing in pace. But to be honest, I mean, the market is moving very quickly, and we're scrambling to keep up with our customer demand.

Yes. I would just add, Kent, that this is a new industry that has not gone through a cycle like this before of such rapid build. And you can see from the demand charts, we need that. The industry needs that demand to come online. And it's, we're accelerating as quickly as we can, and that's just to sustain our position going forward. But that proven capacity build that I talked about is a strength of ours, and it's going to have to develop further still in this industry in order to keep up. So I think for the foreseeable future, we see it as a big effort just to sustain and build the capacity required to keep up with demand.

All right. Great. And another one from the earlier session. Do the bromine operations have any plans to extract lithium in Wave 4?

So let me, I'll take that one, and then we'll see. So we are looking at that. So I'm not sure if we can be bromine operations, it would be lithium operations, but businesses would be integrated. So we will look at that. And then 4, we'll see, that's a bit out and we have time before we get there, definitely not in Wave 3. It's probably the back end of Wave 4 if we get there, and that's probably, that's where it would either come in there or the phase after that. But we're looking at the technology and the opportunities, but it's definitely either IV or after that.

And I don't know, maybe the question was asked before I spoke about that, but that's an area of focus from a development standpoint for us. It's going to take, every brine is going to have a different sort of process technology to optimize the factors of sustainability, costs, quality. And that's where we're looking at direct lithium extraction as a possibility. There's innovation ahead there. I think we have the capability, and we're looking to address it and make that a viable resource. But as Kent said, we have other areas that will come on before that comes to market.

All right. Great. This question was asked a few different ways. But this particular version is from Kevin McCarthy with Vertical Research Partners. RE: lithium, what is the level of realized price embedded in your new financial guidance for 2022 as well as the new 5-year lithium sales CAGR of 24% to 28%?

Willing to take that one? I think that's you.

So for 2022, as we commented, both Eric and I commented, we're expecting at least a 15% to 20% increase in lithium prices. That's really off the base of the contract concessions that we gave in 2019 and 2020 expiring, but also the strong increase in prices that we're seeing in both carbonate as well as hydroxide around the world. As you look at our longer-term projections for lithium, there's about a 4% to 6% CAGR on pricing going forward. It gets us almost to the mid-cycle prices that we had in the last cycle, but not quite there. But like I said, this is going to be a big question mark of how does the market respond from a supply/demand fluctuation perspective. So difficult to predict, we decided to be a bit more conservative and just allow us to get back into that mid-cycle range.

Right. Great. Let's take one last one from the chat, and then we'll go to the phones. So this question is from David Deckelbaum at Cowen. Can you address your conversion capacity plans for China. Is the intention to build capacity versus acquire?

So I'll start. Eric, you can add into that. So we laid out those plans in our Wave 3 program for the most part. And it will be a combination. We'll look to acquire if we find the asset and the deal that we want to do, but we're also looking to build. It will be either. It will be build and acquire or build depending on if we find the assets and a deal that we want to do from an acquisition standpoint.

I don't know if there's a lot to add. It's part of Wave 3. An acquisition allows us to get to market faster, provided the asset, the target in question fits our criteria from a sustainability, quality and cost point of view. We also look to assets that we could expand. So that's where it could be both acquire and build. And so it fits into Wave 3 and that repetition that we talked about and Jac further described of building and successfully building, reducing capital intensity and improving our execution capability to bring these assets to market.

All right. So we're going to go to the phones. Now it's my understanding that the phone questions were difficult to hear on the webcast. So if you'll bear with me, I'll just repeat the question for the webcast audience before the presenters answer it. So operator, we're ready for the first question from the phones.

The first question comes from Chris Kapsch with Loop Capital Markets.

Yes. The question is a follow-up, getting some more color on the pricing dynamic. And I heard the 15% to 20% guidance next year. Just curious how that is comprised by, say, fixed long-term contracts versus on exposure to spot or what might be characterized as evergreen contracts with escalators? And then also, how does that outcome compare to where you're prior pricing floors were prior to the concession?

Right. So the question is really around the new outlook for lithium and what that implies for our contracting strategy versus what's open to the market?

Sure. So I'll jump in, Chris. Thanks for the question. It's still a bit of what I was discussing towards the end of my presentation. Again, 70% of our business will be under contract. That's sort of the long-term goal in and around that range. And as we bring on this new capacity next year, that falls into that as well. So we'll have more to sell next year than this year. And this year, I would say, greater than 90% is under some form of contract. So we'll get closer to that 70% mix in the coming year or so. And within that, that 30%, that will be subject to market conditions. That will be at a price or a spot-based buyer. Even within the 70%, we'll have a minority business that are long-term commitment, but still have some variability on price. But as I said, the majority of that 70% will be under some more muted movement relative to the market. That being said, relative to that prior long-term price you were talking about that we gave concessions against during the pandemic, we'll be at or above that going forward next year.

Okay. The follow-up, Eric, would be just in terms of the order of magnitude. Is it comparable for carbonate and hydroxide or is there a little bit more of an outsized increase for hydroxide given sort of the tighter supply/demand fundamental outlook there?

Well, it's maybe not as you might think in that carbonate is generally more subject to spot or price-based contracts. It's more of a China-based market where that's more prevalent. So that's where you'll see more of the swing on price versus hydroxide, which is tight, but it's also a product that never moved down as low during the depths. And so it isn't going to have the bounce that carbonate would off of those depths as it moves upward in a strong market. So it's tight and already at a high price. A lot more of the variability is going to be on the carbonate side in the upswing that we're talking about.

And Eric, I would add that tech grade product is primarily, the technical grade products that go into grease and glass, that's primarily driven by the carbonate price as well. So that will be part of the market that moves.

The next question comes from Arun Viswanathan with RBC Capital Markets.

I guess I just wanted to delve into the cost side a little bit. Obviously, a lot of pressures out there on transportation and logistics as well as raw materials. Maybe you could just describe what you're seeing across your businesses, if there's any extraordinary cost pressures? And then how do you kind of combat that? Is there pricing opportunities that you can undertake or is that mostly supply/demand driven?

Yes. So I would say, I'll start and then I think the GBU Presidents will have a view on it. But I think it's different across the businesses. I mean, the challenges we're seeing, I mean, there is pricing pressure kind of a little bit across the board. But really, it's kind of disruptions that we're seeing in particular chemicals and raw materials. So chlorine is probably the biggest example, but we have that in other materials where there's just, there's challenges. That may turn into pricing issues in time. But for now, it's a supply issue. And we anticipate having inflation on our raw materials and our supply base. And that's part of why you see us focus so much on productivity and this operational excellence and driving cost out of the system. So we're trying to be ahead of that. I mean, we've been working on this for a while. We're trying to be ahead of that, but there are pressures. And whether we can transfer them in the market from a pricing standpoint, we'll see. What happens in the marketplace, that will be determined by the market, but we're trying to make sure we mitigate as much as possible by minimizing those costs. Anybody else? Okay. That covered it.

The next question comes from David Begleiter with Deutsche Bank.

Eric, on the lithium volume forecast for next year, which I believe was up 10%. Is limiting factor your own supply or the market itself?

It's our own supply, David, pure and simple. This is a tight market. If we could get supply faster, we'd be able to sell it as a team. It's a tight market, and we'd love to be able to do so. So that's why we're so focused on capital execution and why honing that skill that we have is going to be important going forward.

Eric, just on Wave 3, when can we expect the next announcement of capacity in either Australia or China?

Well, I may defer to Kent on that. We are actively engaged and Jac's team is, it takes the lead on this, so he could comment as well. We're actively engaged in looking at sites for greenfield expansion. And we've already elaborated and said we have an ongoing M&A evaluation that we're looking at for conversion sites. So on the greenfield sites, which tend to have more certainty, I would say it's a place in the not-too-distant future because we need to get those plants started and so they'll soon become public, the site selection we go through and who we've chosen in China to proceed with. So it would be inside of this year that we start.

Yes. I mean, we're working on those actively and we're in the early, I can say the early planning phase. But when we get to a final investment decision and get Board approval for an investment is when we would go public.

The next question comes from Joel Jackson with BMO Capital Markets.

I have a two-parter. When you talk about your expectation for 15% to 20% at least higher lithium pricing next year because of not going back to minimum pricing, not doing concessions. How much of this is what you expect academically and how much are you actually engaging customers with? And then my second question is, I think in the past, under these contract discussions or contract set up, you've talked about longer-term lithium margins trending above 40%, that was kind of the language you used. Now you're trying to guide to 45% going forward. Can you talk about the difference in what seems like a margin guide up over the longer term?

Sure. So let's talk about, I'm fixated on your margin question. Your first question was on, sorry, I lost it. Joel, just give me a keyword, please.

Well, you talk about pricing being up next year 15% to 20%.

Right. What's the dialogue with our customers?

How much of that is dialogue versus what you're sort of thinking academically?

Yes. So I would say it's dialogue. Remember what we have just talked about. We have contracts that were giving concessions, either through the middle of this year versus the long-term agreement or through the end of the year. So some have already come off and the prices are rising, and that's been embedded in our Q2 guidance we gave. Others will come off at the end of the year. So we're talking about that now. And the dialogue is about that prior price and it varies by contract or moving to a different contract structure altogether aligned with the approach I described. And then on the margin side, the way I think about it, Joel, is we've always been in the mid-40s. You go back to the last cycle, we've been in the mid-40s. I think as we looked at our plan more closely and even without pricing, you've got much higher utilization on our plants. You're getting scale. Scott earlier talked about contribution margin. So when you think about La Negra, you're filling out a site. When you think about as we build out Kemerton going forward and add III and IV, you're filling out a site. You're getting leverage on that. So that alone drives margin in addition to the operational excellence or manufacturing excellence things we talked about. So that gets you into the 40s. Maybe the difference of getting into the mid- to high 40s is price realization, what we can do with contract prices.

Yes. Joel, I would just add to that, if you go back to 2019, our outlook was to be north of 40%. At that point, we hadn't signed up for this acceleration of investment so. And to Eric's point, each individual plant is bringing significant contribution margin to the total P&L. And so now with these Wave 3 investments starting to come into the planning, the planning period, that's why you can see these margin realizations.

The next question comes from Matt DeYoe with Bank of America.

Perhaps beating the dead horse a little bit. So very optimistic about demand growth and the new trend of supply and under certain scenarios, lithium seems like the limiting factor, right? And so at some point, if things are really bullish, lithium will actually reduce the amount of EV sales or lithium availability. And obviously, the market is expecting that's going to drive significant price increase. And so if we're at a period where, say, lithium is back at $17,000 to $20,000 per metric ton for a period of time, I mean, how should we expect your pricing model to respond to that? Would it shape into the mid high teens or is that disruptive to what you think is the value proposition over time or supportive of new product coming into the market?

Okay. So I'll start, Eric. And if I understand the question, I mean, our model has not really changed. It's still long-term contracts. We've kind of moved away from just fixed price to be more where it moves with the market, a bit of variability. So it would move up if those prices go up and then will move down if those prices go down. But with kind of probably in some cases caps and floors, in other cases not. And then some exposure to the spot market and then our industrial business is exposed to the spot market. So I'm not sure we're chasing it, but I think that's kind of where the market is. And I think this is really the second cycle. We had the one cycle, prices went up and then they went way down. Our anticipation, we may not be right, is that we don't have the highs and the lows that we saw the last time around, although the spot prices are moving pretty high at the moment. But we're expecting that to dampen and not have such highs and such lows. But time will tell. We're early in that. And again, this is kind of the second cycle in this industry.

And I would just add that, and I know maybe you didn't intend the question this way, but I would not think of it, I don't think of it at least as increasing prices happening because there's just not enough supply. I think if you look at what happened in the last cycle, so much capacity left the market that was higher cost. So many investors, private investors in some of those assets lost their shirts that it was unhealthy where price went. And so when Kent says, we believe we might be entering a new phase of maturity in this industry where pricing is not as volatile, that's one area we would expect that, that as economics improve to support higher cost resources needed in the market, that pricing traverses in a range that's more rational vis-a-vis the economics that those investors need to earn in those assets. So our picture that we gave today is where we see things coming out of a bad place from an economic standpoint. And you see us accelerating our strategy. We have considerable financial resources that Scott described to do that. Here's hoping that other supply can come in to meet that demand. We believe it's a fundamentally attractive market. There is lithium available. It's just at a higher cost profile to come into the market.

Okay. I appreciate that, Eric. And if I can kind of ask one more for you. Can you give us a sense like what your runway is at Greenbushes, if both you and Tianqi kind of execute on the projects that you've laid out? We think about Greenbushes as operating for the next 30 years, 40 years, 50 years. What does that actual time line look like if you get to Kemerton V and Tianqi kind of ramps accordingly as well?

Yes. Well, I could talk a little bit about the expansion strategy. You had 2 questions there, I think, if I may parse them for you. One was, how much can we get out of that asset? How much of a runway of growth can it support? The other is, how long does the asset last? Addressing the latter first, we're going to be putting out our own report per SEC guidelines on, it's basically like the Canadian NI 43-101. I mispronounce that schedule. I can never remember the acronym. But we'll be putting out our own disclosure for SEC purposes, the details of that. Most studies are done against 20 years because that's practically required, that's the usual requirement for an economic resource. But we would believe that there's a long life, at least 20-plus years in this resource. In terms of its capability, it will support, that growth rate we talked about, that top line growth rate and the volume growth rate over this plan period, it will support us into the latter half of this decade. That and Wodgina will support us. But we'll gradually start to hit capacity at that resource in about, I would say, '27, '28 in that period of time if we're able to execute the conversion capacity as we've said we would. It would be in about that time frame that we would look to other resources.

Yes. And to make sure that's clear, that's just the growth part. That would still last 20 years.

It would still last. We still see those plants invested in for some 20 years and beyond. Thank you, Kent.

The last question comes from John Roberts with UBS.

Eric, plug-in EVs use much smaller batteries than full electric. And some OEMs like Toyota have a big part of their business plan on plug-in. What's the outlook embedded in your assumptions for plug-ins versus full EVs?

So John, in that presentation there, there's a hash mark that depicts it obviously. It's not very analytical, and we could get with you subsequently and provide the details, but it's less than 20% now and less than 20% of the vehicle population as you go out to 2025 and 2030. And that's not sort of an idle sum in the air sort of estimate. What that is, is based upon what Toyota is doing, what the U.S. manufacturers are doing, what the European manufacturers are doing, what the Asian production base is doing. It's a whole picture bottoms-up assessment. And it really, when it comes right down to it, it's just the technology will become so powerful. And I mean that more in a figurative than a literal sense in terms of what it can do from a cost per kilowatt hour and range standpoint on electric vehicle side. We just see that being the predominant vehicle as does the industry based on the investments it's making worldwide.

And then, Scott, you don't show free cash flow positive until 2025 in your slides. If you were to monetize the Catalyst business before you turn free cash flow positive, would we expect you to just run with really low debt until your free cash flow positive? Or we can think about because you mentioned no share repurchase, I don't know if there'd be any deployment of any proceeds from a Catalyst transaction.

Yes, John, good question. So just one clarification. Our current projections are we tip into free cash flow positive in 2024. And with a potential transaction with Catalyst, we would look to obviously invest in the growth opportunities in lithium and bromine. So that's our first priority is if there's an opportunity to accelerate, perhaps accelerate additional M&A transactions. That's where our focus would be.

All right. Great. Let's go back to the chat questions for a little bit. Stephen Richardson from Evercore asks, in light of the lithium market update and supply deficit and lithium you forecast, can you talk about your contracting strategy for new volumes available? How is your approach to cathode producers/OEM shifting? It's a little bit different than what we've talked about so far, I think. And do you expect more volumes to be sold directly to OEM counterparties?

Sure. So contracting has become very important particularly for automotive OEMs as well as battery producers. As you go closer to the point of consumption, the consumer, I think you can assume that the level of investment and the risks are higher to assure security of supply. So our customer base sees that. They've increased contracting. That's why we foresee a long-term contracting strategy, multiyear, majority of our business being under contract. It's the right thing to do both for the customer and to underwrite and give us confidence in our ability to expand. So in terms of the mix, it is shifting. We do have contracts now with OEM producers. We expect to have more, but part of our strategy will be to have balance across supply chain because not every customer wants the same thing. There are some automotive producers who prefer to have an established network of Tier 2 or 3 suppliers that we would supply to. And there's others that want to have the contract directly. And so we're working with various different types of structures based upon the automotive manufacturers' need. I think you could see from what I showed that it's a portion of our mix on that one slide, the customer slide. I don't remember the number offhand. And we still are selling a healthy amount, though, to direct to cathode and battery producers by 2026.

Okay. Thanks for that. So a couple of questions now from Colin Rusch at Oppenheimer. His first question is, can you speak to the maturity of the lithium recycling technologies and how you're approaching investing in those technologies?

Well, I could into get into it and maybe Ellen might. Ellen addressed this topic specifically in her presentation. For us, this is about participating in battery recycling, not being a full-on battery recycler. So our knowledge is in, and I showed you that road map of extraction and process technologies, about applying that to a byproduct stream in that supply chain, in that recycling supply chain. That's important to our customers, and Ellen can share a little bit about that in a moment, but it's also important for us as we think about how we want to sustain and grow our business. We have know-how to provide. We are thinking we can build that into our relationships and to our supply network over time as this opportunity develops. You want to add more, Ellen?

Sure. As I mentioned in my presentation, the EU Battery Directive is really going to accelerate the recycling of all the minerals that are found in EV battery. And so working with our partners is really important and our customers to work with them so that we can meet these goals that the EU is going to set out. It's going to be really important so that we can reduce the amount of lithium that we extract. That is something that consumers want. That is something that environmentalists want. It's good for the environment. It's also good for our business because this opens up a new market for us where we can both be sustainable and meet our customers' needs.

All right. So let's see, we had one more from Colin here. I think Colin's second question was around the evolution of different battery grades that we're seeing as battery chemistry continues to evolve.

Sure. I'll jump on that one as well for Colin. So it is part of the strategy I described of building understanding, deep understanding on the application side of our materials. And so when we talk about the Battery Materials Innovation Center and the scientists who are building, yes, it's about new products, and I talked about that on the new frontier side. But in the existing products, it's about continuously improving the grade of product to get more out, more energy density, more efficiency in the battery cell. And specifically, it's things like crystalline structure and it's things like ionic and purity levels that you're looking to address. That's what we're building application capability around, and we complement that then with our process and extraction technology to drive the improvements in the actual process. So it's sort of an integrated approach to how we drive value there, Colin.

All right. Next question from Kevin McCarthy at Vertical Research Partners. On Slide 60, your base case forecast suggest that hydroxide will be even tighter than carbonate in 2026, seems to be generally the consensus. However, given that circumstance, do you expect customers to shift demand towards carbonate even if by necessity? And if so, when and in which applications might that happen?

I can answer that one again. I would say actually what we more likely would expect is the supply base to change its mix to being more hydroxide-oriented. We have that capability. We can repurpose our carbonate and process it the way we do a small stream today in Kings Mountain on a bigger way. And of course, we can add assets that, of course, that do it as well. Similarly, we have the ability to produce on the carbonate side if that were to happen. So we've got the flexibility. Where we see this, our projection when we look at that detailed bottoms-up model, where we see carbonate is being in that legacy column when I talked about technology. Energy density, it gives low $100 per kilowatt hour cost, but the compromise is a slightly lower range. And so it really is sort of a vehicle that's very affordable, but a vehicle that doesn't have the range. And so there's a segment of the market that many automotive producers have demonstrated that exist for that product, and we see that taking place. But in order to drive full electrification and get 400 miles, which is, on average, in the U.S., what most of us like to have in our tank and have as a range, that's higher energy density that can only be accomplished with hydroxide, and that's the growth driver for the center and the high end of the market.

All right. Another question from Ann Gurkin at Davenport. You outlined lithium expected capacity additions. How much of that expected capacity addition is contracted at this point? Are you adding committed lithium capacity or are you building capacity and need to fill orders?

Yes. I think, I mean, Eric can give us the detail on that, but we're building to keep up with the commitments that we have. They're not all contracted. So if you look at the whole Wave 3 and into 4, for sure, they're not contracted, but we have relationships with customers that want to contract for it. So it is not all contracted, but we have the relationships with people that want to buy. I think that's the right way to represent it.

That's correct. I mean, Jac, on his time line talked about 3 years to build a greenfield plant. And as we're approaching those investment decisions, our aim is to have a majority of that business either in active negotiations where we feel confident about being able to close or already closed.

All right. This question has come from a couple of people, but this particular one is from P.J. Juvekar at Citi. What signals are you waiting for the restart of the Wodgina mine?

So again, I'll start with that. So it's a signal. I mean, we need the conversion capacity to utilize it, and that's either us building capacity or doing an acquisition. So once we have visibility on that, we'll start the process. The lead time, it's tricky because the lead time to restart the mine is shorter than a build, but not necessarily shorter than an acquisition, depending on what that works so. But the conversion capacity is the trigger for that when we have kind of line of sight and we know we can convert it, then we'll restart the mine.

All right. Great. We probably have time for maybe 1 or 2 more. Michael Sison from Wells Fargo asks, are there opportunities for lithium to be produced or at least converted in the United States? What are the headwinds there? And could there be an opportunity for Albemarle if you got some government support which is likely needed? Are U.S. EV players in the U.S. worried about a lack of domestic supply?

Yes. I'll take the beginning of that and Eric can fill in again. But I would say we're definitely interested in doing that. We've got resource here. So Magnolia, as we've talked about a couple of times today, a little further out. Kings Mountain, not too far from here, is another resource that we have that's a possibility. Government support for that would be helpful. Both European and U.S. automakers are pushing for localized supply. And I think, ultimately, that will happen, whether it's conversion of a resource sourced somewhere and converted locally. Some form of that, I think, will ultimately happen in both North America and Europe, and we're engaged in conversations around that.

Yes. I would say the capacity that we have in the U.S. today is sort of commensurate with the opportunity on the energy storage side. Our commitment to our customers is, let's engage in a commitment and we'll have the capacity where you need it in the region. And if you want to localize, then let's make that commitment and we'll go ahead and build that capacity. We have the capability, whether it's taking carbonate from Silver Peak, which is expanding, or from the Salar de Atacama from Chile and converting it through a unit like we have here in Kings Mountain. We could further add to the Kings Mountain footprint through the resource, which will be now shipping to a whole different process, now spodumene to hydroxide. And then, of course, we mentioned longer-term Magnolia. So we have the opportunities. Right now, most of that cathode demand, which is a point of consumption, is all in Asia still. We do expect it to migrate. And we'll be ready and here when it does, when that demand does start to materialize.

And Eric, you've talked about in the past how recycling is a way to localize supply as well. So you're actually importing the materials through the original battery, but then you keep it in region through that recycling stream.

All right. Thank you so much. For those of you that we didn't get a chance to get to your questions at the chat, we will get back to you through the IR team later this week. At this time, that concludes our Q&A session, and I'll turn it over to Kent Masters for final remarks. Kent?

Okay. Thanks, Meredith. So you've heard a lot from us today. But to close, I'd like to go back to the strategy. So we will grow profitably by building capacity in line with customer demand. We just talked about that. We will maximize productivity through operational discipline that optimizes earnings and cash flow, but more importantly, it builds that base for us to grow from. We will invest with discipline to maintain that financial flexibility that we believe gives us an advantage. And we will do all of this in a sustainable manner, from the resource through the end products. And that allows us to enable the sustainability ambitions of our customers. So we're very excited about the opportunities that we have, and we hope after today that you understand those opportunities a little better, and we hope you share our enthusiasm. So thank you for your time and thank you for your interest in Albemarle, and please have a safe day. Thank you.

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