Albemarle Corporation (ALB) Earnings Call Transcript & Summary

So good morning and good afternoon, and welcome to the Jefferies 2022 Renewables Conference. It's my pleasure to introduce the Albemarle management team. I believe for most of you, they don't require much of an introduction. They're quite familiar, but we have Kent Masters with us today, our CEO and Chairman; and Scott Tozier, their CFO. And thank you very much. It's good to see you in person. And interesting timing today, you put out a press release overnight, and I think there will be a lot of interest in that. So maybe if we could start off with discussing what changed since the last earnings call, and then we'll sort of take it from there.

Okay. So thanks, Laurence, and thanks to Jefferies for hosting us today, and thank you all for your interest in Albemarle. So we have a few slides that we'll go through to get us through the guidance quickly. This is a very exciting time for us for the lithium industry and the EV revolution. And I'm sure, you Laurence referenced that already the press release we put out last night. So just as a reminder, the -- on the next slide, there it is some of the comments today are forward-looking statements and our safe harbor statement, you see it on the slide, and it's shown in the presentation. So if we move right into that. So I guess, secondly, there's some non-GAAP financial measures, and there's a reconciliation of non-GAAP to GAAP financial measures in the appendix if you're looking for that. And then here with just a quick overview for Albemarle. So we're a global specialty chemicals business, 3 segments; lithium, bromine and the catalyst business, and a lot of the excitement is driven from our Lithium business. It's the largest and the fastest growing, but the other business have a nice profile both from profitability and growth in their own right. But we are really investing in this business and the announcement we put out overnight kind of highlights now our growth is expected to be from an EBITDA standpoint for '22, up 160% from prior year. So let's just take a look quickly at that, at the guidance that we put out. So our -- we're now showing revenue at $5.8 billion to $6.2 billion, adjusted EBITDA of $2.2 billion to $2.5 billion. That's up -- the revenue was up $600 million from our previous guidance and EBITDA up $500 million from previous guidance. And you can see the metrics from prior year. And then I'll just skip down to the diluted earnings per share. So guidance of $12.30 to $15, and that's up 200% to 275% off of fiscal year '21. So I think -- and just to talk a little bit about what drove the change in the guidance. Scott, can you give me one more slide there you go. So really, this is about changes in pricing in the lithium business. This is all driven from the Lithium segment. And you've heard us talk for the last couple of years that we are negotiating some of the historical fixed price contracts to be more indexed to reference prices, indexed to the market, and we were able to negotiate a couple more contracts since our earnings call over the first quarter, and that led to this upgrade and guidance. So we're now showing about 70% to 80% of our business is battery grade. And of that business, 60% is indexed to variable price indices. And some of the -- those are -- they tend to be longer-term contracts, let's call them, 5 years as a good benchmark. And then they are referenced to indices, common indices that are public, typically fast markets or benchmark minerals type indices, and they would adjust sometimes some contracts are different, but on average, it's quarterly. They adjust quarterly. And in some of those contracts, we have floors and ceilings, but there are contracts that are open in both upside and downside. And then the balance of that battery grade material, we have the traditional 20% of that business fixed price. And even though we call them a fixed price contract, they do have openers, typically on an annual basis and then about 20% of that is spot. So that is really what drove the change in the guidance is the couple of contracts that we moved to that and the fact that we had another month of prices staying at that. And then our guidance for the year is really based on the prices we see in the second quarter holding throughout the year. If the prices stay where they are or go up, we would have upside to this guidance and a material correction of the downside we have downside to the guidance. So in the 3 segments, really, the only thing that has changed is in our lithium business. And our EBITDA for that business for '22 with this guidance change is expected to be up about 300% year-over-year. And our average realized pricing is up about 140% year-over-year. So that is the update I wanted to cover with respect to the press release that we put out overnight. And now we'll go to Q&A.

And for those of you on the line, if you do want to submit questions, please submit your questions through the web interface, and we'll weave them into the discussion as well. So please feel free to chime in. Maybe if we can just start by teasing out some of the details on the shift in the contracts that you're seeing. Of the ones who were up for renegotiation, are you now pretty much done? Or should we expect that there is another 2 or 3 that might be reset or re-calibrated over the next 6, 12 months?

So we've had conversations with all the customers that are in that fixed price category, and there's several that are still there, and we would look to renegotiate those over time. And I'm not -- I don't know if it's the next 6, 8 months of the next year, but at some point -- and we may have to live the life of the contract before we change it, but we would look to put them on a similar type of profile that are indexed to them to -- index to the market and then whether it has a cap or floor depends on what the customer's view is.

And of the ones that are up for like the annual renegotiation cycle, is there a lumpiness created by that? Are they old you at the same time? Or are they staggered across the year?

Well, they are not. I mean there's only a few now that are there, but they tend to be staggered.

And then as you think about the -- where you just -- you calibrated to current prices. If current prices stay where they are, given the lag effect there, your actual average selling price should come in higher in Q3, Q4, just catching up to where the indexes are. Is that right?

That's correct.

And so that's not in your current framework?

No. Yes. So we've kind of said -- we've said this on the quarter, and it's important that we're -- what we see for the second quarter, we're kind of forecasting that for the balance of the year, and that's kind of the basis of our guidance.

And then can you talk a little bit about kind of the entire floor ceiling framework? I think you've made various comments about how kind of the prior floor framework didn't quite stick when it was tested. So can you talk a little bit about what kind of floor and ceiling people should be thinking about? And how much volatility is embedded in those corridors? The volatility in spot prices is rather crazy.

Yes. So -- but it is a range, right? And each contract is kind of unique with the customer. But we've segmented our customer base and we tried to contract on the basis in which they want to work as opposed to forcing. But previously, we forced kind of one standard on how everyone liked it. And that resulted in the downturn that we had to give concessions against those floors. So we're trying to segment the markets or the people who want to contract that on that basis. And therefore, we're convinced that they'll live with that in - on a down cycle, and we get benefit from the floor. So that's the difference between now and then.

And how are you calibrating the contracts between the needs of the battery material companies and the OEMs? And who's driving the parameters? And is the dynamic changing over time?

Well, I think the OEMs are more and more involved. I mean several years ago, we wouldn't talk to the OEMs, now that we do, whether they control the contract or they're just buying from the battery maker, they tend to have -- they have influence. And I think they're driving it more than the battery makers.

And so one of your most frequent questions I get is about since it's such a highly visible supply gap around the 2030 time frame and given the lags, what is Albemarle's strategy with respect to making sure that the OEMs are satisfied that you've done your part to either secure their position or manage the industry's ecosystem in order to give them the best chance of hitting their targets in 2030?

Well, I mean, we're investing heavily. So I mean, we fully expect to be able to deliver the volumes that we commit. And we'll make sure in the way we can track that we create a little bit of buffer in there. So we're not going to sell on a long-term contract every molecule that we make. I think that would give you [indiscernible] a chance of missing. So we'll create a little bit of buffer. And we're -- you saw on the other slide, we have about 20% that's on the spot market, and we'll probably try and keep that. We won't contract everything, and we may even kind of grow that a little bit over time as we understand what the spot market looks like.

Laurence, I'd also add that we've got a track record of adding capacity in the conversion facilities. So we've done that multiple times in multiple geographies already. We're also long resource, which is also important, meaning that we don't have to go develop a resource in order to supply that far out at this point. So that helps with their confidence level.

And so when you have -- I think you have a target of about 400,000, 500,000 tons by the -- late in the decade, early next decade. How sort of firm is that? And how much bandwidth, engineering bandwidth do you have to pull projects forward, if customers are eager for you to sort of accelerate the volume growth?

Yes. So, we -- I mean we have -- we think we've built the capability to execute projects and it's been growing and it's getting better and better. And as we do -- we're learning in different geographies. We've done big projects in Chile, now in Australia. We're starting big projects in China. So we're building the capability, both from the number of people but the experience we have in different geographies, and that's across chemistries as well. So carbonate hydroxide and from a resource, from Brine and from Hard Rock. So we are building a very strong capability to execute against that plan that you mentioned towards the end of the decade. So we have capability. We're stretching it a little bit at the moment, but we're going to make sure we don't get too far out over that. So if we have the confidence we can bring projects forward, we'll do that. As Scott mentioned, we have the resources for that, which is the more difficult part. And we're still looking for additional resources, which would apply to our portfolio kind of after the 2030. But we can add additional resources, we will -- or I'm sorry, additional conversion capacity, but only if we feel like we have the confidence to execute that.

And when you think about sort of the engineering talent in China versus outside China, your confidence on bringing up or your competitor's ability to bring up adequate conversion capacity. Either, how do you think about in terms of a competitive gap, or in terms of just the industry miss rate? Because it feels like at least from the outside is if the industry is going to undershoot kind of volume targets given they're kind of history of stumbling?

Yes. And I think you have to look at it between. So from an industry standpoint, you look at industry players who've done it before, who understand the process chemistry have built plants and have operated them. That's one group and people who haven't done that. So I think you put a higher risk factor on regardless of where they are, put a higher risk factor on people who are building the plant for the first time, particularly if it's first-of-a-kind technology, first-of-a-kind technology or even first-of-a-kind technology for that company.

And in terms of the market dynamics, are you seeing sort of demand destruction? Our understanding, we just hosted an EV conference in China, and a lot of the companies sort of indicated a kind of soft ceiling around CNY 500,000. It seems as if there is may end up being a 2-tier price market in China and outside China. Can you just talk a little bit about how you see the demand environment? And how sustainable a regional disconnect in pricing could be?

Yes. So we've heard that number. I'm not sure where it's coming from, but we have heard that number coming out of China. But I haven't -- it's not seen in place. I haven't heard it from a customer or the government. But we have heard that number through some reports that we had seen. I don't -- that's not happening yet. And I'm not sure, if -- looking at a bifurcated market between in China and outside of China, I mean China is importing resource into their market. So if that market price got dislocated inside and outside, those resources would go somewhere else. So I'm not sure there's too much room for there to be a bifurcated market because the resource is global, and it's not really coming out of China.

Is there adequate conversion capacity outside China to take kind of to basically ship the resource somewhere else to process it somewhere else or --?

Yes. In the short-term, I mean, probably not in the short-term necessarily, but the long-term, that would be the case.

It would probably be something that fixes over a couple of years, if it was actually a real policy.

Yes. But there is -- I mean there is capacity in other geographies. So that -- I think over the long-term, that would self-correct from that perspective. In the near term, that could happen, but we haven't seen that happening so far.

And then China, I think for demand destruction, it's a little bit that tough to say with the COVID lockdowns. Obviously, that's softened the market overall in all consumer type of purchases. So I think we're going to have to wait to see after they open back up what really happens.

So on the supply side, I mean, you've done and published fairly detailed assessments of the supply outlook based on both bottoms-up and top-down models recollect the framework. How much of that demand forecast hinges on customers who are relatively new to this world and may depend on the capital markets for hitting their expansion plans?

Is that about lithium or…

For the lithium, like what's the ripple effect back to the lithium supply demand if the capital markets close? It's a question that's been coming up quite a bit.

Yes. So right now, there seems to be a lot of money in the market capital for the lithium space. If that were to tighten up, I think -- I mean, there are some projects that would happen. But when we look at our forecast from a supply standpoint that you kind of you referenced how we look at it, we discount that to some degree based on our experience, what we know about the people building it the resource and try and make it realistic. But if you were -- if capital were to dry up for that space, that would impact supply, for sure, in several years out, not so much in the near term because you're a number of years before those projects come on.

And how do you think about sort of how your cost curve is going to evolve? Because I mean, if we look further out, the marginal projects will probably end up being lower in quality. So how does that affect your -- how we should think about kind of your position on the cost curve and how your ASPs evolve?

Yes. So I mean that -- I mean as -- I mean, this is what we've talked about all along, is that -- if you get further out on that supply curve, the costs go up, as you referenced lower quality resources cost more to process, capital is different. As new technology comes on, everything we've seen so far is either more cost or higher capital to process that, which builds that cost curve up as you go out. And then we will -- as we add additional resources and projects with lower quality resources, we'll move out on that cost curve as well, but we'll always have those key fundamental plants that feed off those low-cost resources on the low cost of the -- on the low side of the cost curve. So the way the industry builds out economically should create a nice opportunity for Albemarle.

And can you talk a little bit about how the CapEx requirements will be evolving? Are you considering any M&A targets in the U.S. and Canada? And how do technical changes and technical standards affect the CapEx on the conversion assets?

Okay. It was 3 questions.

Actually.

So tell me the first one again.

The first is just the overall CapEx for developing additional resources, which I think is basically thinking about the upstream side. And then the second part related to that is sort of the CapEx for the conversion assets as things…

Yes. So on the resource side, I mean, the capital for resources, I mean that's -- it's resources unique, right? So it all depends on where it is, how much you have to develop it, how remote it is. You have to build roads. You have to build infrastructure caps? Is it going to be fly-in-fly out? Or can you operate with local communities. So I think each one is unique. It's hard to say where that goes. But I think it's safe to say the best and most convenient resources are taken and being -- have been developed or are currently being developed. So the rest are going to be a little more far field and probably more expensive to develop. And then the conversion assets, it depends on the technology and the resource about the capital, but it also depends on where it is. So China, there's a very -- there's a well-oiled machine in China to do construction around process plants, process chemistry, and that's been developed over a number of years in oil and gas in the chemicals industry. So there's a lot of capability in China. And in Western Australia, there wasn't so much of a resource, there wasn't so much of an industry we're kind of ready to develop that and the labor in Western Australia have some short supply. So we ran into the same thing. And I think the industry did in Western Australia. It's a tight labor market in general. When resource prices go up, labor gets tighter and then COVID was another issue on top of that. So that was a unique situation that made that more expensive, but it's an expensive geography, more expensive by the pandemic. China is probably the lowest cost place in the world to execute projects like that. And I would say Europe and North America are closer to Australia, maybe somewhere in between.

So on portfolio allocation and sort of on the -- how you think about managing capital allocation within the portfolio? And frankly the number of legs of the stool. Can you talk a little bit about the bromine business. Right now, it's doing well. Can you talk about the dynamics, what's driving that? Are they sustainable and how bromine fits in the portfolio?

Sure. So the bromine has been in the portfolio for a while, at a period of time it was, I think, referred to as a cash cow, but bromine's kind of come into its own from a growth standpoint. And that's really driven by digitization and electrification. And frankly, a lot of trends -- same trends driving lithium, although it's a little bit broader. But the bromine from a flame retardant and fire protection standpoint, there is much more bromine in an electric vehicle than there is an internal combustion engine, but the same trend around so many screens and computers and chips and everything that we use is driving that business. So it's a -- we think that's a sustainable trend, and it's got a nice growth profile. And we're investing in the business, bringing on additional capacity. They tend to be smaller projects because we need the resource and we already operate in the 2 places with the best resources in Jordan and in Arkansas in the U.S. And then finally, I would say, for bromine, the brines in Arkansas that we process for bromine, there's lithium in those brines. We know that -- we've known that for some time. It's lower quality, brine than the Salar de Atacama as an example, but we have the opportunity to price that. We'll need new DLE technology to do that, but we believe we'll be able to do that and the pricing structure supports that today.

I would add, Kent too, that the bromine business is now starting to develop new products as well. So from a sustainable growth and a sustainable profitability, that's going to definitely support it as -- if you go back a decade, we haven't had new products that were lying. We've just been riding the existing products.

And the bromine business has a very attractive margin position. So would you use the recent margin position for starting off for thinking about lithium extraction, or would you use a lower margin, let bromine cross-subsidize the lithium extraction to some extent? And how do you think about the incentives for having North American production versus how you think about total economics?

So you're talking about lithium from the brines at Magnolia. So I think -- I mean I think where pricing structure for lithium is today, the projects will standalone. We just need to make -- we have to -- the technology has to move forward, and we have to scale it on the brines in Magnolia. It's going to take some work, but we're -- we feel confident that we'll get there. It's a matter of timing and the market will support it kind of anything that we see as a forward-looking pricing now would support that project.

What's attractive too is that, we don't have to invest in the mining infrastructure, right? The pipelines are there, the pumping infrastructure is there. So all we have to do is take the spent brine from the bromine process run it through with the DLE technology and then reinject the brine back into the ground. So there's no real investment in the resource required.

And then how proven out is the DLE technology at this point?

It's -- well, it needs to be proven. So we work all the different components on a lab basis, but it has to be proven to work on that -- on the particular brines at scale. So there's work to do. It's not ready to go.

And how do you think about bringing on -- we mentioned earlier sort of moving towards lower quality sort of sources of lithium. How do you think about the relative appeal of those versus investing in recycling capacity? And what do you see as the trade-offs of picking one versus the other as an area of focus for the next investment cycle?

Yes. I think the -- I mean, timing is a big part of that. So the lower quality resources, we still need those to get lithium into the market that we need for the EV market. And the recycling is probably once you get all those molecules in, there is a period of time for it, to work its way through the system and come back, and that's at least 10 years away, if not more than that. So I think you have to do both.

And I guess I've seen some forecast of recycling getting to the 20% to 30% of the market by 2030. What do you think is realistic?

Yes, that's optimistic versus our view.

So a couple of questions have pointed out that one of your peers is targeting 40% growth, and you're targeting 20% to 30% volume growth. And so is the takeaway that it generally takes longer for Albemarle to ramp conversion plants and its competitors? And why would that be?

Yes. But I'm not -- I can't comment on what our competitor is doing, but we are growing trying to grow 20%, 30%, maintain that share. And that is probably limited by our ability to execute on those particular projects. Now we -- and we have been doing that. We've done that in a number of geographies we have experienced in Chile and Australia. We have -- we're getting experience in China at the moment. So I think we're pretty good at it. So I can't -- I don't comment about my competitors, but we think we do that pretty well.

I would add, Kent too. Some of it depends on when that conversion capacity actually comes on. So it comes on in chunks, right, rather than in a smooth fashion. So if the competitor had invested a couple of years earlier than we have been very possible they could be in that range and we're behind.

How does the softening of Chinese lithium prices in the spot market impact your discussion with clients? Is there enough of a gap that your contract prices still have upward momentum? Or can you give us a sense for -- to what degree the kind of volatility matters?

So I mean, in prices, the spot prices have come off a bit and then flattened, I would say. So -- and we think that's kind of COVID-driven, but we'll see what happens after that. But for where our prices are, it has to come down a material amount to impact our prices.

Is there a -- if you look at Albemarle's history, I mean there's been, over the years, some strategic shifts where MRL has done a good job identifying serve assets with advantaged cost positions and unique franchise I think in catalysts, the bromine JV and Jordan. Is Albemarle look open to looking at or considering other molecules that are -- has similar structures where you can secure low-cost positions in a strategic differentiated chemistry at the same time? Or is the focus for the foreseeable future, basically, where can we navigate in the lithium space because the opportunities are so great?

Yes. So I think -- I mean, look, we would be open to look at opportunities in other businesses, but we have between bromine and lithium, we've got a lot of very lucrative opportunities, a nice market, growing profile, world-class resources that we can leverage and in businesses that we know and we have an advantage and that we know we can execute on those projects. So I think the focus is going to be bromine and lithium. If we could look at other businesses, if we saw something, but we're not desperately trying to find another leg to the portfolio.

And so a question that often comes up is, if you have excess cash flow as, for example, this year, you're going to sort of be well ahead of your target on sort of on your profit growth. How do you think about allocation of excess cash to growth investments, M&A, dividend growth? How are you going to prioritize returning capital to shareholders versus investing in the business?

Well, we have a strong investment program around lithium growth lithium bromine and catalysts. And we're investing in the business. From that respect, and I don't think our profile changes. I mean we have a dividend. We want to grow the dividend, but at a kind of slow and steady rate. We're not going to jump the dividend back. And we think we've got very good investment opportunities within our base business. We want to maintain the dividend, but we're not planning on growing it dramatically, but we'll continue to grow that business. And I think that's how you'll see us allocating capital.

Just add to investment-grade credit rating has been very important to us. That flexibility that it brings has been very valuable through the downturns as well as when we're accelerating our investments because of all those growth opportunities that we've got -- don't plan on a stock buyback from Albemarle for any time, in the near term, at least.

And how do you think about sort of direct M&A consolidation of industry resources versus different kinds of JV structures. And is there anything that a partner can bring to a JV to make it interesting?

Well, I mean, there are a lot of things partners could bring to a joint venture to make it industry. Are you thinking within the industry, specifically? Is the other question?

Well, what would it take? I mean because you clearly have access to capital. You already have, as you say, plenty of resources, good quality resources to develop. So what would it take for you to look at a nontraditional structure, a co-investment or something else? I mean what kind of...

Yes. So I think that would probably be more likely from a customer perspective rather than someone in the lithium industry. And so there can be opportunities there. So that might tie us into the recycling aspect of it down the road. We've partnered with someone who's a customer could bring the lithium back because we think will play a key role in reprocessing lithium at the end of life from a battery standpoint. So opportunities like that, that we will look at. I'm not sure there are too many opportunities for us to look at that within the industry. But I mean we've done JVs to get mining capability because that's not really our core business. So we've done joint ventures around math. But I think your question was a little bit more about from a conversion asset standpoint. I think we'd be looking to do, we would be open to having conversations with customers or potential customers, industry players that would bring something to us, we don't have today. And one of the things I'm thinking of is recycling.

And are there red lines in terms of sort of assets or skill sets, you don't want to share, you don't want to lose control of?

Yes, there's probably a lot of things we don't want to share or lose control of. But I mean, we've worked pretty hard to get our resource portfolio that we've developed, and we felt like that it's a great portfolio of resource, and we need to continue to develop about our plan to share that. That's kind of a fundamental key for us. Our knowledge around conversion capacity plants and how to execute that is valuable, but probably the resource is the piece that we really don't want to share.

And on the political risk in Latin America, so first your sense of kind of the current state of play in Chile, how knowable are the outcomes? And then what's the implications for Argentina? And how do you think about risk profile for projects there?

Yes. So I mean Chile, we have a new administration in place and a new constitution that's being written. But the discussions we've had so far with the new government has been very thoughtful. They've kind of reassured us. They're not looking to nationalize existing businesses. But I think the government does want to get into the lithium business to some degree, probably on a value-add basis that they've also said they'd be open to public private partnerships with existing players. So that could be very interesting for us. But I think -- I guess the message is all the discussions we've had with the new administration, they've been very thoughtful and to reassure us that they're not trying to take our business.

And then in terms of how Argentina might play out?

Yes. So we have a resource [indiscernible] that we are developing. Chile and Argentina are quite different, and we'll go in with our eyes wide open. But lithium tends to be in these unusual places and then you have to deal with that geopolitical risk. Argentina is -- can be a challenge, but we've got a good resource there, and we'll develop that as we go forward and then manage that geopolitical risk as appropriate.

And how do OEMs want to approach the geopolitical risk? Do they want to pick where the lithium comes from? Or do they want you to manage it for them, so they can be basically agnostic from the sourcing?

Yes. I think that probably depends on the OEM. And I think everyone -- they're a little bit different. What we try and sell as a value proposition is we have a diverse resource base that comes from different geographies, and we can mitigate that risk on your behalf by having resources in multiple geographies. And the diversification that we have is greater than I think all of our competitors at least most, I'm safe in saying, so we try and bring that risk mitigation to our customers. And I think they're pretty happy with that.

How do you think about sort of Europe at this point as an area for new investment?

So I mean Europe is going to be a big market for lithium to have been clearly there's a need and a desire to localize supply to the extent possible. It's just short on resources. So it's probably going to have to be some kind of unique hybrid model here where you bring some resource in and maybe do some processing here in Europe. I mean we're -- we have a big position expanding in China at the moment. We'll pivot to the west. So North America, we have a pretty strong plan because we have resources there. And then Europe, we're talking to our customers about the opportunities there. The trick is the resource. We'll have to bring in some resources. At least it will have to be at least a hybrid model. It can't be all local. There's just not a resource for that.

The European OEMs are also very interested in building out their recycling plan. And so probably ahead of where we are in North America in doing that. So a lot of active discussions with them with Albemarle's participation.

And when you are in discussions with OEMs about the sort of medium-term supply deficit, how much leeway does the community feel it has to back away from the carbon net 0 targets, if the supply isn't there?

What community?

I mean, it's certainly the auto OEMs, they have various sort of EV penetration and reduction of carbon footprint and that will become difficult if the lithium industry doesn't ramp up adequate capacity?

Yes. I mean I haven't heard anyone backing away from those targets. They're pushing that we -- that the industry in best, and we are working with our partners to do our part of that. You had a question earlier about our growth ambitions. I mean we'd like to maintain our share and build along with our customers to keep that. But that's a challenge. We think that's a stretch for us to do that. If we can accelerate that, we will. But only if we think we've got the capability to do it. We're not going to go way out on a bit, make promises and not be able to deliver.

And when do the decisions need to be made to lock in kind of adequate supply by 2030? What's the -- if everybody wants to take it right up to kind of the limit, when is the last period to make the decisions?

It depends on the decision. So if you need a resource and conversion, you need to be doing that today. We're looking for -- we're good for -- pretty closely in the decade, but we're looking for new resources now. If you're planning on bringing on a new resource from scratch and then adding conversion facility, you need to have very strong plans right now.

And then the last one, which has come up quite a bit is, how do you think -- how is your thinking about mid-cycle and trough evolved given that kind of the price environment we're in is so far different from what a peak was supposed to be, even just 1 year or 2 ago. So how has your thinking evolved on that front?

Yes. So we -- I mean -- so I want to call it mid-cycle or trough pricing, whatever you are, we think that's definitely moved up. So I don't think -- I mean we saw $4 a kilo in China spot prices last year. I don't think you ever see that again. And I think kind of the trough prices have moved up. And it's hard to say how much because we're 1.5 cycles in or 1.25. I'm not sure where we are. So it's difficult to say where that might come down, but it feels like it's significantly changed and that the industry and our customer base realize there needs to be investment and aggressive investment in order to keep up with that growth curve from electric vehicles.

I think one of the other points of evidence is, as we look out to 2030 and our projection of what the cost curve looks like, that marginal cost at the right side has moved up as well. So not necessarily proof that there is an increase in the mid-cycle price, but at least it's supportive of that.

And if memory serves, you have a -- you've shown in the past how your [ capital ] intensity for new projects has been coming down across investment cycles? Are your peers keeping up with that? Can they match that? Or is that going to be a sort of structural problem for the industry?

I think it's -- I think the large players can keep up with that because most of that is coming from brownfield expansions. Now if you're investing outside of China, you're going to have a higher cost. 2 of us have greenfield sites that are being built in Western Australia with expansion capabilities. So I think it's there. Now as you get into the smaller players or start to get into new geographies, that changes. So as we look at the United States, we're expecting cost to be higher than what we've seen on average across our existing expansions.

And I think it was several years ago, I think I talked about like trend inflation on costs being around 3%, 4%. What do you think is kind of a good bogey for just sort of underlying cost inflation for projects going forward?

For discount capital, or --? Yes. Well, it's difficult to say because we're in this unusual period right now. So I think -- and we have to get through the impact from COVID, supply chain issues. So we're going to -- you're going to see us, I think, a spike and then it will come back down to trend. But we're right in the middle of that. So that's a tough one to call.

And then the cost of -- for converting -- as the quality of the ore body goes down, the cost goes up in a nonlinear fashion.

That's correct. That's correct.

Because you're processing that material more, right? And it takes more energy, it takes more time.

Sort of higher end of the cost curve should be going up faster than the 3%, 4% kind of trend?

Yes. Both capital and operating costs.

Okay. And I think we're going to get the hook. So I think that's probably a good point to end up. Is there anything else you'd like to address in closing?

No. I mean I don't think so. So we've talked about the pricing. I think that's pretty clear. And it is an exciting time in the lithium business. I mean, Albemarle in general across all 3 of our businesses, but lithium, the growth is -- it's amazing, and it's -- we are pushing to keep up with that.

I think people will be asking us like, well, what's the odds of another press release in a month's time. No pressure. But thank you very, very much for doing the chat today.

All right. Thank you.