The electric vehicle (EV) industry is experiencing a slowdown, affecting everyone involved. According to Evercore ISI analyst Stephen Richardson, there is “no one immune from this downcycle.”
Albemarle’s Third Quarter Performance
Lithium miner Albemarle (ticker: ALB) reported its third-quarter earnings on Wednesday evening. The company earned $2.74 per share from sales of $2.3 billion. However, these figures fell short of Wall Street’s expectations of $3.77 per share and $2.5 billion in sales. Comparing to the same period last year, Albemarle’s earnings dropped significantly from $7.50 per share, despite an increase in sales from $2 billion.
Falling Earnings and Lithium Prices
Albemarle’s earnings have suffered greatly, alongside the decline in lithium prices. A year ago, benchmark lithium prices stood at around $81,000 per metric ton. Today, they have plummeted to approximately $23,000 per metric ton.
While the decline in sales can be attributed to weakened prices for Albemarle’s products, high costs have also contributed to the disappointing results. Richardson stated that the “lag effect of lithium index prices on average selling prices was somewhat anticipated,” impacting sales. Furthermore, higher spodumene inventories and their associated costs of goods sold have further impacted the company’s earnings. Spodumene is an ore used in the production of lithium products.
Imbalanced Supply and Demand for Lithium
The main reason behind the current struggles in the industry is the imbalanced supply and demand for lithium. Lithium is a crucial component used in lithium-ion batteries for EVs. Although EV demand continues to grow, it has decelerated compared to before. As a result, lithium buyers now face an excess inventory problem. Additionally, lithium miners have increased their production capacity in anticipation of high demand that has yet to materialize.
Impact on Albemarle’s Stock
As a result of the challenging business environment and disappointing earnings, Albemarle’s stock has suffered. In early trading, the stock fell by 4.5%, in contrast to the 0.5% and 0.3% increases seen in S&P 500 and Dow Jones Industrial Average futures, respectively.
Over the past year, Albemarle shares have experienced a significant decline of approximately 54% due to the sharp drop in benchmark lithium prices, which fell by around 70%.
Investors are eagerly awaiting insights from management on when the industry will rebound. Albemarle’s management will be hosting a conference call at 9 a.m. Eastern time to discuss the company’s results and address investors’ concerns.