A Onetime Paper Maker Is Now the King of Lithium

Turns out, they were right.

Albemarle is now the world’s most valuable lithium producer, with a stock-market capitalization of almost $23 billion. It is also the third-biggest producer of lithium chemicals used to make lithium-ion batteries, behind SQM of Chile and China’s Ganfeng Lithium.

All that makes the Charlotte, N.C.-based company, which started off in 1887 as a paper mill, a key cog in a tight global supply chain for battery metals used in electric cars, smartphones and other applications at a time when governments are pushing to electrify their economies.

“The number of companies able to produce lithium at competitive costs is small, and Albemarle is one of them," says James Dow, investment manager at Scottish firm Baillie Gifford. He started buying Albemarle stock in 2017, and several Baillie Gifford funds now own a combined 2% stake.

“We think this is a 20-year story," Dow says.

The global lithium market was worth some $48 billion in sales last year, according to Benchmark Mineral Intelligence, up from $1.6 billion in 2015, at the time of Albemarle’s big lithium deal. In May, Ford Motor signed a long-term contract with Albemarle to buy enough lithium to make around three million EV batteries.

To keep up with the demand, Albemarle has embarked on new acquisitions and capacity building.

In March, Albemarle proposed a $3.7 billion takeover of Liontown Resources, an Australian lithium miner that is developing one of the largest and highest-grade hard rock lithium deposits in the world. Liontown rejected the bid as too low.

It was Albemarle’s third offer since mid-October, and bankers aren’t expecting it to quickly walk away. Albemarle has accumulated a small stake in Liontown “to highlight a commitment to the transaction," the company has said.

The pursuit comes amid other deal making in the industry. Philadelphia-based Livent recently agreed to merge with Australia’s Allkem, a move that would create a roughly $11 billion lithium player. Exxon Mobil recently bought rights to a chunk of promising lithium acreage in Arkansas.

Albemarle is also pushing ahead with organic growth. Lithium can be mined from the earth like other metals or extracted from briny water deposits. Albemarle gets its lithium both ways, at operations in Nevada, Chile and Australia.

It refines the extracted material into compounds that include lithium carbonate and lithium hydroxide, which are then used in battery production. Albemarle’s integrated approach has put it at the center of Western efforts to diversify supply lines.

China has emerged as a global leader in EV production and is spending billions to boost its access to lithium-mine production globally. Meanwhile, it dominates the business of refining lithium extracted elsewhere in the world.

The West is trying to catch up. The Energy Department in October gave Albemarle a nearly $150 million grant for EV-battery making. In March, Albemarle said it would build a $1.3 billion-plus lithium-processing facility in South Carolina.

It has also been a lead player in the recent rapid development of the lithium industry in Western Australia, which is currently the world’s biggest source of lithium production. In May, Albemarle said it plans to double the capacity of a plant in Western Australia that makes lithium hydroxide.

Lithium, the lightest of all metals, was discovered in 1817. For decades, its best-known use was the treatment of manic episodes of bipolar disorder. Its low mass and high energy-storage potential, though, also made it ideal as a battery component.

Exxon helped pioneer lithium-ion batteries in the 1970s, before dropping the business amid weak demand. The batteries eventually went mainstream, ending up in hand-held camcorders in the early 1990s. They first powered an EV, the Tesla Roadster, in 2008.

Apart from EV batteries, lithium is used in other clean-energy technologies, including industrial-scale batteries that can store energy from solar panels and wind farms and smaller ones for residential use.

Despite the recent tailwinds, Albemarle is facing its share of challenges. Its stock has drifted lower since peaking in November, as lithium prices have cooled and investors questioned the sustainability of the company’s growth plans.

Chief Executive Kent Masters, who took over in 2020, has said the company’s prospects are clear. “We have a tremendous growth opportunity ahead of us," he told investors in January.

The company has said it more than doubled net sales last year over the year before—to around $7.3 billion. It has projected net sales of some $18 billion by 2027. Last year, earnings increased nearly four times year-over-year, to $3.5 billion. Albemarle has said it expects that to double by 2027.

Geopolitics and labor issues have coincided with the steep demand rise. Albemarle operates in the Atacama Desert of Chile, where President Gabriel Boric in April announced plans to create a state-owned lithium company. He said the state would take a majority stake in partnerships with private companies to develop lithium.

Albemarle’s shares fell 10% on the announcement, though they have since recovered. The company, whose agreement lasts through 2043, said it expects no material impact and the Chilean government “has made clear" it will respect existing mine contracts.

In Australia, Albemarle has had a tense relationship with union leaders, who have raised concerns about workplace safety and job openings for locals. Albemarle says the company is working to improve the management of dust at its processing plant in Western Australia and that it gives priority to local employment.

Albemarle got its start making blotter paper and paper for commercial packaging. In 1962, it bought a much bigger chemical company. ​​Paper divestments followed, and Ethyl, as the company was then known, spun off its chemical business to become a publicly traded company called Albemarle. In the 2000s and 2010s, it added more chemicals businesses and sold off others.

Its dominance in lithium came after its $6.2 billion purchase of Rockwood, which held what continues to be the company’s key lithium assets in Australia and Chile. Albemarle also runs the U.S.’s only operational lithium mine, in Silver Peak, Nev.

Luke Kissam, who ran the company for nearly a decade and orchestrated the Rockwood deal, said demand outstripped his forecasts at the time.

“Looking back, we underestimated the growth," Kissam said. Others, he said, underestimated Albemarle’s ability to capitalize on that demand. “The Street didn’t believe our forecasts. We far exceeded them in terms of revenue and profitability."