By Ernest Scheyder
LAS VEGAS (Reuters) -Albemarle, the world’s largest lithium producer, plans to hold more auctions for the metal used in electric vehicle batteries to increase price transparency and promote better understanding of the opaque market, a said director Tuesday.
The move is one of the most aggressive by an industry leader to clear up widespread confusion over the price of lithium. It would also help better support supply contracts with automakers hungry for fresh and consistent supply.
“What we’re trying to do is build trust,” says Eric Norris, head of Albemarle (NYSE:)’s energy storage company, told Reuters on the sidelines of the Fastmarkets Lithium Supply and Battery Raw Materials Conference in Las Vegas.
Although lithium has surged in popularity over the past decade, confusing futures pricing from market leader China has made it unclear what a realistic global benchmark for its price should be. The fight became especially acute after Chinese prices plunged last year, dragging down shares of Albemarle and other Western lithium producers.
The London Metal Exchange has yet to launch a long-planned lithium futures contract, and volumes on the CME Group (NASDAQ:) lithium contract are dwarfed by those for and other crucial minerals.
In response to price uncertainty, Albemarle auctioned off some of its Australian lithium supplies in March, a practice the company now wants to copy globally, Norris said.
“Our intention is to do more of it” in more parts of the world and for different types and grades of lithium, he added.
Albemarle plans to provide its auction data to Fastmarkets and other pricing agencies to formulate it into publicly available prices, he said, noting that many of the company’s long-term contracts are tied to such data.
Data sharing should also encourage the use of hedging and other financial contracts to reduce risk, Norris said.
“If we can create more volume and more liquidity… it will benefit the entire industry.”
‘TAP THE POTENTIAL’
In Chile’s Salar de Atacama, where Albemarle produces lithium using evaporation ponds, the company has mapped out an aggressive growth plan using direct lithium extraction technology, Norris said.
However, Albemarle has no plans to bid to develop Chile’s other lithium-rich salars, or salt flats, moves that rivals are taking.
“We haven’t even started to fully realize the potential of what we have in the Atacama,” Norris said.
With the recent drop in lithium prices, this may be the right time for industry consolidation, Norris said, but Albemarle is focusing on existing projects.
“There should be bigger players with bigger balance sheets… in this space to credibly support future growth,” he said. “We never rule out acquisitions, but our priority now is internal organic investments.”
