Albemarle Corp ⛏ 🔋 ($ALB) - Share Chat

This chemicals company produces specialised products for batteries, petroleum and lubricants.

If you love Tesla, EVs and going green… then you need Albemarle $ALB in your portfolio and here is why:


[googlefinance - $ALB]

$ALB started its life trading at a modest $6.44 in the mid 90s as a spin off of Ethyl Corporation founded in 1921. With a team carrying the institutional memory of it’s ancestor, Albemarle became a staple in pension funds and mutual funds around the world becoming a dividend aristocrat that now functions like a tech stock. But why?

Why has $ALB risen from a trading range of $60-$80 to an ATH of $250+ at the time of writing… quite simply, lithium is the new oil.

Much like how oil doesn’t come out of the ground and enter our fuel tanks… lithium cannot come out the ground and be of use immediately. It must be refined and processed to be of use. Of course this is common sense, but in much of the same way that not all oil is economical, neither is all lithium sources and refiners. This is where $ALB has its ace over the entire industry, it has the lithium source and refining process set up as a vertical structure within itself. It has mines that are no longer in use just in case it needs further reserves to meet demand… as such, $ALB has no real non-Chinese competition and that is an important note to make, as China’s trade relations and supply chain shocks have set a tone in international markets.

“But $ALB doesn’t make batteries… surely I should invest there?”
Yes, own the entire supply chain from brine to $TSLA if you want. Look at the forecast for battery production by 2028:


[Statista - GWh produced 2028]

The top battery manufacturers will put out somewhere around 1200-1300 GWh, and the average EV can be estimated to have around 100 kWh at that time. So we are looking at enough battery production to support 12-13 million cars per year assuming the following… that ALL batteries are used for cars. That is a tall order. Assuming we do not need batteries in our phones, or for green-energy buffering (think wind and solar) with the ESG direction we are heading in. Good thing lithium mines don’t harm the environ… cough nevermind, lets move on!

“What is battery production like now? It’s useless having those figures without the current production”
Good point my friend, here you go:


[Lithium-ion battery production in GWh]

Don’t want to add that up… 269 GWh. So around 1/5th of what is projected going forwards. So we are looking at a 5 fold increase in demand, when $ALB has had a 4 fold increase in price.

Sounds like demand is growing faster than supply… and we are also assuming that demand is not inelastic (hint* it is… we need transport infrastructure if you haven’t noticed).

So where is the price heading? Well, the UK is going electric only for personal vehicles circa 2030. Europe in 2035. And that would easily gobble up all 1300ish GWh we hope we have by then for new car sales per year! Let’s hope no one else wants EVs eh?

It seems clear to me that $ALB hasn’t gotten close to finishing its run. We could be looking at a trillion dollar company!!! Not quite, but assuming a 50% market penetration to supply to these battery manufacturers which is fair, and the future predicted cost per kWh of $60. I find a future lithium-only revenue for $ALB to be ~$40b or around 11x where we are now for revenue.

That is not saying we will hit 11x, given the 4x run we have had so far a more conservative estimate is 2-3x so a price range of $500 to $750 assuming no stock splits.

Before you go, thank you for reading… and consider investing your returns in fuel cells since this lithium solution may blow up in our faces as you can see the numbers now!

download

4 Likes