Background
A 37% slump in lithium prices over one year, an electric-vehicle price war and rising pressure for costly carbon-neutral policies are causing stock losses across the clean energy supply chain.
Shares in Albemarle Corp., the world’s top lithium producer, fell 20% in a month, even as executives told investors on Aug. 3 that EV demand would support a market flooded with supply. Also sliding were Albemarle supplier Tianqi Lithium Corp. and customer Ford Motor Co. The automaker is scaling back its EV production targets, with losses from EVs expected to reach $4.5 billion this year.
While environmental, social and governance funds are ready to invest to support the energy transition, they are demanding an expensive path of carbon-reduction measures.
The issue
Albemarle’s supply chain is a sea of red. Catalyst producer Ecovyst Inc. and components maker Daebo Magnetic Inc. declined more than 10% in the past month. Ford fell 19%, while General Motors Co., declined 14% as it struggled to get workers to accept wage restraints amid price cuts by Tesla Inc. Factors in GM and Ford’s stock woes include their slow EV progress, pressure on vehicle prices and union negotiations. Meanwhile, BMW AG lost 5.4%, as Tesla outsold German automakers in EVs.
Commodities across the clean energy supply chain are mostly down, with lithium off 37% in one year, cobalt 36%, zinc 32%, aluminum 11.5% and nickel 9% as lower supply risks have cut prices of key metals.
Albemarle and its leading suppliers saw sales miss analyst estimates, while its four biggest automaker customers beat revenue forecasts. Increased sales by battery materials suppliers is in contrast to projected auto industry declines (including fossil fuel vehicles) as interest-rate hikes wreck demand.
The world’s biggest automakers are all exposed to lithium and have been making acquisitions to build a reliable supply chain. Exxon Mobil Corp., which holds exploitation rights to lithium resources in a promising region of Arkansas, is in talks with automakers about lithium supply. BloombergNEF estimates a successful net zero energy transition by 2050 will require $10 trillion of metals. BNEF also forecasts demand will surge above supply by 2028 in the net zero scenario.
Meanwhile, Albemarle Chief Financial Officer Scott Tozier said he sees ESG risks across his supply chain, from climate regulation to droughts.
Albemarle’s lower GHG per unit of revenue didn’t reduce absolute GHG emissions across its supply chain because output rose. The company is tracking above the pace required and has work to do in adopting behaviors sought by the strictest ESG funds.
Tracking
Use Bloomberg’s newly enhanced SPLC function to analyze commodity and ESG exposures in supply chains. Read BNEF for energy transition analysis. Run ALB US Equity SPLC to Analyze Albemarle’s supply chain.
For more information on this or other functionality on the Bloomberg Professional Service, click here to request a demo with a Bloomberg sales representative. Existing clients can press <HELP HELP> on their Bloomberg keyboard.
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