Morningstar | CORFO Announces Arbitration Against Albemarle; Maintaining $131 FVE With Outlook Unchanged
The Chilean regulator CORFO, which owns the Salar de Atacama where Albemarle produces lithium, announced arbitration against Albemarle due to a pricing dispute regarding the the contract between the two parties that was signed in 2016. A clause in the contract states that Albemarle must sell up to 25% of its battery grade lithium carbonate production in Chile to downstream parties, such as battery producers, that CORFO has chosen.The price of the sales to downstream parties is stated to be at the lowest parity pricing. Albemarle interprets this as the lowest price it sells battery grade lithium carbonate to external parties, while CORFO wants to include internal transfer prices for some product that Albemarle exports to refineries outside of Chile.
We expect this dispute will likely take multiple years to resolve. Without any clear precedent on which pricing scheme will prevail, we've left our outlook unchanged and maintain our $131 per share fair value estimate for narrow-moat Albemarle.
Albemarle is a global developer, manufacturer and marketer of chemicals across a range of end markets including energy storage, petroleum refining, consumer electronics, construction, automotive, lubricants, pharmaceuticals, crop protection and custom chemistry services. The company's segments include: Lithium, which develops and manufactures a range of basic lithium compounds and lithium specialties and reagents; Bromine Specialties, which includes products used in fire safety solutions and other chemicals applications; and Catalysts, which includes Clean Fuels Technologies, fluidized catalytic cracking catalysts and additives, and performance catalyst solutions.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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