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Morningstar | Higher EV adoption should drive strong profit growth for Albemarle's low-cost lithium operations.

Albemarle became the world's largest lithium producer following the January 2015 acquisition of Rockwood. The company effectively controls around one third of the lithium carbonate market through its own salt brine assets in Chile and a 49% joint venture interest in the Talison mine in Australia. Albemarle's Chilean assets are among the world's lowest-cost sources of lithium. Talison is one of the best spodumene resources in the world, which allows Albemarle to be one of the lowest cost lithium hydroxide producers globally as spodumene can be converted directly into hydroxide.As electric vehicle adoption increases, we expect mid-double-digit annual growth for global lithium demand, one of the best growth profiles among commodities. We anticipate that Albemarle and its Talison joint venture will be able to fulfill a sizable portion of incremental demand as Albemarle is investing in major capacity expansions at both of its lithium production locations. Albemarle is looking to grow its Chilean brine lithium production capacity from 27,000 metric tons in 2016 to over 140,000 metric tons over the next decade. Furthermore, the company’s Talison joint venture will triple its spodumene capacity from 80,000 metric tons to 250,000 metric tons on an LCE basis. Albemarle will continue to receive roughly half of Talison’s production and is building a 100,000 metric ton lithium hydroxide plant in Australia to convert the spodumene.Albemarle is the world's second-largest producer of bromine, a chemical used primarily in flame retardants for electronics. Bromine prices have recently stablized as increased demand for use in servers and automobile electronics is offset by a decline in demand from TVs, desktops and laptops as well as lower demand for bromine used in oil field completion fluids. Despite a fairly tepid demand outlook, we expect Albemarle to generate healthy profits from bromine due to its low-cost position in the Dead Sea.Albemarle is also a top producer of catalysts used in oil refining and petrochemicals production. These chemicals are highly tailored to specific refineries and most need to be constantly replaced, giving the company a steady stream of cash flows.