Lithium producer Livent will earn less money than it expected this year as import restrictions and a lack of skilled labor have delayed its critical mine expansions.
The company cut its annual revenue guidance to between $890 million and $940 million, from a previous forecast of between $1.03 billion and $1.13 billion due to the deferral of mine expansion projects in Argentina, the only place in the world where Livent extracts lithium. The project was scheduled to go online this year but will start operating in 2024.
Livent’s chief executive, Paul Graves, tried to put the quarterly results in a better light, noting that 2024 may be a stronger year due to a recovery in prices as electric vehicle manufacturers that overstocked in the past return to buying in higher volumes.
“We will see a rapid increase in the price of battery materials when buying restarts,” Graves said in a Tuesday press call.
Growth in production was Livent’s best hope for increasing revenues in a year when the price of lithium sank. The price reached an all-time high in 2022 on fears of shortages as a result of pandemic disruptions. Mining project suspensions slowed supply expansion, while demand for electric vehicle batteries manufacturing continued to grow. Carmakers overstocked, especially in China, Livent’s largest destination market. When value chains normalized and shortage fears dissipated, sales fell and the spot price of lithium plunged. This was reflected in the collapse of share prices of the largest companies in the sector, such as Albemarle, SQM, and Livent.
At its peak, the spot price of lithium topped $80,000 per ton; on Wednesday it was just above $21,000 on the Shanghai Metal Exchange. Livent sells lithium at contractually set prices, which are not public. Graves clarified that the company no longer uses fixed-price contracts, but rather market-based pricing contracts.
Livent’s stock price fell 2% on Wednesday. Albemarle shares were down 3%, reflecting negative expectations about the entire sector.
Over the past 12 months, Livent shares fell 52.1%, a similar magnitude drop to those of Albemarle (58.2%) and SQM (50.7%). The Global X Lithium & Battery Tech ETF, which tracks the stock price of lithium miners and battery makers, fell 29.13% over the same period.
Although the long-term outlook remains positive due to the growing demand for lithium in battery manufacturing, investors are less enthusiastic about the industry. Although U.S. electric vehicle sales grew by 50% during the third quarter, it was less than the industry had expected, which is a sign of a possible slowdown.
With Livent’s mining project delay, the two stages of expansion will begin production in 2024, Graves said. The project plans to double the capacity of the Salar del Hombre Muerto mine in Argentina, adding an additional 20,000 annual tons of production.
Ramp-up delays are common in these types of projects, said Pavel Molchanov, equity research analyst at Raymond James & Associates. The slow pace of supply expansion is, in fact, one of the reasons why some analysts predict lithium shortages could finally happen in the near future.
Livent's revenue in the third quarter fell 8.7% from a year earlier to $211.4 million.
Earnings per share rose 47 cents but were lower than analysts had expected. The profit increase was mainly explained by a reduction in production costs due to lower royalty payments in Argentina, linked to the price of lithium, and to better prices for inputs used in the production of butyllithium, one of the specialty materials manufactured by the company.
"It was a little disappointing that they were not able to get their new volume into production this year, but Livent still has solid margins," said Seth Goldstein, equities strategist at Morningstar Research. "I think the market is skeptical about lithium prices right now and whether those prices will produce profits."
In the latest earnings report, Livent highlighted the progress of the merger with Allkem to create Arcadium Lithium, which it claims will be the world's third-largest lithium producer by 2027. The deal would be completed before the end of the year, according to Livent.