Jeffrey Zekauskas: Second, just what you said was that your EBITDA margin was being penalized by about 7 to 10 percentage points than your lithium business because of these timing differences. If you look at the EBITDA of energy storage, excluding equity income, in the quarter, it was about negative 15. And so if you take 10% of the energy storage revenues of $1.7 billion, that’s another $170 million. You netted out, that’s $150 million. So it looks like the EBITDA margin on your businesses, excluding Talison is about 8%. And – so what am I doing wrong in the math? What am I missing? And then why do the – so what are the returns on your business, excluding Talison and the changes in inventories?
Scott Tozier: Yes. So Jeff, this is important because our strategy is to be an integrated producer. That means we’re going to make money throughout the chain from the mine all the way through the chemical conversion into the salts business. Given where the prices are today and how they dropped, the JV is making the joint venture and we will just focus on Talison, but the same is happening at Wodgina. The JV is making a significant amount of our operating income. And as those high-cost spodumene inventories being processed in the quarter and the second half of this year, primarily in China, we are actually seeing losses as you commented on that conversion. But that’s really just being driven by the timing of that spodumene inventory being processed.
If you were to normalize and again, in a flat rate and flat price environment, you would see normal margins in both the core business as well as the joint venture ultimately. And so again, I think as you look at the geography of our P&L, that’s the effect that we have been talking about with that inventory spodumene lag happening.
Operator: Your next question comes from the line of Aleksey Yefremov with KeyBanc Capital Markets. Your line is now open.
Aleksey Yefremov: Thanks and good morning everyone. On your fourth quarter guidance for lithium, if I look at your Slide 15 and sort of take the difference between your expected fourth quarter margin for the segment and expected normalized margin of 35%. I get about $300 million to $400 million EBITDA impact of this timing difference just in the fourth quarter. Does this sound about right to you as a dollar impact for this phenomenon?
Scott Tozier: Yes. That’s pretty close, Aleksey.
Aleksey Yefremov: Great. And another question is the – you mentioned the impact of lower equity income because your partner chose not to take their full allocation. Can you talk about the size of that impact in the fourth quarter? And also if you can talk about it directly, maybe you can speak about your equity income expectations in general in Q4.
Eric Norris: Aleksey, hey, it’s Eric Norris. It obviously because of that curve that you referenced on Slide 15, it would vary at any point in time. But in the fourth quarter itself, it’s over $100 million sort of in that $100 million to $200 million range.
Aleksey Yefremov: Thanks.
Operator: Your next question comes from the line of David with Deutsche Bank. David, your line is open.
David Begleiter: Thank you. You referenced some spodumene producers or lepidolite producers in China shutting down as well as maybe some non-integrated producers. When did you start see shutdowns to occur? And how much is being shutdown in your view?
Eric Norris: It’s Eric again. So, you may recall that we saw the same phenomenon in the – during the first quarter as well when prices took a similar dip and if you – and so there are a couple of factors going on. One, starting first with merchant spodumene producers, those are the producers we refer to as they are buying spodumene on the market, converting it in China. Their cost has – when you start to get certainly at current price levels, actually, probably when you get into the mid-20s and less, they start – their margins start to get upside down. In fact, the prior comment that Scott just answered around the negative margins that were pointed out in the quarter on a non-consolidated basis, for us are an illustration of what a non-integrated producer would be dealing with.
So, they shutdown at those prices or they have to, unless they can get their hands on lower-cost spodumene. Spodumene has been coming down, hasn’t been coming down at the same rate. The big question, obviously, that pivot point of when they shutdown depends on when or what the spread is basically to spodumene, but that is currently negative. Lepidolite is a bit of a different story. It’s a much higher cost material to produce and has had – there has been froth with environmental and start-up challenges. So, there has been both a moderation of capacity for those reasons over the course of the year as well as a moderation of capacity for the same reason I just referenced. Un-integrated lepidolite producers who buy lithium in the market and convert it are seeing a similar margin loss at these prices.
If you look at lepidolite producers from peak from where they started the beginning the year to now, it’s about a 40% reduction of which about 10% has come offline in the recent few months, some more came off in the earlier part of the year. So, those are the various factors that are driving closures within China at these prices. Obviously, price recovers, they could come back, of course.
David Begleiter: Got it. Eric, did you mention that ‘24 volumes in energy storage should be up around between a 20% to 30% range, that you were guiding to longer term?
Eric Norris: I don’t know that we have given a guidance fully on that yet. But I mean if you take the demand forecast that we gave you earlier in the year that were multiyear, you would see a similar growth rate projected for next year as we had this year. This year’s growth rate was clipped a little bit by – for lithium consumption. It was clipped a little bit by the inventory correction we saw during the year, but it’s well into the 30s for sure going into next year, we believe.
David Begleiter: Thank you.
Operator: Your next question comes from the line of David with TD Cowen. David, your line is open.
