Joel Jackson: Yes. Okay. Fair enough. I just wanted to also ask you about the U.S. strategy. So as this industry was really looking at regional supply chains and you really were going to go after Kings Mountain and U.S. Mega-Flex, you put those plans on hold, but you’re still doing the permitting, of course, at Kings Mountain. As you know, it takes a while sometimes to get mine’s permit in the States. Is this — how important is this U.S. strategy going to be? Is this something maybe that will have to be reassessed? Can the DoE or DoD with some of the different funding options help revive some of this? It seems like there’s a bit of a damper here on some of the objectives of political and the industry.
Eric Norris: Yeah. No. I think there’s a big impact on that. I’m building this, we say in the West, so called Europe and North America, but focus is and we were a bit more focused on North America, we have access to a great resource at Kings Mountain, but where prices are today, the economics aren’t there for those projects. So we continue to progress, as you said, the permitting, the kind of real long lead time items that are not real capital intensive, in anticipation of prices coming back to where we’d be able to do those investments or some support or another way that we maybe could do those. But they’ve been pushed out. I mean, our — at Richburg, we haven’t, that’s not a canceled project, it’s been delayed.
So we’re still doing some of the long lead time permitting there, but no construction and we stopped engineering work on it. And Kings Mountain, we’re progressing with the permitting because that’s long lead time. We hope to work out a solution, but it requires better pricing in order to execute on those projects. And those are prom — and those are kind of the two of the best opportunities to start the supply chain. We need a lot more support, not just, we can’t do it ourselves, but that would be the first project we would bring to market in North America, and probably, as others as well, particularly around resources.
Operator: Your next question comes from a line of Mike Sison from Wells Fargo. Your line is open.
Mike Sison: Hey. Good morning. Could you just remind us, given your new CapEx plans, what your — what capacity you’ll end with in 2024 and then could you give us an update on how you think that will unfold in 2025, 2026, 2027? So where do you think you’ll be in capacity to offer the market over the next several years?
Eric Norris: So depending on where we land — Mike’s is Eric, depending on where we land in that range of 10% to 20%, you’re talking something that could be close to, it’s going to get close to 200,000 tons, 190,000 tons, 200,000 tons at the top end and that is being driven, just to be specific, by more production out of Chile, which we discussed earlier and that’s realizing some of the efficiencies of the Salar Yield Project and the bottlenecking capacity downstream for La Negra to drive that growth. It’s also being driven by increased spodumene production out of Australia and the ramp of Kemerton, Qinzhou as well, where Meishan is more of a 2025 item for the time being, but that plan is ramping nicely for that period of time.
That then brings me to how you think about the future. Kemerton I and II will continue to ramp as you go into 2025. Meishan will start to ramp in 2025 and 2026. The interesting thing about our near-term volume picture is we’re going to be looking at that sort of 20% plus volume growth for some years to come, based upon the investments we have made already. The things that we have idled or paused from an investment standpoint that Kent earlier referenced were longer term, further out, sort of really second half of decade in terms of what they were going to deliver. So the impact of slowing those down, should prices stay low and we not return to investing those projects will be felt in the latter part of the decade, which is, I’ll also remind you, is a point in time where we see industry supply already getting tight relative to demand.
So there’s some real challenges because we don’t see demand slowing down. We certainly see weakness in certain parts of the smallest market, which is North America, but on the whole we see a very strong growth and a challenging environment for supply to be able to meet it in the long term. But we have good growth, I would say, in the coming years for multiple several years ahead of us.
Kent Masters: And some of that is just the lead time and getting these investments on the books and then executing against it. It’s a number of years to get those out there. So the projects we’re pulling back on, as Eric said, impact the back half of the decade.
Mike Sison: Got it. And just a quick follow-up, and just because I figured you guys be better off knowing what the potential is for lithium prices. I know you don’t want to get into a specific forecast, but what do you think needs to happen to get pricing back to greenfield economics?
Kent Masters: Well, I mean, prices stay where they are. You’re going to see production come off and projects come off the books and that will eventually bring prices up and balance will happen. And then hoping we’re in a cycle where lower highs and higher lows starts to prevail, but — and that was what we were anticipating in this cycle. This is still higher than the last low, so maybe it’s just not quite as mature as we had anticipated. But we need to get into lower highs and higher lows so that there is some consistency in the industry and people can see through to an investment case for new projects.
Eric Norris: It’s not an understatement to say, Mike, that if prices stay where they are, which is well below marginal cash costs, and as we said, we thought it would be less volatile, is that you’re going to see — we believe, you’re going to see enough projects ultimately come off that that inflection point where we start to get structurally short on supply moves forward from the latter part of the decade into the middle part of the decade. So that only — what that says is excessively low prices only aggravate excessively high prices potentially down the road. That’s the challenge. We, and certainly our customers, would love to see a much more moderated cycle and as the market does recover, we’ll look to try to find ways to reduce that volatility in our mix. But certainly we’d hope that for the industry more broadly as well.
Mike Sison: Got it. Thank you.
Operator: Your next question comes from a line of John Roberts from Mizuho. Your line is open.
John Roberts: Thank you. Does that lower end of the 2024 volume growth at 10% include a sequentially flat March quarter or sequentially down March quarter in volume?
Kent Masters: So sequentially from the fourth quarter, is that what your question, I guess, year-over-year…
John Roberts: Correct.
Kent Masters: Just to clarify the question.
John Roberts: We start the year out without any growth sequentially.
Kent Masters: Yeah. I mean, I think, there’s going to be a difference between production and sales. I think you — if you look at what happens seasonally with EVs, it is — each year is a rapid rise to December and then a drop seasonally in January. So from a production standpoint, we’ll be sequentially up. From a demand standpoint, seasonal demand plays a role for the whole industry, including us.
John Roberts: Okay. And then on slide 19 that has the industry EV growth and the lithium growth, so battery sizes are getting smaller here in the near-term, but it looks like it flips and the assumption here is that full EV start — before the end of the decade, full electric start out growing hybrids again?
Kent Masters: Yeah. Well, and it’s hard to generalize that, John. I mean, I think, you have to go by region. So what I’d tell you is in China, there was a nice growth in plug-in hybrids last year. By our reckoning and our estimates, the estimates we had at the beginning of the year where we didn’t anticipate that, that plug-in hybrid growth came at the expense of internal combustion engines, not at the expense of battery electric vehicles in China, which is the largest market. It’s 6% of the market. In Europe in the past year, you’ve seen the opposite trend. Battery electric vehicles have been growing faster than plug-in hybrids. The U.S., which is the smallest market is in a pivot point now, which I don’t, we’ll have to see which direction it goes.
There’s a lot of discussion about how certain automotive producers are struggling with demand and costs to play and so I think they’re looking at plug-in hybrids as an alternative, but it is on the margin it’s the smallest market. So I think it has the least effect on lithium demand. By and large, going back to your original question, battery size grows, may grow at varying rates year on year on year, but it grows over time as we go forward.
Operator: And our final question comes from a line of Kevin McCarthy from Vertical Research Partners. Your line is open.
Kevin McCarthy: Yes. Thank you and good morning. Would you comment on the expected quarterly cadence or phasing of your adjusted EBITDA and Energy Storage in your $15 per kilogram scenario? I thought I heard a comment in the prepared remarks that you would expect to be at a 30% margin by the end of the year. So perhaps you can kind of walk through that margin escalation expectation.
