Q2 2026 Albemarle Corp Earnings Call

Operator 4: Hello, welcome to Albemarle Corporation's Q2 2026 Earnings Call. I will now hand it over to Meredith Bandy, Vice President of Investor Relations and Sustainability.

Speaker #2: Thank you, and welcome, everyone, to Albemarle's second quarter 2026 earnings conference call. Our earnings were released after market closed yesterday, and you'll find the press release and earnings presentation posted to our website under the Investors section at albemarle.com.

Meredith Bandy: Thank you, welcome everyone to Albemarle's Q2 2026 earnings conference call. Our earnings were released after market close yesterday, you'll find the press release and earnings presentation posted to our website under the investors section at albemarle.com. Joining me on the call today are Kent Masters, Chief Executive Officer, Neal Sheorey, Chief Financial Officer, Mark Mummert, Chief Operations Officer, and Eric Norris, Chief Commercial Officer, are also available for Q&A. As a reminder, some of the statements made during this call, including outlook, guidance, expected company performance, and strategic initiatives, may constitute forward-looking statements. Please note the cautionary language about forward-looking statements contained in our press release and earnings presentation. That same language applies to this call. Please also note that some of our comments today may refer to non-GAAP financial measures. You can find reconciliations in our earnings materials.

Speaker #2: Joining me on the call today are Kent Masters, Chief Executive Officer, and Neal Sheorey, Chief Financial Officer. Mark Mummer, Chief Operations Officer, and Eric Norris, Chief Commercial Officer, are also available for Q&A.

Speaker #2: As a reminder, some of the statements made during this call, including Outlook, guidance, expected company performance, and strategic initiatives, may constitute forward-looking statements. Please note the cautionary language about forward-looking statements contained in our press release and earnings presentation that same language applies to this call.

Speaker #2: Please also note that some of our comments today may refer to non-GAAP financial measures. You can find reconciliations in our earnings materials. And now, I'll turn the call over to Kent.

Meredith Bandy: Now I'll turn the call over to Kent.

Speaker #3: Thank you, Meredith. Strong start to 2026 continued in the second quarter, with improving conditions across our key markets. Second quarter net sales of $1.7 billion increased 31% year over year, driven by higher pricing in energy storage and both higher pricing and volumes in specialties, supported by disciplined execution.

Kent Masters: Thank you, Meredith. Our strong start to 2026 continued in Q2, supported by disciplined execution and improving conditions across our key markets. Q2 net sales of $1.7 billion increased 31% year over year, driven by higher pricing in Energy Storage and both higher pricing and volumes in Specialties. Adjusted EBITDA more than doubled to $858 million, with our enterprise EBITDA margin expanding to 49%. Importantly, we converted that performance into cash. We generated $710 million of cash from operations, representing a more than 80% operating cash conversion, and $638 million of free cash flow in the quarter. We are also on track to reach the high end of our $100 to $150 million full-year target for cost and productivity improvements. These results reflect a deliberate focus on operational excellence and cost discipline. We also benefit from globally diverse and resilient key end markets.

Speaker #3: Adjusted EBITDA more than doubled to $858 million. With our enterprise EBITDA margin expanding to 49%. Importantly, we converted that performance into cash. We generated $710 million of cash from operations, representing a more than 80% operating cash conversion.

Speaker #3: $638 million of free cash flow in the quarter. We are also on track to reach And the high end of our $100 to $150 million full-year target for cost and productivity improvements.

Speaker #3: These results reflect a deliberate focus on operational excellence and cost discipline. We also benefit from globally diverse and resilient key end markets. Global lithium consumption was up 45% year-over-year through May.

Kent Masters: Global lithium consumption was up 45% year over year through May, tracking above our forecasted range, driven by continued strength in stationary storage and improving growth in electric vehicles. Needed supply increases are coming to market slower than demand growth due to limited spodumene availability, temporary disruptions in shipments from Africa, and slower than expected ramp-up of Chinese lepidolite mines. As a result, inventories are low and the physical lithium market remains tight. We are improving our 2026 outlook considerations, including raising our Specialty sales and EBITDA outlooks due to a strong year-to-date performance and reducing expected capital spending, thanks to ongoing capital efficiency efforts. Beyond our 2026 outlook, we are also advancing resource options that can support sustainable growth through the cycle. On today's call, I'll focus on our efforts at the Salar de Atacama, where we're leveraging decades of brine processing expertise to advance direct lithium extraction.

Speaker #3: Tracking above our forecasted range, driven by continued strength in stationary storage and improving growth in electric vehicles. Needed supply increases are coming to market slower than demand growth due to limited spodumene availability, temporary disruptions in shipments from Africa, and slower-than-expected ramp-up of Chinese lepidolite mines.

Speaker #3: And as a result, inventories are low and the physical lithium market remains tight. We are improving our 2026 outlook considerations, including raising our specialty sales and EBITDA outlooks due to a strong year-to-date performance and reducing expected capital spending thanks to ongoing capital efficiency efforts.

Speaker #3: Beyond our 2026 outlook, we are also advancing resource options that can support sustainable growth through the cycle. On today's call, I'll focus on our efforts at the Solarda Atacama, where we're leveraging decades of brine processing expertise to advance direct lithium extraction.

Speaker #3: We also have opportunities at our Australian Hard Rock Joint Ventures. Wajina is outperforming on better-than-planned ore availability and recoveries. This has helped offset the impact of a fire at Greenbush's CGP-3 plant which occurred on June 9.

Kent Masters: We also have opportunities at our Australian hard rock joint ventures. Wodgina is outperforming on better-than-planned ore availability and recoveries. This is helping offset the impact of a fire at Greenbushes' CGP3 plant, which occurred on 9 June. CGP3 restarted on 1 August. Now, I'll turn it over to Neal to discuss recent results and outlook. I will then cover recent market trends and give more detail on our resources before we open the call for Q&A.

Speaker #3: CGP-3 restarted on August 1. Now, I'll turn it over to Neal to discuss recent results and outlook. I will then cover recent market trends and give more detail on our resources before we open the call for Q&A.

Speaker #4: Thank you, Kent, and good morning, everyone. I'll begin with our second quarter results on slide 5. Second quarter net sales were $1.7 billion driven by energy storage pricing up 73%, while specialties pricing and volumes were up 11% and 8%, respectively.

Neal Sheorey: Thank you, Kent, and good morning, everyone. I'll begin with our Q2 results on slide five. Q2 net sales were $1.7 billion, driven by Energy Storage pricing up 73%, while Specialties pricing and volumes were up 11% and 8% respectively. Adjusted EBITDA for the quarter was $858 million, up 155% year-over-year, reflecting higher net sales and our ongoing cost and productivity improvements. Both segments contributed to this strong growth, with Energy Storage adjusted EBITDA up 229% and Specialties up 61%. Net income attributable to Albemarle was $480 million, and we reported diluted earnings per share of $3.52. Turning to slide six, I'll walk through the key drivers of our year-over-year EBITDA performance. As I mentioned, Q2 adjusted EBITDA increased primarily due to higher pricing in both segments. Due to higher lithium pricing, our cost of goods sold reflects increased Chilean commission payments and higher-priced spodumene inventory.

Speaker #4: Adjusted EBITDA for the quarter was $858 million, up 155% year over year. Reflecting higher net sales and our ongoing cost and productivity improvements. Both segments contributed to this strong growth, with energy storage adjusted EBITDA up 229% and specialties up 61%.

Speaker #4: Net income attributable to Albemarle was $480 million, and we reported diluted earnings per share of $3.52. Turning to slide 6, I'll walk through the key drivers of our year-over-year EBITDA performance.

Speaker #4: As I mentioned, second quarter adjusted EBITDA increased primarily due to higher pricing in both segments. Due to higher lithium pricing, our cost of goods sold reflects increased Chilean Commission payments and higher price spodumene inventory.

Speaker #4: The impact of higher spodumene pricing is offset by increased equity income from our Taliesin Joint Venture versus the prior year. Across both segments, cost and productivity improvements helped offset raw material and supply chain cost increases related to the situation in the Middle East.

Neal Sheorey: The impact of higher spodumene pricing is offset by increased equity income from our Talison joint venture versus the prior year. Across both segments, cost and productivity improvements helped offset raw material and supply chain cost increases related to the situation in the Middle East. Corporate and all other reflects a reduction in adjusted EBITDA due to the Ketjen Refining Solutions divestiture, partially offset by favorable foreign exchange impacts. Turning to slide seven. We are maintaining our total company outlook ranges and expect to come in at the high end of the scenario ranges due to strong year-to-date performance and an increased Specialties outlook. These factors offset modestly lower expected Energy Storage sales volume due to the fire at the CGP3 plant at the Talison joint venture.

Speaker #4: Corporate and all other reflects a reduction in adjusted EBITDA due to the Ketchin refining solutions divestiture, partially offset by favorable foreign exchange impacts. Turning to slide 7, we are maintaining our total company outlook ranges and expect to come in at the high end of the scenario ranges due to strong year-to-date performance and an increased specialties outlook.

Speaker #4: These factors offset modestly lower expected energy storage sales volume due to the fire at the CGP-3 plant at the Taliesin Joint Venture. Our outlook ranges continue to reflect the expected impact of supply chain disruptions related to the situation in the Middle East, which we still estimate at approximately 70 to 90 million dollars on an unmitigated basis for the full year.

Neal Sheorey: Our outlook ranges continue to reflect the expected impact of supply chain disruptions related to the situation in the Middle East, which we still estimate at approximately $70 to $90 million on an unmitigated basis for the full year. In Specialties, we are increasing our outlook due to higher pricing and volumes, which I will cover in more detail on the next slide. The Specialty segment delivered another strong quarter. Net sales were $424 million, up 20% year-over-year, and adjusted EBITDA was $118 million, up 61% year-over-year. Adjusted EBITDA margin was 28%, up 700 basis points from the prior year period. The solid performance in the Q2 was primarily due to higher pricing and volume and favorable product mix as a result of bromine market disruptions related to the situation in the Middle East.

Speaker #4: In Specialties, we are increasing our outlook due to higher pricing and volumes, which I will cover in more detail on the next slide. The Specialties segment delivered another strong quarter.

Speaker #4: Net sales were $424 million up 20% year over year, and adjusted EBITDA was $118 million, up 61% year over year. Adjusted EBITDA margin was 28%, up 700 basis points from the prior year period.

Speaker #4: The solid performance in the second quarter was primarily due to higher pricing and volume, and favorable product mix as a result of bromine market disruptions related to the situation in the Middle East.

Speaker #4: As a result, we are increasing our full-year outlook ranges. Raising net sales to $1.4 to $1.6 billion and adjusted EBITDA to $275 to $325 million.

Neal Sheorey: A result, we are increasing our full-year outlook ranges, raising net sales to $1.4 to $1.6 billion and adjusted EBITDA to $275 to $325 million. This increase reflects strong year-to-date performance as our teams have worked to capture the upside of increased bromine pricing while mitigating Middle East-related supply chain disruptions through proactive cost management. Our H2 outlook assumes stabilization of the bromine market as we've seen pricing normalize since reaching a peak in April, and it reflects continued uncertainty in the Middle East. Such, we expect Q3 net sales and EBITDA to be lower sequentially. Long term, we continue to see margin upside for the Specialty segment as our business and asset diversity continues to deliver positives. Specialties benefits from diverse end markets, including electronics and semiconductors, building and construction, oil and gas, and pharmaceuticals.

Speaker #4: This increase reflects strong year-to-date performance as our teams have worked to capture the upside of increased bromine pricing while mitigating Middle East-related supply chain disruptions through proactive cost management.

Speaker #4: Our second half outlook assumes stabilization of the bromine market as we've seen pricing normalize since reaching a peak in April, and it reflects continued uncertainty in the Middle East.

Speaker #4: As such, we expect third quarter net sales and EBITDA to be lower sequentially. Long term, we continue to see margin upside for the specialties segment as our business and asset diversity continues to deliver positives.

Speaker #4: Specialties benefits from diverse end markets, including electronics and semiconductors, building and construction, oil and gas, and pharmaceuticals. Geographic diversity also complements the platform's end-market diversity and adds resilience against regional volatility.

Neal Sheorey: Geographic diversity also complements the platform's end market diversity and adds resilience against regional volatility. Turning to Energy Storage on slide nine. Net sales increased 78% year-over-year, and adjusted EBITDA increased 229%, both driven by higher pricing. Q2 sales volumes were 65,000 tons lithium carbonate equivalent, or LCE, with an average realized price of approximately $20 per kilogram LCE. Realized price was approximately 15% below market pricing due to the dilutive impact of spodumene sales on an LCE basis and the three-month pricing lag for our long-term agreements. See slide 24 in the appendix for additional information. For the Q3, net sales and adjusted EBITDA are expected to decrease sequentially due to lower sales volumes and assuming that pricing is lower sequentially for the quarter as it stands today.

Speaker #4: Turning to energy storage on slide 9, net sales increased 78% year over year and adjusted EBITDA increased 229%, both driven by higher pricing. Second quarter sales volumes were 65,000 tons lithium carbonate equivalent, or LCE, with an average realized price of approximately $20 per kilogram LCE.

Speaker #4: Realized price was approximately 15% below market pricing due to the dilutive impact of spodumene sales on an LCE basis and the three-month pricing lag for our long-term agreements.

Speaker #4: See slide 24 in the appendix for additional information. For the third quarter, net sales and adjusted EBITDA are expected to decrease sequentially due to lower sales volumes and assuming that pricing is lower sequentially for the quarter as it stands today.

Speaker #4: Additionally, energy storage margins are expected to decrease sequentially due to the timing of spodumene inventories and also assuming that today's pricing continues for the quarter.

Neal Sheorey: Additionally, energy storage margins are expected to decrease sequentially due to the timing of spodumene inventories, also assuming that today's pricing continues for the quarter. As a reminder, it takes approximately 4 months to ship and process spodumene purchased from the Talison joint venture. In a rising price environment, this creates a margin tailwind as we process lower cost inventory while benefiting from higher selling prices. In a declining price environment, that timing effect reverses and is dilutive to margins. For the full year, energy storage sales volumes are now expected to be in the range of 225,000 to 235,000 tons LCE or flat to down 4% year over year. This reflects the delay in the CGP3 ramp following the 9 June fire, partially offset by better-than-planned production at Wodgina. As Kent mentioned, CGP3 restarted last weekend and is now ramping back up. Turning to slide 10.

Speaker #4: As a reminder, it takes approximately four months to ship and process spodumene purchased from the Taliesin Joint Venture, and a rising price environment this creates a margin tailwind as we process lower-cost inventory while benefiting from higher selling prices.

Speaker #4: In a declining price environment, that timing effect reverses and is dilutive to margins. For the full year, energy storage sales volumes are now expected to be in the range of $225 to $235,000 tons LCE, or flat to down 4% year over year.

Speaker #4: This reflects the delay in the CGP-3 ramp following the June 9 fire, partially offset by better-than-planned production at Wagenau. As Kent mentioned, CGP-3 restarted last weekend and is now ramping back up.

Speaker #4: Turning to slide 10, we continue to focus on converting earnings into cash as evidenced by our performance over the last three years. First half operating cash flow conversion is at the high end of our long-term target range of 60 to 70 percent.

Neal Sheorey: We continue to focus on converting earnings into cash, as evidenced by our performance over the last three years. H1 operating cash flow conversion is at the high end of our long-term target range of 60% to 70%. In the Q2, we benefited from increased Talison dividends and non-recurring working capital reductions driven by favorable inventory and accounts receivable. On a full year basis, we still expect cash flow to be impacted by $87.5 million of deferred revenue related to our 2025 customer prepayment, which benefits EBITDA but does not contribute cash, and approximately $100 million of spend related to idling Kemerton Train 1. Slide 11 highlights our continued focus on cost and productivity. Thus far, we have achieved approximately $100 million of run rate savings year to date.

Speaker #4: In the second quarter, we benefited from increased Taliesin dividends and non-recurring working capital reductions driven by favorable inventory and accounts receivable. On a full-year basis, we still expect cash flow to be impacted by: $87.5 million of deferred revenue related to our 2025 customer prepayment, which benefits EBITDA but does not contribute cash; and approximately $100 million of spend related to idling Kemerton Train 1.

Speaker #4: Slide 11 highlights our continued focus on cost and productivity. Thus far, we have achieved approximately $100 million of run-rate savings year to date. This performance puts us on track to reach the high end of our $100 to $150 million full-year target.

Neal Sheorey: This performance puts us on track to reach the high end of our $100 to $150 million full year target. Across these gross improvements, roughly 40% has been driven by supply chain and back-office initiatives. The remaining 60% includes manufacturing cost out and incremental volumes and yield. Examples of these productivity improvements include debottlenecking projects at La Negra, JBC, and our lithium conversion sites in China. Importantly, these improvements continue to help us offset the supply chain disruptions and cost inflation related to the situation in the Middle East. With that, I'll turn it back over to Kent to discuss the market outlook.

Speaker #4: Across these gross improvements, roughly 40% has been driven by supply chain and back-office initiatives. The remaining 60% includes manufacturing cost out and incremental volumes and yield.

Speaker #4: Examples of these productivity improvements include debottlenecking projects at La Negra, JBC, and our lithium conversion sites in China. Importantly, these improvements continue to help us offset the supply chain disruptions and cost inflation related to the situation in the Middle East.

Speaker #4: With that, I'll turn it back over to Kent to discuss the market outlook.

Speaker #3: First, let me highlight the breadth of Albemarle's end markets and why we are generally seeing resilient demand trends. Our portfolio serves key markets across mobility, energy, connectivity, and health, and that diversity strengthens our resilience through the cycle.

Kent Masters: First, let me highlight the breadth of Albemarle's end markets and why we are generally seeing resilient demand trends. Our portfolio serves key markets across mobility, energy, connectivity and health. That diversity strengthens our resilience through the cycle. Electric vehicles and stationary storage remain significant long-term growth drivers. Together, these two end markets make up about 50% to 60% of Albemarle's total net sales last year. We'll talk in more detail on both these markets in a moment. In specialties, electronics and semiconductors, building and construction, and oil and gas remain key market segments. AI-related demand continues to support electronics and semiconductor applications. In oil and gas, clear brine fluid demand has remained stable in the Middle East, while geopolitical uncertainty has incentivized demand in other regions such as the Americas and Europe.

Speaker #3: Electric vehicles and stationary storage remain significant long-term growth drivers. Together, these two end markets make up about 50 to 60 percent of Albemarle's total net sales last year.

Speaker #3: We'll talk in more detail on both these markets in a moment. In specialties, electronics and semiconductors, building and construction, and oil and gas remain key market segments.

Speaker #3: AI-related demand continues to support electronics and semiconductor applications. In oil and gas, clear brine fluid demand has remained stable in the Middle East, while geopolitical uncertainty has incentivized demand and other regions such as the Americas and Europe.

Speaker #3: We can serve all these geographies from our global asset network. Creating resilience in volatile environments like we face today. Let's now turn to a deeper dive into EV and stationary storage markets.

Kent Masters: We can serve all these geographies from our global asset network, creating resilience in volatile environments like we face today. Let's now turn to a deeper dive into EV and stationary storage markets. Turning to slide 13. Lithium demand is up 45% through May, primarily driven by continued strength in stationary storage. We are increasing our 2026 and 2030 stationary storage forecast ranges due to that strong demand. We now expect stationary storage battery production of 900 to 1,100 gigawatt hours in 2026, up 11% or 100 gigawatt hours from our prior forecast. We are also raising the low end of our 2030 stationary storage range to between 1,500 and 2,000 gigawatt hours, up approximately 9% from our prior forecast. As a result of this change, we are also raising the low end of our 2030 forecast for total lithium demand by 100,000 tons.

Speaker #3: Turning to slide 13, lithium demand is up 45% through May, primarily driven by continued strength in stationary storage. We are increasing our 2026 and 2030 stationary storage forecast ranges due to that strong demand.

Speaker #3: We now expect stationary storage battery production of 900 to 1,100 gigawatt-hours in 2026, up 11%, or 100 gigawatt-hours from our prior forecast. We are also raising the low end of our 2030 stationary storage range to between 1,500 and 2,000 gigawatt-hours, up approximately 9% from our prior forecast.

Speaker #3: As a result of this change, we are also raising the low end of our 2030 forecast for total lithium demand, by 100,000 tons. Lithium demand growth continues to outstrip supply growth.

Kent Masters: Lithium demand growth continues to outstrip supply growth. As a result, we exited Q2 near record lows in terms of days of lithium salt inventory. Based on mass balance calculations, we also estimate spodumene inventories are at near historic lows, and some conversion sites in China have reportedly shut down or reduced production due to the lack of spodumene availability. Lithium demand continues to diversify by application and geography as stationary storage gains share. Slide 14 highlights the strength of stationary storage demand. Global stationary storage production has nearly doubled year-over-year, with broad support across most geographic regions. Long-term demand remains supported by multiple secular trends. First, global electricity demand growth is accelerating, led by urbanization, AI and data centers, and EVs. With grid upgrades taking multiple years, stationary storage is the fastest and most cost-effective way to support grid reliability.

Speaker #3: As a result, we exited the second quarter near record lows in terms of days of lithium salts inventory. Based on mass balance calculations, we also estimate spodumene inventories are at near historic lows.

Speaker #3: And some conversion sites in China have reportedly shut down or reduced production due to the lack of spodumene availability. Lithium demand continues to diversify by application and geography, as stationary storage gains share.

Speaker #3: Slide 14 highlights the strength of stationary storage demand. Global stationary storage production has nearly doubled year over year, with broad support across most geographic regions.

Speaker #3: Long-term demand remains supported by multiple secular trends. First, global electricity demand growth is accelerating, led by urbanization, AI and data centers, and EVs. With grid upgrades taking multiple years, stationary storage is the fastest and most cost-effective way to support grid reliability.

Speaker #3: Also, policy support in regions like China, Europe, and Australia improves project economics for stationary storage and renewables. We now expect stationary storage to make up about 30% of 2026 global lithium market demand, nearing parity with light-duty EVs.

Kent Masters: Policy support in regions like China, Europe, and Australia improves project economics for stationary storage and renewables. We now expect stationary storage to make up about 30% of 2026 global lithium market demand, nearing parity with light-duty EVs. Turning to slide 15. Year-to-date, global EV sales are up 10% year-over-year. EV sales growth inflected in Q2, up 16% versus prior year. European EV demand remains strong, up 31% year-to-date, driven by policy support in key markets like the UK, Germany, France, and others. Europe also benefits from increased model availability and affordability as Chinese OEMs have increased exports and domestic production for the region. In China, growing EV exports and larger battery sizes have helped offset weaker domestic EV unit sales.

Speaker #3: Turning to slide 15, year to date, global EV sales are up 10% year over year. EV sales growth inflected in the second quarter, up 16% versus the prior year.

Speaker #3: European EV demand remains strong, up 31% year to date, driven by policy support and key markets like the UK, Germany, France, and others. Europe also benefits from increased model availability and affordability, as Chinese OEMs have increased exports and domestic production for the region.

Speaker #3: In China, growing EV exports and larger battery sizes have helped offset weaker domestic EV unit sales. The rest of the world was the fastest growing region in the first half, up 90% year over year, and has overtaken North America as the third-largest market, led by growth in Brazil, Australia, India, and South Korea.

Kent Masters: The rest of the world was the fastest-growing region in H1, up 90% year-over-year, and has overtaken North America as the third-largest market, led by growth in Brazil, Australia, India, and South Korea. Turning to slide 16 for an update on our Australian joint ventures. As previously mentioned, Greenbushes' CGP3 plant restarted on 01 August. We had previously expected the plant to reach full run rate by year-end. Prior to this incident, the plant was ramping ahead of schedule. However, to ensure adequate contingency for our downstream operations, we've assumed CGP3 reaches full run rate in Q1 2027. Greenbushes is in the middle of a multi-year transformation. Mine optimization studies are progressing well, and we anticipate operational improvements and further brownfield expansion projects. Our primary focus remains on operating the mine safely, and we have good alignment with all partners towards that goal.

Speaker #3: Turning to slide 16 for an update on our Australian joint ventures. As previously mentioned, green bushes CGP3 plant restarted on August 1. We had previously expected the plant to reach full run rate by year-end.

Speaker #3: Prior to this incident, the plant was ramping ahead of schedule. However, to ensure adequate contingency for our downstream operations, we've assumed CGP3 reaches full run rate in the first quarter of 2027.

Speaker #3: Green bushes is in the middle of a multi-year transformation. Mine optimization studies are progressing well, and we anticipate operational improvements and further brownfield expansion projects.

Speaker #3: Our primary focus remains on operating the mine safely and we have good alignment with all partners towards that goal. At Wagenau, operations are performing well.

Kent Masters: At Wodgina, operations are performing well, supported by better-than-planned ore availability and recoveries. All three processing trains are now operating. Ore quality is expected to remain consistent next quarter before improving later this year as the availability of clean ore increases. As we have highlighted before, these hard rock assets are an important part of our long-term resource position and provide near-term brownfield growth opportunities. Moving to slide 17. Albemarle has decades of brine processing expertise at Magnolia and Silver Peak in the United States, the Salar de Atacama and La Negra in Chile, and JBC in Jordan. That foundational experience informs how we are advancing DLE technology at the Salar de Atacama. Our dedicated team of scientists, engineers, and operators have a deep understanding of DLE fundamentals based on more than 10 years of research and innovation.

Speaker #3: Supported by better-than-planned ore availability and recoveries. All three processing trains are now operating. Ore quality is expected to remain consistent next quarter before improving later this year as the availability of clean ore increases.

Speaker #3: As we have highlighted before, these hard rock assets are important part of our long-term resource position and provide near-term brownfield growth opportunities. Moving to slide 17, Albemarle has decades of brine processing expertise at Magnolia and Silver Peak in the United States, the Salarda Atacama and La Negra in Chile, and JBC in Jordan.

Speaker #3: That foundational experience informs how we are advancing DLE technology at the Salarda Atacama. Our dedicated team of scientists, engineers, and operators have a deep understanding of DLE fundamentals based on more than 10 years of research and innovation.

Speaker #3: Over that time, we've ve evaluated dozens of DLE technologies, including both proprietary and third-party solutions. Our highest and best opportunity to leverage DLE is in the Salarda Atacama based on the large-scale and high-grade of that world-class asset.

Kent Masters: Over that time, we've evaluated dozens of DLE technologies, including both proprietary and third-party solutions. Our highest and best opportunity to leverage DLE is in the Salar de Atacama, based on the large scale and high grade of that world-class asset. At the Salar, we have progressed from scientific research and lab-scale work to pilot validation and integrated pilot testing. In March of 2026, we submitted an environmental assessment permit for a DLE project at the Salar de Atacama. Our phased approach to DLE is intended to support future growth and sustainability while leveraging Albemarle's existing infrastructure and process chemistry expertise. We intend to advance this project prudently, subject to regulatory approvals, community consultation, and technology validation. On slide 18, we show our phased DLE concept at the Salar de Atacama. Our current environmental permit submission seeks authorization for up to six trains.

Speaker #3: At the Salarre, we have progressed from scientific research and lab-scale work to pilot validation and integrated pilot testing. In March 2026, we submitted an environmental assessment permit for a DLE project at the Salarre to Atacama.

Speaker #3: Our phased approach to DLE is intended to support future growth and sustainability while leveraging Albemarle's existing infrastructure and process chemistry expertise. We intend to advance this project prudently, subject to regulatory approvals, community consultation, and technology validation.

Speaker #3: On slide 18, we show our phased DLE concept at the Salarre to to Atacama. Our current environmental permit submission seeks authorization for up to six trains, the planned investment will start with one train as we prove the technology at a commercial scale.

Kent Masters: The planned investment will start with one train as we prove the technology at a commercial scale. Under this scenario, lithium-rich brine would be extracted from the Salar through pumping wells and sent in parallel to the existing evaporation ponds and the proposed DLE plant. The concentrated lithium solution from the DLE plant would be combined in the final solar evaporation ponds and further concentrated before being converted at La Negra into battery-grade lithium carbonate. Our proposed DLE plant does not use solvent extraction, meaning that we retain the option to reincorporate the lithium-depleted brine back into the Salar through dedicated wells. The Atacama integrated pilot plant has operated for more than a year. Our over 3,000 operating hours, giving us valuable data and confidence in our process design and scale-up capabilities. Recoveries are critical to efficiency and sustainability, particularly in brine deposits.

Speaker #3: Under this scenario, lithium-rich brine would be extracted from the Salarre through pumping wells and sent in parallel to the existing evaporation ponds and the proposed DLE plant.

Speaker #3: The concentrated lithium solution from the DLE plant would be combined in the final solar evaporation ponds and further concentrated before being converted at La Negra into battery-grade lithium carbonate.

Speaker #3: Our proposed DLE plant does not use solvent extraction. Meaning that we retain the option to reincorporate the lithium-depleted brine back into the Salarre through dedicated wells.

Speaker #3: The Atacama integrated pilot plant has operated for more than a year. Our over 3,000 operating hours, giving us valuable data and confidence in our process design and scale-up capability.

Speaker #3: Recoveries are critical to efficiency and sustainability. Particularly in brine deposits. This is something we've worked on for years. A conventional pond system recovers about 30 to 40 percent of the lithium in extracted brine.

Kent Masters: This is something we've worked on for years. A conventional pond system recovers about 30% to 40% of the lithium in extracted brine. With Albemarle Salar yield improvement technology, we've been able to increase recoveries to 50% to 60%. Our DLE pilot plant has demonstrated recoveries of over 90%, allowing us to extract more lithium with a smaller footprint and more fully utilize this world-class resource. Our team is also focused on minimizing water footprint in Chile. Approximately 85% of processed water is recycled at the current DLE pilot plant. Our DLE project is consistent with our broader strategy: leverage our world-class resources, technical expertise, and existing infrastructure to create durable long-term value while improving sustainability outcomes. In summary, Albemarle delivered another strong quarter, including net sales of $1.7 billion and cash from operations of $710 million.

Speaker #3: With Albemarle's Salarre yield improvement technology, we've been able to increase recoveries to 50% to 60%. Our DLE pilot plant has demonstrated recoveries of over 90%, allowing us to extract more lithium with a smaller footprint and more fully utilize this world-class resource.

Speaker #3: Our team is also focused on minimizing water footprint in Chile. Approximately 85 percent of processed water is recycled at the current DLE pilot plant.

Speaker #3: Our DLE project is consistent with our broader strategy. Leverage our world-class resources, technical expertise, and existing infrastructure to create durable, long-term value while improving sustainability outcomes.

Speaker #3: In summary, Albemarle delivered another strong quarter, including net sales of 1.7 billion dollars and cash from operations of 710 million dollars. We are improving our 2026 outlook considerations by increasing specialties outlook, optimizing capital expenditure spend, and tracking toward the high end of our cost and productivity target.

Kent Masters: We are improving our 2026 outlook considerations by increasing specialties outlook, optimizing capital expenditure spend, and tracking towards the high end of our cost and productivity targets. We are also capitalizing on long-term secular growth opportunities in energy transition and energy resilience, including strong global grid storage demand. Finally, we remain focused on execution and disciplined capital allocation to enable us to grow ratably through the cycle. With that, I'll turn the call over to the operator for Q&A.

Speaker #3: We are also capitalizing on long-term secular growth opportunities in energy transition and energy resilience, including strong global grid storage demand. Finally, we remain focused on execution and disciplined capital allocation to enable us to grow readably through the cycle.

Speaker #3: With that, I'll turn the call over to the operator for Q&A.

Speaker #1: We will now move into our Q&A portion. If you would like to ask a question, please press star 5 to raise your hand. As a reminder, that is star 5 to raise your hand.

Operator 3: We will now move into our Q&A portion. If you'd like to ask a question, please press star five to raise your hand. As a reminder, that is star five to raise your hand. Also, please bear in mind this Q&A session is limited to one question and one follow-up per person. Our first question comes from David Begleiter with Deutsche Bank Securities. Your line is now open.

Speaker #1: Also, please bear in mind this Q&A session is limited to one question and one follow-up per person. Our first question comes from David Greiter with Deutsche Bank Securities.

Speaker #1: Your line is now open.

Speaker #2: Thank you. Good morning. Kent and Neal, can you just clarify your comments on guidance coming at the top end of the scenario ranges? Which one are you are you referring to?

David Begleiter: Thank you. Good morning. Kent and Neal, can you just clarify your comments on guidance coming at the top end of the scenario ranges? Which one are you referring to? Total company or energy storage? Just some clarification, that would be great. Thank you.

Speaker #2: Toll company or energy storage, just some clarification on that would be great. Thank you.

Speaker #4: Good morning, David. This is Neal. It's really both, and maybe I can clarify that a little bit. So we were referring to the $20 per kg LCE scenario.

Neal Sheorey: Good morning, David. This is Neal. It's really both. Maybe I can clarify that a little bit. We were referring to the $20 per kg LCE scenario. Actually, there's a couple reasons why we say that we're towards the top end. First of all, if you look at market pricing so far this year in the H1 of the year, it has trended actually on average a little bit higher than $20. Naturally, that pushes us towards the higher end of the $20 range. In addition to that, obviously, we've had a little bit better volume performance in the H1 of the year. We've been working on our cost and productivity improvements. At least at an enterprise level, you had the very strong performance from specialties, particularly in the Q2.

Speaker #4: And actually, if you there's a couple of reasons why we say that we're towards the top end. First of all, if you look at market pricing so far this year in the first half of the year, it has trended actually on average a little bit higher than $20.

Speaker #4: So naturally, that pushes us towards the higher end of the $20 range. Then in addition to that, obviously, we've had a little bit better volume performance in the first half of the year.

Speaker #4: We've been working on our cost and productivity improvements. And at at least at an enterprise level, you had the very strong performance from specialties, particularly in the second quarter.

Speaker #4: So, for all of those reasons, at an enterprise level, if pricing had been at that $20, we would be towards the upper end of that range.

Neal Sheorey: For all of those reasons, at an enterprise level, if pricing had been at that $20, we would be towards the upper end of that range in the H1 of the year. Then the same would be true for the energy storage segment as well.

Speaker #4: In the first half of the year, and then the same would be true for the energy storage segment as well.

Speaker #2: Very helpful. And Kent, just on potential government funding for lithium—there's been increasing talk about the government focusing on the critical minerals supply chain and ensuring that up in the US.

David Begleiter: Very helpful. Kent, just on a potential government funding for lithium, there's been increasing talk about the government focused on critical minerals supply chain and shoring that up in the US. Can you talk about where you stand on those discussions? Thank you.

Speaker #2: Can you talk about where you stand on those discussions? Thank you.

Speaker #4: Okay, so look, there has been a lot of talk about it and discussions, and we've talked to the government quite a bit. So we've been involved in that process for quite some time.

Kent Masters: Okay. Look, there has been a lot of talk about it and discussions. We've talked to the government quite a bit. We've been involved in that process for quite some time. I don't have anything to tell you about today that involves that. It continues around critical minerals. Lithium's probably not the highest priority across all those critical minerals. You probably see that from the projects that they've announced. We have conversations. We're talking to them, but we have nothing to tell you about today.

Speaker #4: We don't have anything to tell you about today that involves that. But it continues around critical minerals, lithium is probably not the highest priority across all those critical minerals, and you've probably seen that from the projects that they've announced.

Speaker #4: But we have conversations. We're talking to them, but we have nothing to tell you about today.

Speaker #2: Thank you.

David Begleiter: Thank you.

Speaker #1: Our next question comes from Patrick Cunningham with Citi. Your line is now open.

Operator 3: Our next question comes from Patrick Cunningham with Citi. Your line is now open.

Speaker #5: Hi. Good morning. This is Rachel for Patrick. So you've noted lithium demand is accelerating higher than expectations in growing faster than supply. So curious to hear kind of your latest thoughts on the supply side of the equation.

Rachel Smith: Hi, good morning. This is Rachel for Patrick. You've noted lithium demand is accelerating higher than expectations and growing faster than supply. Curious to hear kind of your latest thoughts on the supply side of the equation and if the market requires higher pricing levels to support new investments.

Speaker #5: And if the market requires higher pricing levels to support new investments.

Kent Masters: Okay. You kind of said it. Demand is a little stronger than we were anticipating. It is strong. EVs were weak in Q1, but they kind of trended back in Q2, and energy storage demand is kind of off the charts. With EVs coming back, there is strong demand. Supply's a little behind that. When we look out, say, for the year, there is supply coming on, and you always need that supply to come on because this market is growing. It's behind demand, so that's probably why you see inventories getting down to levels which we haven't seen for a while. The inventory, so the physical market is very tight. You'll see there are projects on the board. We expect investments to come. You need that to keep up with supply.

Speaker #4: Okay. So okay. So you said you kind of said it. So demand is a little stronger than we were anticipating, it is strong. There's a bit it was EVs were weak in the first quarter, but they've kind of trended back in the second quarter.

Speaker #4: And then energy storage demand is kind of off the charts. And that and so with EVs coming back, there is strong demand. Supply is a little behind that.

Speaker #4: So when we look out, say, for the year there is supply coming on, and you always need that supply to come on because this market is growing.

Speaker #4: It's a little it's behind demand. So that's probably why you see inventories getting down to levels which we haven't seen for a while. So the inventory so the physical market is very tight.

Speaker #4: And then you'll see there are projects on the board where we expect investments to come. You need that to keep up with supply. And then your question about, is pricing driving that? I don't mean—we're in a range where people will invest in good projects, and more speculative projects, probably not.

Kent Masters: Your question about is pricing driving that, I mean, we're in a range where people will invest in good projects and more speculative projects, probably not. It's not a bad place from a pricing perspective. I don't think it's driving projects that weren't planned, and it's not taking projects that were planned off the books. It's not a bad place to be.

Speaker #4: So it's not a bad place from a pricing perspective. I don't think it's driving projects that weren't planned. And it's not taking projects that were planned off the books.

Speaker #4: So it's not it's not a bad place to be.

Speaker #5: Got it. Thank you so much for that. And you've raised both the 2026 and 2030 stationary storage demand forecast. So curious to hear if anything changed specifically in your customer discussions or project pipeline visibility to give you the confidence to increase the longer-term outlook.

Rachel Smith: Got it. Thank you so much for that. You've raised both the 2026 and 2030 stationary storage demand forecast. Curious to hear if anything changed specifically in your customer discussions or project pipeline visibility to give you the confidence to increase the longer-term outlook.

Speaker #5: Thank you.

Neal Sheorey: Thank you.

Speaker #4: Yeah. Look, I think it's just the confidence that we see in the projects that are happening, the supply chain that's getting built out, and all the activity.

Kent Masters: Yeah. Look, I think it's just the confidence that we see in the projects that are happening, the supply chain that's getting built out, and all the activity. Eric, maybe you want to talk about any specific customer discussions that give us more confidence?

Speaker #4: Eric, maybe you want to talk about any specific customer discussions that give us more confidence?

Speaker #3: Well, most of the chemistry in question that we're talking about that's driving this is driving our demand is iron phosphate chemistry comes out of China.

Neal Sheorey: Well, most of the chemistry in question that we're talking about that's driving this, that's driving our demand is iron phosphate chemistry, comes out of China. Our customer discussions there indicate a market that is tight and struggling to keep up with installation demand. Installations are exceeding actual battery production. We can track sort of about a one-year lag between when lithium is sold and when it goes into an installation. The latter, the installation number that's been announced, is larger than what's being produced today, and that drives a healthy market, and we're seeing that in our customer base in China right now.

Speaker #3: So our customer discussions there indicate a market that is tight and struggling to keep up with installation demand, installations are exceeding actual battery production.

Speaker #3: We can track, sort of, about a one-year lag between when lithium is sold and when it goes into an installation. And the latter—the installation number that's been announced—is larger than what's being produced today.

Speaker #3: And that drives a healthy market. We're seeing that in our customer base in China right now.

Speaker #1: Our next question comes from John Roberts with Mizuho. Your line is now open.

Operator 3: Our next question comes from John Roberts with Mizuho. Your line is now open.

Speaker #2: Thank you. Could you talk a little bit about the constrained supply out of both Africa and China for lithium? How long would you expect that to last?

John Roberts: Thank you. Could you talk a little bit about the constrained supply out of both Africa and China, lepidolite? How long would you expect that to last?

Speaker #4: Yeah. So that's been a story over the last year. I would say and it's starting to it's starting to move. So you see that starting to move and that'll go into the back half of the year of a bit of additional supply.

Kent Masters: Yeah. That's been a story over the last year, I would say, and it's starting to move. You see that starting to move, and that'll go into the back half of the year of a bit of additional supply. I think it's a little different. Africa's moving a little faster. Lepidolite. I think we've seen one mine come back on and start to ramp up. That will add capacity, but as we said, the market's pretty tight. Inventories are low. We kind of need that capacity.

Speaker #4: I think it's a little different. Africa is moving a little faster on lepidolite. I think we've seen one mine come back online and start to ramp up.

Speaker #4: So that will add capacity. But as we said, the market's pretty tight. Inventories are low. We kind of need that capacity.

Speaker #2: And then what's the sequential price assumed for bromine in the specialties guidance?

John Roberts: What's the sequential price assumed for bromine in the specialties guidance?

Speaker #6: Hi there, John. This is Neal. So look, I it's hard to give you a specific price on bromine in the for the third quarter.

Neal Sheorey: Hi there, John. This is Neal. Look, it's hard to give you a specific price on bromine for Q3, mainly because, as we've shown you before, there is a bromine index in China, but only about a third of our volume tracks that bromine index. One thing I will say about the Chinese bromine index, which you can observe, is that index hit a peak back in Q2 and has come back down to levels today that are probably closer to where we started the year. That's one data point. The other data point is that, look, I think supply-demand fundamentals were quite a bit tighter in H1 due to the situation in the Middle East and as some supply chains were reorienting.

Speaker #6: Mainly because as we've shown you before, there is a bromine index in China, but only about a third of our volume tracks that bromine index.

Speaker #6: One thing I will say about the Chinese bromine index, which you can observe, is that index hit a peak back in the second quarter and has come back down to levels today that are probably closer to where we started the year.

Speaker #6: So that's one data point. The other data point is that, look, I think supply-demand fundamentals were quite a bit tighter in the first half of the year due to the situation in the Middle East.

Speaker #6: And as some supply chains were reorienting. So right now, what we're assuming is that there's a little bit more normalized kind of supply-demand fundamental in the back half of the year.

Neal Sheorey: Right now, what we're assuming is that there's a little bit more normalized kind of supply-demand fundamental in H2. I will admit, we're watching this closely because obviously the situation in the Middle East hasn't gone away. Generally speaking, we're assuming that pricing kind of holds where it is today, but it is a live situation.

Speaker #6: But I will admit, we're watching this closely because obviously the situation in the Middle East hasn't gone away. So generally speaking, we're assuming that pricing kind of holds where it is today.

Speaker #6: But it is a live situation.

John Roberts: Thank you.

Speaker #2: Thank ank you.

Speaker #1: Our next question comes from Aaron with Venetian with RBC. Your line is now open.

Operator 3: Our next question comes from Arun Viswanathan with RBC. Your line is now open.

Speaker #2: Great. Thanks for taking my question. I hope you guys are well. I guess first off, just wanted to ask about the volume picture. So maybe we should get some initial expectations for volume for next year.

Arun Viswanathan: Great. Thanks for taking my question. Hope you guys are well. First off, just wanted to ask about the volume picture. Maybe we can get some initial expectations for volume for next year. You will be facing maybe some limitations this year, just given the fire, but that could be offset by Wodgina extra production. Do you expect to grow volumes next year and maybe kind of in the low single-digit range, or how should we think about how volumes evolve from here for energy storage?

Speaker #2: I guess you will be facing maybe some limitations this year just given the fire, but then that could be offset by Wajina extra production.

Speaker #2: So, do you expect to grow volumes next year? And maybe kind of in the low single-digit range? Or how should we think about how volumes evolve from here for energy storage?

Speaker #4: Yeah. So I'll start with that. But I would say, I mean, this year is I think we'll get close to offsetting the fire at Taliesin with extra performance at Wajina.

Kent Masters: Yeah. I'll start with that. I would say, this year is, I think we'll get close to offsetting the fire at Talison with extra performance at Wodgina. We were kind of tight there. We kind of pulled back on our volume estimates a little bit, but we think we can cover that for the most part. And that'll make us kind of flat year-over-year, just because of our capacity. We will have growth into next year as CGP3 ramps. We won't get the full year of it probably next year. I mean, close. When we're saying we'll get close to full production in the Q1, you'd see that annualizing as we go forward. We'll have room for growth next year. It will be, I mean, you can do the math on what that looks like.

Speaker #4: So we were kind of tight there. We've kind of pulled back on our volume estimates a little bit, but we think we can cover that for the most part.

Speaker #4: And that'll make us kind of flat year over year just because of the our capacity. We will have growth into next year as CGP-3 ramps.

Speaker #4: We'll get we won't get the full year of it probably next year, I mean, close. And we're saying we'd get close to full production in the first quarter.

Speaker #4: Then you'd see that annualizing as we go forward. So we'll have room for growth next year. It will be I mean, you can do the map on what that looks like.

Speaker #4: So it's high single digits, I would say.

Kent Masters: It's high single digits, I would say.

Speaker #6: Yeah. Arun, and maybe I can point you back to—this is a slide that we put out, gosh, I think it might have been two quarters ago.

Neal Sheorey: Yeah, Arun, maybe I can point you back to, this is a slide that we put out, gosh, I think it might have been two quarters ago, I don't expect you to remember this. If you follow our 15% CAGR volume growth that we've said we're doing from 2022 to 2027, that would put 2027 in the range of 240,000 to 260,000 tons LCE. I would say now that CGP3 is back and ramping back up, we're back on that trajectory. That's maybe a way to think about 2027.

Speaker #6: So I don't expect you to remember this, but if you follow our 15% CAGR volume growth that we've said we're doing from '22 to '27, that would put 2027 in the range of 240 to 260,000 tons LCE.

Speaker #6: And I would say now that CGP-3 is back and ramping back up, we're back on that trajectory. So that's maybe a way to think about 2027.

Speaker #2: Okay. Great. Thanks for that. Appreciate it. And then just as a follow-up, just on the pricing outlook, you guys said had mentioned that the market is relatively tight.

Arun Viswanathan: Okay, great. Thanks for that. Appreciate it. Just as a follow-up, just on the pricing outlook, you guys had mentioned that the market is relatively tight, energy storage demand is very robust. Would you agree that we've seen anticipatory price declines ahead of new supply coming back online, specifically the lepidolite as well as the Zimbabwe tons? Do you expect the recent price declines to kind of-

Speaker #2: Energy storage demand is very robust. But we have seen anticipatory would you agree that we've seen anticipatory price declines ahead of new supply coming back online specifically the lapidolite as well as the Zimbabwe tons?

Speaker #2: Do you expect that decline the recent price declines to kind of plateau in the and moderate as you go into the second half, or do you see continued price declines possible?

Arun Viswanathan: plateau and moderate as you go into H2 or do you see continued price declines possible, especially given the low inventory levels that you mentioned. Why have prices, I guess, been going down and do you expect that to stop? Thanks.

Speaker #2: Especially given the low inventory levels that you mentioned. So why have prices, I guess, been going down? And do you expect that to stop?

Speaker #2: Thanks.

Speaker #4: Yeah. So we're not we're not going to tell you what we think the price is in the quarter. So we've not been very good at predicting that.

Kent Masters: Yeah. We're not going to tell you what we think the price is in the quarter. We've not been very good at predicting that. It's a very speculative market, driven by traders in China for the most part. With the inventories tight, the demand that we've seen, you do have forecasting volumes coming back on, but again, with the growth rates we see, we need that. Otherwise, you're going to get into a more difficult problem. Price, it was up, it has come back. It's kind of, I'd say consolidating, right? Around the price where it is right now, which is around $20 or so. That's not a bad price, as we've talked about. Can't speculate as to what it's going to do. It's very heavily driven by trading and someone's view of volumes coming on.

Speaker #4: But it is it's a very speculative market. Driven by traders in China, for the most part. With the inventories tight, the demand that we've seen you do have a forecasting volumes coming back on.

Speaker #4: But again, the growth rates we see, we need that. Otherwise, you're going to get into a more difficult problem. But price it was up.

Speaker #4: It has come back, but it’s kind of, I’d say, consolidating, right? Around the price where it is right now, which is around $20 or so.

Speaker #4: Which is it's not a that's not a bad price. As we've talked about. So can't speculate as to what it's going to do. It's very heavily driven by trading.

Speaker #4: And someone's view of volumes coming on. We do see those volumes coming on, but we need that with the growth rate with a 45% growth.

Kent Masters: We do see those volumes coming on, but we need that with the growth rate. With a 45% growth, you're going to have to have supply coming on or it's going to get very tight.

Speaker #4: You're going to have to have supply coming on, or you're going to it's going to get very, very tight.

Speaker #2: Thanks.

Vincent Andrews: Thanks.

Speaker #1: Our next question comes from Lawrence Alexander with Jefferies. Your line is now open.

Operator 3: Our next question comes from Laurence Alexander with Jefferies. Your line is now open.

Speaker #2: So, given your progress with the DLE at the Atacama, can you give your perspective on the attractiveness or not of projects elsewhere in Chile?

Laurence Alexander: Given your progress with the DLE at the Atacama, can you give your perspective on the attractiveness or not of projects elsewhere in Chile? What would you need to see for those to move up your priority list?

Speaker #2: What would you need to see for those to move up your priority list?

Speaker #4: Well, I would look DLE we've done a lot of work over time, and we've kind of prioritized the Salar and the Atacama. For that.

Kent Masters: Look, DLE, we've done a lot of work over time, and we've kind of prioritized the Salar de Atacama for that. That's our focus. We've still got technology development work to do, but we feel pretty good about it, enough that we've submitted the permit and we've kind of built a plan around that. I think I want to execute on that project first and then see where that goes against other resources in Chile or in other places in South America or wherever. I think we're getting more confidence in DLE and brine resources. We want to execute against the project in the Salar de Atacama, then we'll be able to talk about that.

Speaker #4: So that's our focus about we've still got technology development work to do, but we feel pretty good about it. Enough that we've submitted the permit, and we've kind of built a plan around that.

Speaker #4: So I think I want to execute on that project first and then see where that goes against other resources in Chile or in other places in South America, or wherever.

Speaker #4: I think the we're getting more confidence in DLE and brine resources. And but we want to execute against the project in the Salar de Atacama, and then we'll be able to talk about that.

Speaker #2: Thank you.

Laurence Alexander: Thank you.

Speaker #1: Our next question comes from Joel Jackson with BMO. Your line is now open.

Operator 3: Our next question comes from Joel Jackson with BMO. Your line is now open.

Speaker #5: Hi. Good morning. Thanks for getting the question. It's Evan on for Joel. Your cash build-up has been quite large recently. And some of your previous have announced restarts in project.

[Analyst] (BMO): Hi, good morning. Thanks for the unit question. It's Evan on for Joel. Your cash buildup has been quite large recently, some of your peers have announced restarts and project go-aheads. When would we expect you to go ahead with some of your brownfield projects? Short of that, how does the company want to use your extra cash?

Speaker #5: Go ahead. When will we expect you to go ahead with some of your brownfield projects or short of that? How does the company want to use your extra cash?

Speaker #4: Okay. So let me start with the projects. So I mean, we are kind of we're executing against that now. So you see CGP-3. That we would consider that one of those.

Kent Masters: Okay. Let me start with projects. We're executing against that now. You see CGP3, we would consider that one of those. It's online now and ramping up after we had some issues there. The other projects, we have not gone through an FID. We've not agreed those project with our partners either. There's potential for doing projects both in Wodgina and at Talison additional. We need to ramp CGP3 before we take that on again. We'll have to agree with our partners and get to FID. That's going to take us a little bit of time, but that would be our next phase of growth. Further out is the Salar de Atacama project that we're talking about is another, then we have Kings Mountain. Further out, we have Antofalla. Those are all resources we own.

Speaker #4: It's online now and ramping up after we had some issues there. And then the other projects we have not gone through an FID. We've not agreed those project with our partners either.

Speaker #4: But there's potential for doing projects both in Wajina and at Taliesin additional. But we need to ramp CGP-3 before we take that on. Again, we'll have to agree with our partners and get the FID.

Speaker #4: So it's going to take us a little bit of time, but that would be our next phase of growth. And then further out, use the Salar de Atacama project that we're talking about.

Speaker #4: Another. And then we have Kings Mountain. And then further, further out, we have Antapaia. Those are all resources we own. So there's potential there could be other resources that become available.

Kent Masters: There's potential there could be other resources that become available. We expect your cash question. We want to have a strong balance sheet, and we've been doing that. We've used it for that. These growth projects are a big opportunity for us to invest, and we think given brownfield nature in jurisdictions that we know with partners that we know, with technology that we know, we feel that those are low risk, good return projects. That said, we're always evaluating projects against all alternatives for the use of capital, and we do that every time we look at a big investment.

Speaker #4: So we expect your cash question. So we want to have a strong balance sheet. So and we've been doing that. So we've used it for that.

Speaker #4: These growth projects are a big opportunity for us to invest. And we think given brownfield nature, in jurisdictions that we know with partners that we know, with technology that we know, we feel that those are low risk, good return projects.

Speaker #4: But that said, we're always evaluating projects against all alternatives for the use of capital. And we do that every time we look at a big investment.

Speaker #5: Great. Thanks. And would you mind providing an update on the ramp of CGP-3? Just any color you can give on the re-rant. Thank you.

[Analyst] (BMO): Great. Thanks. Would you mind providing an update on the ramp of CGP3? Just any color you could give on the reramp. Thank you.

Speaker #4: Well, it's been up about five back on about five days now. And it's operating at reduced rates, but it's operating I think reasonably well as what we would have expected to be five days in from a restart.

Kent Masters: It's been up back on about five days now. It's operating at reduced rates, but it's operating, I think, reasonably well as what we would've expected to be five days in from a restart.

Speaker #5: Thank you.

[Analyst] (BMO): Thank you.

Speaker #1: Our next question comes from Vincent Andrews with Morgan Stanley. Your line is now open.

Operator 3: Our next question comes from Vincent Andrews with Morgan Stanley. Your line is now open.

Speaker #2: Thank you. And good morning, everyone. Excuse me. Neal, can I ask you on specialties just to give us a little bit of help bridging things into 27, sort of all else equal?

Vincent Andrews: Thank you and good morning, everyone. Excuse me. Neal, can I ask you on Specialties, just to give us a little bit of help bridging things into 2027, sort of all else equal. How do we think about the normalization of the bromine price versus the incremental cost of $70 to $90 million, which I assume is largely in Specialties? It would seem like for the year that the higher price has offset the $70 to $90, but will that $70 to $90 go away in 2027, assuming there's resolution of the conflict by then? Within the non-Chinese index business, has there been any benefit to you from the disruption caused by Iran in terms of have you gained any market share? Have your prices gone up in that part of the business?

Speaker #2: How do we think about the normalization of the bromine price versus the incremental cost, the 70 to 90 million, which I assume is largely in specialties?

Speaker #2: It would seem like for the year that the higher price has offset the 70 to 90. But will that 70 to 90 go away in 2027, assuming there's resolution of the conflict by then?

Speaker #2: And then within the non-Chinese index business, has there been any benefit to you from the disruption caused by Iran, in terms of have you gained any market share?

Speaker #2: Have your prices gone up in that part of the business, or is that we're really just talking about the Chinese index volume that we need to think about?

Vincent Andrews: Is that we're really just talking about the Chinese index volume that we need to think about?

Speaker #4: Okay. A lot in there, Vincent. Let me answer maybe the first half starting there, and then I'll pass it over to Eric to talk about the market piece of things in the back half of the year or in the back half of your question.

Neal Sheorey: Okay. A lot in there, Vincent. Let me answer maybe the H1 starting there, then I'll pass it over to Eric to talk about the market piece of things in the back half of your question. Look, with regards to Specialties, probably too early for me to say what's going to happen to that $70 to $90 million impact. I would just be guessing at the situation in the Middle East. Obviously, if things resolve there, certainly, we would hope that some of that cost escalation would go away or some of those supply chains will get back to kind of a normal position. That would be helpful to us. I would say the team has done a really, really great job of managing through the situation in the Middle East so far in the front end of this year.

Speaker #4: Look, with regards to specialties and the it's probably too early for me to say what's going to happen to that 70 to 90 million dollar impact.

Speaker #4: I would just be guessing at the situation in the Middle East. Obviously, if things resolve there, certainly we would hope that some of that cost escalation would go away or some of those supply chains will get back to kind of a normal position.

Speaker #4: So that would be helpful to us. But I would say the team has done a really, really great job of managing through the situation in the Middle East so far in the front end of this year.

Speaker #4: And so that 70 to 90, we didn't really see a lot of that impact yet in the first half of the year. But again, the situation is still a live dynamic.

Neal Sheorey: That $70 to $90, we didn't really see a lot of that impact yet in the H1 of the year. Again, the situation is still a live dynamic, that's why we continue to say we still think that there's this potential through the year. With regards to margins in 2027, you're right. The bromine pricing has really increased here in the H1 of the year due to some exogenous factors that has pushed our margin up pretty considerably. We're using this moment right now to continue to focus on cost and productivity, specifically in the Specialties business to get the profitability of that business back into a better place than where it has been in the last year or two.

Speaker #4: And so that's why we continue to say we still think that there's this potential through the year. With regards to margins in 2027, you're right that the bromine pricing has really increased here in the first half of the year due to some exogenous factors that has pushed our margin up pretty considerably.

Speaker #4: We're using this moment right now to continue to focus on cost and productivity specifically in the specialties business to get the profitability of that business back into a better place than where it has been in the last year or two.

Speaker #4: So I think even though you might have pricing kind of coming off maybe potentially as we go through 2027, certainly not as strong as we've seen in 2026, I do think I do expect that some of the cost and productivity that we're working on is going to shine through.

Neal Sheorey: I think even though you might have pricing kind of coming off maybe potentially as we go through 2027, certainly not as strong as we've seen in 2026. I do expect that some of the cost and productivity that we're working on is going to shine through. Net net, I think that's why we continue to say we're on this multi-year journey of improving margins in specialties. We'll have more to say, I think, as we go through this year and start preparing for 2027. Maybe with that, I'll pass it over to Eric Norris to talk about the market.

Speaker #4: And so net net, I think that's why we continue to say we're on this multi-year journey of improving margins in specialties. And we'll have more to say, I think, as we go through this year and start preparing for 2027.

Speaker #4: Maybe with that, I'll pass it over to Eric to talk about the market.

Speaker #3: Yeah. Vincent, you may or may not know this. It's a fairly diverse business. The upstream part of the business, which is elemental bromine and HBR, that's the part that is traded in the China market and where you see a price index rather, I should say, in the China market.

Eric Norris: Yeah. Vincent Andrews, you may or may not know this. It's a fairly diverse business. The upstream part of the business, which is elemental bromine and HBr, that's the part that is traded in the China market and where you see a price index rather, I should say, in the China market, the SunSirs index. That's well less than a third of our business. Certainly that skyrocketed up, that provided some opportunities, and there was a benefit to that. The vast majority of our business is downstream. It's the derivatives we sell downstream. Those have localized to their markets pricing dynamics, in some cases, limited competition where we have a differentiation play, and in other cases, a regional play where we have a regional ability to supply that others can't, particularly in a volatile market.

Speaker #3: The sun series index. That's well less than a third of our business. And so any and certainly that skyrocketed up. They've provided some opportunities, and there was a benefit to that.

Speaker #3: But the vast majority of our business is downstream. It's the derivatives we sell downstream. And those have localized to their markets pricing dynamics. In some cases, limited competition where we have a differentiation play.

Speaker #3: And in other cases, a regional play where we have a regional ability to supply that others can't particularly in a volatile market. We're able to take advantage of that both from a volumetric basis and in a few cases price-based.

Eric Norris: We're able to take advantage of that, both from a volumetric basis and in a few cases, price-based. The balloon, if you will, the pricing you're referring to is a pretty isolated part of our cost structure. The other thing we do across this business is goes to the $70 to $90. It's a second pricing mechanism. It's the pass-through of higher raw material costs. That obviously ebbs and flows with what those raw material costs will do over a period of time. That's separate and apart from what you saw in the upstream part of the business in China. Don't know if that helps, I think it's a more diverse business.

Speaker #3: But the balloon, if you will, the pricing you're referring to is a pretty isolated part of our cost structure. The other thing we do across this business is it goes to the 70 to 90.

Speaker #3: It's a second pricing mechanism. It's the pass-through of higher raw material costs. That obviously ebbs and flows with what those raw material costs will do over a period of time.

Speaker #3: That's separate and apart from what you saw in the upstream part of the business in China. Don't know if that helps, but I think it's a more diverse business.

Speaker #3: And as we go forward, I just want to emphasize we are looking at how we significantly improve the productivity and cost in this business and optimize some of those profitabilities in what is a pretty complex downstream set of derivatives with some good opportunities to do that that we help that we expect to frame a more improved profitability going forward.

Eric Norris: As we go forward, I just want to emphasize, we are looking at how we significantly improve the productivity and cost in this business and optimize some of those profitabilities in what is a pretty complex downstream set of derivatives with some good opportunities to do that we expect to frame a more improved profitability going forward.

Vincent Andrews: Thank you for all the detail. Very helpful. I'll pass it along. Thank you.

Speaker #4: Thank you for all the detail. Very helpful. Very helpful. I'll pass it along. Thank you.

Speaker #1: Our next question comes from Joshua Despecter with UBS. Your line is now open.

Operator 3: Our next question comes from Joshua D. Spector with UBS. Your line is now open.

Speaker #5: Yeah. Hi. Good morning. I was wondering if you could share some of your thoughts around some of the China battery tax breaks and how that might impact lithium demand, if at all, and if that has any ability on the ability to pay for lithium into that market.

Joshua D. Spector: Yeah. Hi, good morning. I was wondering if you could share some of your thoughts around some of the China battery tax breaks, and how that might impact lithium demand, if at all, and if that has any ability on an ability to pay for lithium into that market. Just curious how you'd see that play out.

Speaker #5: Just curious how you'd see that play out.

Eric Norris: I'm sorry. Could you repeat the question again? I'm sorry. It was with regard to China. Could you repeat it?

Speaker #4: I'm sorry. Could you repeat could you repeat the question again? I'm sorry. Could you it was with regard to China. Could you repeat it?

Speaker #5: China tax breaks specifically on batteries. How you see that impacting China demand, if at all, and how that potentially impacts the ability to pay for lithium?

Joshua D. Spector: China tax breaks specifically on batteries, how you see that impacting China demand, if at all, and how that potentially impacts the ability to pay for lithium?

Speaker #4: Yeah. I would say what we are seeing in the market, particularly on the grid storage side, is that any changes in tax—there's been a consumption tax change.

Eric Norris: Yeah, I would say, what we are seeing in the market, particularly on the grid storage side, is that any changes in tax, there's been a consumption tax change. There's been a rollback of VAT on exported batteries that's phased in, has been overwhelmed by demand. Yes, there have been moments of time where I think people are trying to get orders in before certain things expire. The demand has been so strong that it has offset really any impacts we're seeing there that are of significance. That's on the stationary storage side. There have been changes on the EV side as well.

Speaker #4: There's been a rollback of VAT on exported batteries. That's phased in. Has been overwhelmed by demand. Yes, there have been moments of time where I think people are trying to get orders in before certain things expire.

Speaker #4: But the demand has been so strong that it has offset really any impacts we're seeing there that are of significance. And so and that's on the stationary storage side.

Speaker #4: There have been changes on the EV side as well. And that has led to that's a change incentive regime. That has that has pushed, actually, towards higher energy density batteries, which has helped increase the gigawatt hours even as unit sales have been lower this year, although now recovering.

Eric Norris: That has led to, as a change incentive regime, that has pushed actually towards higher energy density batteries, which has helped increase the gigawatt hours even as unit sales have been lower this year, although now recovering after a pull forward demand into last year in that incentive regime.

Speaker #4: After a pull forward demand into the last year in that incentive regime.

Speaker #5: Thanks. That's helpful. And if I could just ask on volume growth into next year, I mean, given that's out of Australia, should we assume that that's primarily spot volume?

Joshua D. Spector: Thanks. That's helpful. If I could just ask on volume growth into next year, given that's out of Australia, should we assume that that's primarily spot volume, your mix will shift that way? Are there any other conversations happening on the rest of your volumes to perhaps get more of that back into a contracted structure?

Speaker #5: So your mix will shift that way? Or are there any other conversations happening on the rest of your volumes to perhaps get more of that back into a contract-type structure?

Speaker #4: It's probably well, it's kind of hard to say, but it's probably a mix across the portfolio, right? So it'd be more there will be probably more spot, but some of our contract volumes.

Kent Masters: Well, it's hard to say, but it's probably a mix across the portfolio, right? There will be probably more spot, but some of our contract volume. I wouldn't assume it all goes spot, but it's probably the same mix of our normal portfolio.

Speaker #4: So I wouldn't assume it all goes spot, but it would it's probably the same mix of our normal portfolio. Well. I would say there are two things I think that might be the right the answer to your immediate question.

Eric Norris: Yeah.

Joshua D. Spector: Okay.

Eric Norris: I would say there are two things. That might be the right answer to your immediate question. Maybe it gives an opportunity to make a broader point, which is there are two things that are driving our mix that are going to result in a higher proportion of volume that's either spot or sold under shorter duration contracts. One is China's growing faster than the rest of the world, the other is that generally spodumene is done not on long-term contracts. It's done on a market base or a shorter term. We do have some longer term, but they're not done under this sort of floor-ceiling basis. They're done on a market basis.

Speaker #4: Maybe it gives an opportunity to make a broader point, which is there are two things that are driving our mix, that are going to result in a higher proportion of volume.

Speaker #4: It's either spot or sold on a shorter duration contracts. One is China's growing faster than the rest of the world. And the other is that generally spot you mean is done not on long-term contracts.

Speaker #4: It's done on a market base or a shorter term. We do have some longer term, but they are not done under this sort of floor-ceiling basis.

Speaker #4: They're done on a market basis. So as a result, that percentage of contracts that we have that are under that we refer to as long-term agreements with floors and ceilings has become slightly smaller.

Eric Norris: As a result, that percentage of contracts that we have that we refer to as long-term agreements with floors and ceilings has become slightly smaller because of those two mixed phenomenon that's going on in the market.

Speaker #4: Because of those two mixed phenomenon that's going on in the market.

Speaker #5: Thank you very much.

Joshua D. Spector: Thank you very much.

Speaker #1: Our next question comes from Matthew Day with Bank of America. Your line is now open.

Operator 3: Our next question comes from Matthew DeYoe with Bank of America. Your line is now open.

Speaker #6: Good morning. I have two so first, Eric, you know, global lithium demand tracking 45%, clearly a very strong and I know this is no easy task, but when you look at the initial range given on the year, particularly the plus 15, I mean, where do you think you were most wrong or overly cautious?

Matthew DeYoe: Morning. I have two. First, Eric, global lithium demand tracking 45%, clearly very strong. I know this is no easy task, but when you look at the initial range given on the year, particularly like the +15%, where do you think you were most wrong or overly cautious? Is that still a looming threat as it relates to potential decelerations, or do you think that has been debunked? Then on the DLE plant, just conceptually, is the goal to increase concentrations of lithium before it hits the brine pond? Or are you removing magnesium? Can the DLE plant operate independent of the brine ponds, or is it just an added part of the loop and if it's the latter, what's the net economic benefit between added OpEx and added recoveries?

Speaker #6: And is that still like a looming threat as it relates to potential decelerations, or do you think that has been debunked? And then on the DLE plant, just conceptually, is the goal to increase concentrations of lithium before it hits the brine pond, or are you removing magnesium?

Speaker #6: Can the DLE plants operate independent of the brine ponds, or is it just an added part of the loop? And if it's the latter, what's the net economic benefit between added opex and added recoveries?

Speaker #4: Yeah. Well, I can answer the first question, and I'll let Ken answer the second one. So with regard to where we were most wrong, look, I think we're honest when we gave guys beginning of year and told you where we think we could be wrong.

Eric Norris: I can answer the first question. I'll let Ken answer the second one. With regard to where we were most wrong, look, I think we were honest when we gave guides at the beginning of the year and told you where we think we could be wrong, which was the growth in grid storage. We'd come off a year that frankly, surprised us in the prior year, 2025. The rate of growth, somewhat driven by AI, also driven by grid reliability, finally driven by renewables growth, was incredibly strong last year. We were redoubling our efforts to better get underneath the hood of that. This is a market that's new. It's supplied largely, as you know, LFP out of China. There was some effort on our part to get our hands around that, and that put that range on that.

Speaker #4: Which was the growth in grid storage. We'd come off a year that, frankly, surprised us in the prior year, 2025. We didn't you know, the rate of growth somewhat driven by AI also driven by grid reliability and finally driven by renewables growth was incredibly strong last year.

Speaker #4: And we were redoubling our efforts to better get underneath the hood of that. This is a market that's new. It's supplied largely, as you know, LFP out of China.

Speaker #4: So there was some effort on our part to get our hands around that. And that put that range on that. The upper end of that range was, if you will, sort of a sustained momentum coming out of '25.

Eric Norris: The upper end of that range was, if you will, sort of a sustained momentum coming out of 2025. The lower end of the range was a pullback. The pullback didn't happen. I think another fact you have to remember is that policy plays a role here. Incentives, tariffs, geopolitical aspects, those were unknowns to us as well. Per the prior question about did any tax headwinds slow down demand, they did not. Those were things we needed to see in the market before we could get comfortable with the higher end of the range. Grid storage or stationary storage in general is at a point where it's going to start to become as big a part of this market potentially as light-duty vehicles, EVs. We have a higher degree of confidence around that now, I would say.

Speaker #4: And the lower end of the range was a pullback. The pullback didn't happen. And I think what another factor you have to remember is the policy plays a role here: incentives, tariffs, geopolitical aspects.

Speaker #4: Those were unknowns to us as well. And per the prior question about did any tax headwinds slow down demand, they did not. Those were things we needed to see in the market before we could get comfortable with a higher end of the range.

Speaker #4: Grid storage or stationary storage in general is at a point where it's going to start to become as big a part of this market potentially as light-duty vehicles, EVs.

Speaker #4: So it's we have a higher degree of confidence around that now, I would say. Do you want to answer the DLE question, Ken?

Eric Norris: Do you want to answer the DLE question, Ken?

Speaker #2: Yeah, so I mean, you can see from the chart we put out, it's a hybrid approach that we're taking. We're still trying to leverage the solar evaporation in the pond system.

Kent Masters: Yeah. You see from the chart we put out, it's a hybrid approach that we're taking. We're still trying to leverage the solar evaporation in the pond system, and the assets that we have. We'll take a side stream from the normal pond system, run that through DLE, concentrate it, then put it back into the pond system to finish it. It's a hybrid system. It's a new approach. It's not full DLE. You could run full DLE, technically, but we have those assets and for the efficiency, I mean, the solar evaporation is a very efficient way of doing this. We're kind of kicking that. We're trying to leverage both the solar evaporation and the technology to get us more volumes and lower pumping rates, which allows us to get those more volumes.

Speaker #2: And the assets that we have, we'll take a side stream we'll take a side stream from the normal pond system, run that through DLE, concentrate it, and then put it back into the pond system to kind of to finish it.

Speaker #2: So it's a hybrid system. It's a new approach. It's not full DLE. You could run full DLE, technically, but we have those assets. And for the efficiency, I mean, the solar evaporation is a very efficient way of doing this.

Speaker #2: And we're kind of kicking that off. We're trying to leverage both the solar evaporation and the technology to get us more volumes and lower pumping rates, which allows us to get those additional volumes.

Speaker #1: Our next question comes from Kevin McCarthy with Vertical Research Partners. Your line is now open.

Operator 3: Our next question comes from Kevin McCarthy with Vertical Research Partners. Your line is now open.

Speaker #7: Yes. Good morning. Thank you very much. My first question is on inventories. Can you provide an update on where your own inventories are on a unit basis relative to what you would consider to be optimal?

Kevin McCarthy: Yes, good morning. Thank you very much. My first question is on inventories. Can you provide an update on where your own inventories are on a unit basis relative to what you would consider to be optimal? Then, externally, would welcome any thoughts that you have on inventory levels throughout the supply chain.

Speaker #7: And then externally, would welcome any thoughts that you have on inventory levels throughout the supply chain.

Speaker #4: Yeah. Good morning, Kevin. This is Neal. I'll start on the first part, and then I'll pass it over to Eric to talk about what he's seeing in the overall supply chain.

Neal Sheorey: Good morning, Kevin. This is Neal. I'll start on the first part, then I'll pass it over to Eric to talk about what he's seeing in the overall supply chain. Look, our inventories, we certainly ended the quarter lower than normal. You probably have done the calculation around our working capital. We tend to think about our working capital running at about 25% of sales. We ended the Q2 more like 19% of sales. A good bit of that is because we ran into our inventory, or we consumed some of our inventory in the quarter. Part of that being because of the strong demand that we saw, part of that being because of the CGP3 fire that-

Speaker #4: Look, our inventories we certainly ended the quarter lower than normal. You probably have done the calculation. We around our working capital, we tend to think about our working capital running at about 25% of sales.

Speaker #4: But we ended the second quarter more like 19% of sales. And a good bit of that is because we you know, we ran into our inventory, or we consumed some of our inventory in the quarter, part of that being because of the strong demand that we saw, part of that being because of the CGP-3 fire that happened at the beginning of June.

Neal Sheorey: Happened at the beginning of June, we were able to pivot into our inventories to be able to supply the market. Where I would put our current inventories are probably historically on the low side, we'll need to build that back up, obviously, to be able to navigate the H2, also be prepared for 2027 as well. Maybe I'll pass it over to Eric then to talk about the market inventories.

Speaker #4: And so we were able to pivot into our inventories to be able to supply the market. So where I would put our current inventories are probably historically on the low side and we'll need to build that back up.

Speaker #4: Obviously, to be able to navigate the back half of the year, but then also be prepared for 2027 as well. Maybe I'll pass it over to Eric then to talk about the market inventories.

Speaker #6: If this follows the on the market side, follows the narrative that Ken said earlier and what has physically a very tight market. On the carbonate side in particular, it's under 3 weeks of inventory.

Eric Norris: On the market side, follows the narrative that Ken said earlier and what is physically a very tight market. On the carbonate side in particular, it's under 3 weeks of inventory and in the upstream sort of converter cathode arena. In hydroxide, it's under a month. Those are the levels that at a month, for either of those, we would have declared it a tight market. Now we're under that. It's an illustration of a market that is quite tight at the moment. As you move downstream, we have indication. This is a little more opaque, our take would be that battery inventories are also not that high either. That would make sense if you take that with the comments I made on stationary storage earlier, where installations are exceeding battery production. Basically, the material, as soon as it's made, is going out into an installation.

Speaker #6: And on the upstream sort of converter cathode arena, and in hydroxide, it’s under a month. Those are levels that, at a month, we would—for both of either of those—we would have declared it a tight market.

Speaker #6: Now we're under that. So it's an illustration of a market that is quite tight at the moment. As you move downstream, we have indication this is a little more opaque, but we our take would be that battery inventories are also not that high either.

Speaker #6: That would make sense if you take that with the comments I made on stationary storage earlier, where installations are exceeding battery production. Basically, the material, as soon as it's made, is going out into an installation.

Speaker #6: And similarly, while EVs has been weak, I mean, the main part of this market now is particularly out of China has become the LFP market.

Eric Norris: Similarly, while EVs has been weak, the main part of this market now is particularly out of China, has become the LFP market, that's being driven very much by the stationary storage dynamic. Net net at a very tight market.

Speaker #6: And that's being driven very much by the stationary storage dynamic. So, net-net, it's a very tight market.

Speaker #7: That's very helpful, and maybe a good segue to my second question, Eric, on energy storage. I appreciate the detail you set forth on slides 13 and 14.

Kevin McCarthy: That's very helpful and maybe a good segue to my second question, Eric, on energy storage. I appreciate the detail you set forth on slides 13 and 14. If I did my math correctly, the new 2030 range, after the doubling, let's say this year, it implies, I don't know, a mid-teens sort of a CAGR, which strikes me as relatively conservative. Just curious as to what kind of visibility or how conservative you think that medium to long-term glide path is on the energy storage side.

Speaker #7: You know, if I did my math correctly, the new 2030 range after the doubling you know, let's say this year, implies I don't know, a mid-teens sort of a CAGR, which you know, strikes me as relatively conservative.

Speaker #7: Just curious, as to you know, what kind of visibility or how conservative you know, you think that medium to long-term glide path is on the energy storage side?

Speaker #4: Look, I mean, I'll pair your question with an earlier question, Kevin, that focused on how we were cautious at the beginning of this year.

Eric Norris: Look, I'll pair your question with an earlier question, Kevin, that focused on how we were cautious at the beginning of this year. I think we've gotten to a point where we've gotten more comfortable with our demand projections for this market in the next couple of years. As to the next five years, I think we're going to have to spend more time working on that. This is a market that the trend's favorable in that the market has proven stronger than we thought throughout. I don't know that that's going to be the case for sure. This is our best estimate at the moment.

Speaker #4: I think we've gotten to a point where we're confident we've gotten more comfortable with our demand projections for this market in the next couple of years.

Speaker #4: As to the next five years, I think we're going to have to spend more time working on that. This is a market that the trends favorable in that the market has proven stronger than we thought throughout.

Speaker #4: I don't know that that's going to be the case for sure. This is our best estimate at the moment.

Speaker #7: Thanks very much.

Kevin McCarthy: Thanks very much.

Speaker #1: Our next question comes from Chris Parkinson with Rules Research. Your line is now open.

Operator 3: Our next question comes from Chris Parkinson with Wolfe Research. Your line is now open.

Harris Fein: Great. Thanks. This is Harris Fein on for Chris. Just with the EBITDA bridge on slide six, it looks like COGS were about a $150 million headwind. That includes the spodumene price flow through, the Chilean royalties, and the productivity. Are you able to parse out those three components? How should we be thinking about the quantum of the sequential spodumene inventory impact into the H2? Thanks.

Speaker #5: Great. Thanks, Mrs. Harris. Final for Chris. Just with the EBITDA bridge on slide 6, it looks like COGS were, you know, about a $150 million headwind.

Speaker #5: And that includes the spodumene price flow through the Chilean royalties and the productivity. Are you able to parse out those three components? And how should we be thinking about the quantum of the sequential spodumene inventory impact into the second half?

Speaker #5: Thanks.

Speaker #4: Yeah. Look, I won't give you exact numbers around what drove COGS around all three of those items. But you can imagine that the spodumene lag or the spodumene inventory impact is the largest portion of the COGS driver that usually is the case for us.

Neal Sheorey: Yeah, look, I won't give you exact numbers around what drove COGS around all three of those items, but you can imagine that the spodumene lag or the spodumene inventory impact is the largest portion of the COGS driver. That usually is the case for us. In terms of how to think about maybe the spodumene cost lag as you go into the Q3. Look, the average market spodumene price in the Q2 was about $2,500, somewhere around there per ton, thereabouts. I think right now we're probably in the $2,000 range kind of case. Remember that it takes about four months for spodumene to move through our inventory system and eventually get into salts and then to the customer.

Speaker #4: In terms of you know, where how to think about maybe the spodumene cost lag as you go into the third quarter, look, the average market spodumene price in the second quarter was about $2500, somewhere around there per ton.

Speaker #4: Thereabouts. And I think right now, we're probably in the $2,000 range kind of case. So you should and again, remember that it takes about four months for spodumene to move through our inventory system and eventually get into salts and then to the customer.

Speaker #4: So, you know, take all of that into consideration, and you will see this higher-priced spodumene rolling through our income statement in the third quarter.

Neal Sheorey: Take all of that into consideration that you will see this higher price spodumene rolling through our income statement in the Q3, and that's just naturally because of where market prices were in the Q2.

Speaker #4: And that's just naturally because of where market prices were in the second quarter.

Speaker #5: Got it. That's helpful. And I'll take another shot at a question. Someone asked earlier, just you know, capex is coming down, but it looks like the supply-demand gap is actually widening.

Harris Fein: Got it. That's helpful. I'll take another shot at a question someone asked earlier. Just CapEx is coming down, it looks like the supply-demand gap is actually widening. You're generating a healthy amount of cash. The balance sheet's pretty clean. In terms of incremental uses of cash, are we still thinking debt paydown? Is it more build cash and preserve optionality? How should we be thinking about that?

Speaker #5: You're generating a healthy amount of cash. The balance sheet's pretty clean. So in terms of incremental uses of cash, are we still thinking debt pay down?

Speaker #5: Is it more build cash and you know, preserve optionality? How should we be thinking about that?

Speaker #4: Yeah. I think it I mean, I said it before, so you're probably going to get the same answer. But we wanted to have a conservative balance sheet.

Kent Masters: I've said it before, you're probably going to get the same answer. We wanted to have a conservative balance sheet. We do at the moment, there's not a whole lot of debt to pay down right now at the moment. We do have growth projects. Capital is coming down. I think of that more as capital efficiency. We're getting more and more focused to try and drive efficiency in that, and we've been on that now for a couple of years, and I think we're getting better at that. There'll be growth projects that we layer. We've talked about brownfield projects. There's a couple brownfield projects we've got. We've talked about the Salar de Atacama. You know about Kings Mountain. We have a portfolio of growth projects in the queue.

Speaker #4: We do at the moment. So it's not a whole there's not a whole lot of debt to pay down right now at the moment.

Speaker #4: We do have growth projects. So capital is coming down. I think of that more as capital efficiency. We're getting more and more focused on trying to drive efficiency in that.

Speaker #4: And we've been on that now for a couple of years. And we're I think we're getting better at that. But then there'll be growth projects that we layer.

Speaker #4: We've talked about brownfield projects. So there's a couple of brownfield projects. We've got we've talked about the Salar de Atacama. You know about Kings Mountain.

Speaker #4: So we have a portfolio of growth projects in the queue. We've just not really kicked off any of those at the moment. So we're not spending heavily against that.

Kent Masters: We've just not really kicked off any of those at the moment, we're not spending heavily against that. We do have good growth projects. Again, as I said before, in jurisdictions we know, in technology we know, and with partners that we know. We feel pretty good about those projects going forward. That's going to be where you see our focus. Again, we'll compare that against everything else, all the other alternatives, including our own shares. We always look at that when we do a big investment, and that doesn't change.

Speaker #4: But we do have good growth projects, again, as I said before, in jurisdictions we know, in technology we know, and with partners that we know.

Speaker #4: So, we feel pretty good about those projects going forward, so that's going to be where you see our focus. But again, we'll compare that against everything else—all the other alternatives, including our own shares.

Speaker #4: So we always look at that when we do a big investment. But that doesn't change.

Speaker #1: Our next our last question comes from Mizahir Mammadli with Rothschild & Co. Your line is now open.

Operator 3: Alec, our last question comes from Ozahiem Amadli with Rothschild & Co. Your line is now open.

Speaker #6: Thank you. Just wanted to ask about lithium production. The Wagena production surprise, should we take it as a bit of a one-off, or is it a structural uplift in the production in ore quality?

Ozahiem Amadli: Thank you. Just wanted to ask about lithium production. The Wodgina production surprise, should we take it as a bit of a one-off, or is it a structural uplift in the production in ore quality? On CGP3, basically the Q1 2027 ramp-up timelines, it looks like it doesn't represent a massive slip versus the pre-fire expectations. Does that mean before the fire you were kind of running ahead of the schedule on the ramp-up? Thank you.

Speaker #6: And on CGP-3, you basically the Q1 27 ramp-up timeline it looks like it doesn't represent a massive slip versus the pre-fire expectations. Does that mean before the fire, you were kind of running ahead of the schedule on the ramp-up?

Speaker #6: Thank you.

Speaker #4: Yeah. So OK, green bushes first. You may have to remind me of the other question. But we were running a little bit ahead. And now this is our risk-adjusted view of that.

Kent Masters: Okay. Greenbushes first, you may have to remind me of the other question. We were running a little bit ahead, and now this is our risk-adjusted view of that. It's basically we just slipped the schedule from where we were by the outage. The outage period, we've kind of shifted to that. That gets us to Q1. As we said, we've been up 5 days now. The restart, all that's going well. We're running at reduced rates, so we're back on a ramp schedule. That's our best guess is that Q1. That's kind of all I can say. Sorry, can you remind me of your Oh, Wodgina. Yeah, look, we were working toward better ore, and that was in the plan. We just got there a little sooner. We're a little bit more efficient in getting there.

Speaker #4: So it's basically we just slipped the schedule from where we were by the outage. So the outage period, we've kind of shifted to that.

Speaker #4: That gets us to the first quarter. As we said, we've been up five days now. The restart all that's going well. We're running at reduced rates.

Speaker #4: So we're back on the ramp schedule. And we've that's our best guess. Does that that first quarter, that's kind of all I can say.

Speaker #4: And sorry, can you remind me of your oh, Wagenau. Yeah. Yeah. Look, that's we were working toward better ore. And we and so that was in the plan.

Speaker #4: We just got there a little sooner. We're a little bit more efficient in getting there. We've still got to work through some of that.

Kent Masters: We've still got to work through some of that, and we expect later to get even better quality ore. It was the plan. We got there a little early, and it's fortunate that it was at a time when it offset the fire at Greenbushes.

Speaker #4: And we expect later to get even better quality ore. So it's it was the plan. We got there a little early. And it fortunate that it was at a time when it offset the fire at green bushes.

Speaker #6: All right, thank you. And maybe if I could get your view on the supply-demand balance, specifically what you're thinking of the impact of production restarts—projects such as Bald Hill that has been restarted recently.

Operator 1: All right. Thank you. Maybe if I could get your view on the supply-demand balance, specifically what's your thinking of the impact of production restarts, projects such as Bald Hill that has been restarted recently. Do you think that's enough to make a dent in the supply-demand balance?

Speaker #6: Do you think that's enough to make a dent in the supply-demand balance?

Speaker #4: So look, you see that you've got 45% growth, right, in demand. So you need some supply to keep up with it. So what we see right now, we're well behind we're behind that curve.

Kent Masters: You see that you've got 45% growth, right, in demand. You need some supply to keep up with it. What we see right now, we're behind that curve at this part of the year, which is why I think you see inventories being tight. Some of those coming on, lepidolite, the African stuff will make a bit of a dent in that, but you need 45% to stand still, and it's hard to see getting 45%.

Speaker #4: At this part of the year, which is why I think you see inventories being tight. Some of those coming on, lapidolite, the African stuff will make a bit of a dent in that.

Speaker #4: But you need 45% to stand still. And it's hard to see getting 45%.

Operator 3: Thank you. That's all the time we have for questions. I will now pass it back to Kent Masters for closing remarks.

Speaker #1: Thank you. That's all the time we have for questions. I want to pass it back to Kent Masters for closing remarks.

Speaker #4: Thank you, operator. Thank you, everyone, for joining us today. Let me leave you with this. We continue to execute with discipline. Our end markets are strong, growing, and increasingly diverse.

Kent Masters: Thank you, operator. Thank you, everyone, for joining us today. Let me leave you with this. We continue to execute with discipline. Our end markets are strong, growing, and increasingly diverse, and we are progressing growth options focused on our world-class low-cost resources. We remain focused on operational excellence, disciplined capital allocation, and the durable competitive strength that set Albemarle apart. I look forward to sharing more milestones and successes with you in the coming quarters. Thank you.

Speaker #4: And we are progressing growth options focused on our world-class low-cost resources. We remain focused on operational excellence, disciplined capital allocation, and the durable competitive strength that set Albemarle apart.

Speaker #4: I look forward to sharing more milestones and successes with you in the coming quarters. Thank you.

Operator 3: This concludes today's conference call. Thank you for your participation. You may now disconnect.