The Challenging Scenario in the Lithium Era David Klanecky VP Lithium Upstream Division
Challenge: Macro Trends Driving Lithium Growth Opportunity Mobility performance, cost and safety Demand for mobile devices and tools Electrification of transportation Salts Electrolyte Additives Metal Energy Efficiency Power grid efficiency and renewable use Weight reduction in aerospace and large format transport (metals and plastics) Friction reduction (grease and eco-tires) Salts Metal Organometallics Health Aging population Pharmaceutical synthesis Increased respiratory distress and illness Salts Specialties Lithium is a Key Enabler to Solving Global Issues 2
Li-Ion Batteries Enabled Consumer Product Innovation Smartphones Tablets Laptops Wearables Power tools 1992 1st Mass Produced Li- Ion Cell 2003 Cell phones become mainstream 2007 iphone debuts In 5 years, Li-Ion batteries went from a niche end-use to the #1 consuming market for Lithium with explosive growth from consumer electronics and expansion into additional consumer devices: power tools, lawn and garden equipment, forklifts, golf carts, etc Future Growth Driven by Expanded Use of Batteries in Numerous Consumer Devices 3
Markets Continue to Accelerate Lithium Demand Market Expectations Transportation (EV, Trucks/Buses) CAGR (2016-21): 32 35% LCE Content: 40 100 kgs EV Sales grew 58% in 2017 Consumer Electronics (CE) CAGR (2016-21): ~8% LCE Content: < 0.1 kgs Grid Storage (ESS) CAGR (2016-21): > 40% LCE Content: > 1,000 kgs Source: Based on Internal Albemarle Demand Model and third-party data 4
Electric Vehicles Value Chain Enabled by Lithium Performance Products Components Cells Packs EV Manufacturer Li Carbonate Li Hydroxide Cathode, Anode, Electrolyte Cylindrical, Pouch, Prismatic xev, PEV, ESS, CE BEV, PHEV, HEV 5
Lithium Use Grows with Automotive Technology Evolution ICE Conventional Internal Combustion Engine Power flow Internal Combustion Engine Transmission Drive Shaft PHEV (Plug-in) Hybrid Electric Parallel Power flow (Toyota Prius) Internal Combustion Engine Lithium Electric Motor Clutch Clutch Clutch Drive Shaft Transmission PHEV Extend Range Electric Series Power flow (Chevrolet Volt, BMW i8) Internal Combustion Engine Electric Generator Lithium Electric Motor Transmission BEV Electric Vehicle (Tesla, GM Bolt) Lithium Electric Motor Transmission 6
Continued Declines in Lithium Ion Costs Expected According to a well known automaker, lithium ion battery costs declining to that of an internal combustion engine ($100/KWh) is achievable by 2025 Source: Bloomberg New Energy Finance Summit (April 2016) 7
Many Auto Companies are pursuing larger Electrification Strategies 8
Electric car models by style and range through 2020 9
New Materials Will Involve Lithium Considerations Driving Continued Innovation in Design: Safety Cost Power Durability Energy Density Type Market Share in Transportation Source: Lux Research 2016 Report No Disruptive Non-Lithium Energy Storage Technologies on the Horizon 10
EV Penetration Demand Outlook Thoughtful & Comprehensive Approach 2025 EV and Lithium Outlook 1 Demand Buildup by Application 20% Demand in kt LCE Application 2017 Demand 17 25 CAGR 2025 Demand 15% 10% ALB Outlook Transportation 50 35% 550 Consumer Electronics 2 60 8% 110 All Other/Industrial 110 3 4% 140 Total 220 ~18% 800 5% 0% 400 600 800 1.000 Total Lithium Demand (kt LCE) 1 Includes estimates from Roskill, BMO Capital Markets, Citi Investment Research, Deutsche Bank, Goldman Sachs, Instine Numora (America), Morgan Stanley, UBS, Oppenheimer, SQM, and FMC 2 Includes grid storage or ESS volumes Key EV Demand Inputs 12.4% EV (BEV + PHEV) penetration in 2025 51 kwh EV battery; 13 kwh PHEV battery 0.85 kg LCE/kWh for cathode; 0.10 kg LCE/kWh electrolyte 11
Supply to Remain Relatively Balanced versus Demand Established majors have strong incentive to commission capacity as demand warrants Relative size of lithium profit generation and resulting equity valuation Duration of resource quotas and time to earn returns on capital deployed New brine projects typically take 10 years to reach quality product levels Brine and hard rock sources are all different and therefore require unique extraction and process technology development Market needs high-cost hard rock capacity to meet accelerating EV demand Sets pricing floor in low teens USD per MT Experience curve for new entrants to produce EV grade Technical and processing challenges to making battery grade (BG) product for EV s Some lower quality resources and conversion capacity unable to economically achieve BG quality requirements of automotive industry 12
The Challenging Scenario in the Lithium Era David Klanecky VP Lithium Upstream Division