Good day, ladies and gentlemen, and welcome to the First Quarter 2018 Albemarle Corporation Earnings Conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Eric Norris, Chief Strategy Officer. Please proceed.

Thank you, Jasmine, and welcome everyone to Albemarle's first quarter 2018 earnings conference call. Our earnings were released after the close of the market yesterday. And you'll find our press release, earnings presentation and non-GAAP reconciliations posted on our website under the Investors section at www.albermarle.com. Joining me on the call today are Luke Kissam, Chairman and Chief Executive Officer; Scott Tozier, Chief Financial Officer; Raphael Crawford, President, Bromine Specialties; Silvio Ghyoot, President, Catalysts; and John Mitchell, President, Lithium. As a reminder, some of the statements made during this conference call about the future actions or performance of the company as well as lithium demand may constitute forward-looking statements within the meaning of federal security laws. Please note, the cautionary language about forward-looking statements contained in our press release, that same language applies to this call. Please also note that our comments today regarding our financial results exclude non-operating, non-recurring and other unusual items. GAAP financial measures and reconciliation from those to the adjusted numbers discussed today may be found in our press release and the appendix of our earnings presentation, both of which are posted on our website. Finally, as announced during the third quarter 2017 earnings conference call, we are now reporting segment revenues and earnings in a new format. Performance Catalyst, which previously had been consolidated with Lithium, is now consolidated with Refining Solutions in a segment titled as Catalysts. Please refer to our 8-K filing of March 12, 2018 for the restatement of segment revenue and earnings in prior periods under this new reporting format. Also note that most external databases that provide consensus earnings estimates have not yet updated their estimates for this new segmentation format. Now I'll turn the call over to Luke.

Thanks, Eric, and good morning, everyone. I'm very pleased with our start to 2018, which highlights the growth of our Lithium business, the strong cash generation of our portfolio, the strength of our balance sheet and our ability to successfully execute our capital expansions in Lithium. First quarter net sales grew by 14% and adjusted EBITDA grew by 18% over the prior year. Lithium delivered double-digit adjusted EBITDA growth of 31%, and both Bromine and Catalysts delivered solid results with strong cash flow. Our adjusted diluted earnings per share grew by 24% compared to the prior year. Consistent with our efforts to manage the portfolio and maintain a strong balance sheet, we closed on the sale of our polyolefin catalysts and components business to W.R. Grace for a sum of $416 million on April the 3. Our lithium capital projects remain on track at planned spending of between $550 million and $675 million for 2018. Page 6 of the earnings presentation deck outlines the progression and timing of expansion plans for carbonate and hydroxide conversion capacity. Let me provide a brief update on that project. We were in the construction phase for the Xinyu II lithium hydroxide expansion in China and plan to commission the plan in early 2019. During the second half of 2018, we expect to make electrical tie-ins in La Negra relating to the expansion. La Negra II is on track to reach nameplate run rates in 2019. And we have moved from engineering to construction for the La Negra III, IV lithium carbonate expansion. We still expect to commission La Negra III in 2020. In the Salar de Atacama, by the end of the fourth quarter 2018, we expect to reach the full pumping rate of 442 liters per second, which is the rate needed to…

Thanks, Luke, and good morning, everyone. In the first quarter, we reported adjusted diluted earnings per share of $1.30, an increase of 24% compared to the first quarter of 2017. The increase was driven by an adjusted EBITDA increase of $31 million or about $0.21 per share from our Lithium business. Lower corporate costs and favorable foreign exchange contributed about $0.08 per share. We continue to expect our 2018 effective tax rate, excluding special items, non-operating pension, and OPEB items, to trend toward the lower end of the previously provided range of 23% to 24%. Operating working capital ended the quarter at 26.3% of sales, an increase from the fourth quarter of 2017. Capital expenditures during the first quarter were $132 million and will continue to ramp during 2018, reflecting growth capital deployment in our Lithium business. We continue to expect full-year CapEx to range between $800 million and $900 million. Net cash from operations was $122 million, which was about 50% ahead of first quarter 2017, and we still expect to end 2018 between $660 million and $730 million, more than double our 2017 results. And finally, currency exchange rates compared to 2017 were a tailwind to adjusted EBITDA of about $6 million in the first quarter. Our 2017 average rate was just over $1.12 per euro and Q1 2018 averaged about $1.22. Now, moving on to our business performance. Lithium sales increased by 38% compared to the first quarter of 2017 and adjusted EBITDA increased by 31%, with adjusted EBITDA margins of 44%. Volume growth for the first quarter was 19%, with pricing improving by 14%, driven by the increasing demand from our contracted customers. All of our conversion facilities are operating at maximum rates, as we work to bring additional capacity online. In Bromine, first quarter sales of $226 million and adjusted EBITDA of $70 million were up 3% and 2%, respectively compared to the first quarter of 2017. Adjusted EBITDA margins were strong at 31%. Sales growth was driven by moderate price increases, partially offset by freight and raw material costs and by lower volumes caused by constraints in elemental bromine, which we expect to continue through Q2. The market for flame retardants, primarily in electronics, automotive and construction, remained solid. Catalysts reported first quarter net sales of $261 million and adjusted EBITDA of $68 million, resulting in adjusted EBITDA margins of 26%. Year-on-year adjusted EBITDA was negatively impacted due to a shortage of raw materials used in curatives and lower volumes in hydroprocessing catalysts, or HPC catalysts. The decline was partially offset by gains in volume and price for fluid catalytic cracking, or FCC catalysts, which were both up about 2%. And just as a reminder, Q1 included around $11 million from the polyolefin catalysts and components business that won't continue in the future quarters. Now, I'll turn the call back over to Luke.

Hey. Thanks, Scott. As we look to the rest of 2018, Lithium remains on an aggressive path to deliver at least 20% adjusted EBITDA growth during 2018. We expect second quarter Lithium second quarter EBITDA to be sequentially stronger than Q1. Further, we anticipate the second half of 2018 that is fairly equal to the first half of Lithium, with Q3 possibly weaker than Q4 due to downtime needed for the La Negra tie-ins. In Catalysts, we continue to expect good EBITDA growth in our Refining Solutions business. However, curatives is expected to face pressure as a result of raw material challenges, which could unfavorably impact EBITDA by as much as $10 million for the full year. As a result, we expect full-year adjusted EBITDA growth for the Catalysts segment to moderate to the mid-single digits. The favorable market trends in flame retardants are anticipated to continue in Bromine Specialties. And with the exception of the first half capacity constraints for elemental bromine and some derivatives, our plants continue to run very well. Pricing and operational efficiencies are currently expected to offset higher cost for raw materials, freight and distribution. We now expect full-year adjusted EBITDA growth in the low- to mid-single digits on a percentage basis. The upside in Bromine Specialties is expected to offset the headwinds in the curative portion of Catalysts. From a longer-term perspective, we believe that Albemarle stock is currently undervalued. Hence, subject to market conditions, we intend to buy back $250 million of stock via an accelerated share repurchase program that was recently approved by our board. After completion of that program, approximately 10 million shares would remain under our current authorization, leaving ample headroom should we deem additional action to be warranted. The strength of our balance sheet, combined with the operating cash flow from our businesses, give us the confidence that we can take this action, execute our capital projects, maintain our long-term debt-to-EBITDA ratios, and still have plenty of firepower leftover. In fact, absent any further corporate actions such as M&A or additional stock buybacks, we would expect to end 2018 at a net debt-to-EBITDA ratio of around 1 times. Given all of this, for the full-year 2018, we now expect adjusted EPS to be between $5.10 and $5.40. I am confident that Albemarle is well-positioned to maximize shareholder value in the short-, medium-, and long-term. We have a clear and straightforward strategy, grow our Lithium franchise, leverage our strong cash flow from Bromine and Catalysts, and deliver strong margins and returns on our capital growth investments. We believe we have the people, the balance sheet flexibility, and the focus on execution to drive strong and profitable growth over the foreseeable future.

Jasmine, that concludes our prepared remarks. We're now ready for Q&A.

Thank you. And our first question comes from the line of Bob Koort with Goldman Sachs. Please proceed. Dylan Campbell - Goldman Sachs & Co. LLC: Hi. Good morning. This is Dylan Campbell on for Bob. Could you help bridge us to this two-half 2018 Lithium EBITDA is flat relative to first-half 2018, I guess, taking into account what I would presume to be higher volume levels in 2018? And I guess, what would especially offset those higher volumes in the second half of the year?

Yeah. Hi, Dylan. This is John Mitchell. Yes. So, for the second half of the year, I mean, we have baked into the second half what we think we have in terms of production. And also, on the pricing side, our guidance hasn't changed with regard to full-year price effect of the high-single-digit pricing. As we see more capacity coming online, we can adjust our expectations and guidance going forward. Dylan Campbell - Goldman Sachs & Co. LLC: Got it. Thank you. And then, I guess, after completing the sale part of the PCS business in April, can you update us on, I guess, your strategic or your long-term strategic plans for the Catalysts and Bromine businesses, and how they fit into your long-term strategic plans of the consolidated business?

Sure. This is Luke. As we've talked about how each piece of this puzzle fits together, we need the free cash flows from the Bromine and Catalysts business to be able to find the capital that we see in the growth of Lithium. Lithium today doesn't free cash flow in and of itself with the investments that we have. So we look at it and all those pieces fit together. Now, there'll be a point in time in the future where we'll continually assess that portfolio to determine if that is the best path to drive shareholder value. We've not hesitated to make portfolio adjustments when we thought we could drive higher shareholder value by doing so, and we would continue that assessment on an ongoing basis. Dylan Campbell - Goldman Sachs & Co. LLC: Got it. Thank you.

And our next question comes from the line of P.J. Juvekar with Citi. Please proceed.

Hi. This is Scott Goldstein on for P.J. Good morning. I'm looking for more color on within pricing. It just seemed a little more modest than what your competitors realized. Can you maybe break out how much of the growth was from a change in mix and how do you expect that mix to change for the remainder of 2018 and perhaps 2019?

Hi. This is John. So, in terms of the product mix, most of our incremental additional volume is on the carbonate side. But I think the difference in pricing philosophy between the different lithium companies is really what's driving differences in pricing guidance. Again, our focus on long-term contracts, we have certainly clear visibility in terms of the value of the products that we're selling to customers. We want to make sure we're taking a fair and balanced approach with our customers, who are the leading cathode and battery producers of the world. And we are fixated on making sure that we have an excellent risk-adjusted return on our investments. And so our pricing guidance is essentially what's baked into our long-term agreement. So we have good visibility in terms of our approach to pricing. The other benefit in terms of our approach is that we don't see risk in terms of pricing going down. So we have good visibility in terms of stability of the pricing. And we do not expect our prices to be volatile in terms of going down versus others in the lithium space have a different approach in terms of maybe trying to play spot market pricing and other ways to look at pricing in the market.

Okay. Thank you. And maybe just a follow-up. So I think a little more than 80% of your lithium volumes are committed through long-term contracts. Can you just remind us how that trend has changed maybe over the past year? And are you seeing more demand for longer-term contracts in your negotiations currently?

Yeah. Great question. In 2018, I'd say actually almost 100% of our volume is under long-term contract. We had moved our customer base to three- to five-year agreements and now we see a strong pull from the leading providers of batteries and cathodes to go to as long as 10-year agreements. And the rationale for that is really around security of supply. And not just security of supply of any type of molecule, but security supply of an EV grade that meets their specification for a battery that they can make a 10-year warranty on. So I think we have selected a really great basket of leading providers in the cathode and battery space, and we're working together to plan the investments in lithium capacity for EV-grade batteries and they're planning to produce more cells for the OEMs. So we see our long-term agreements getting longer toward 10 years.

That's helpful. Thank you.

And our next question comes from the line of David Begleiter with Deutsche Bank. Please proceed.

Hey, this is David Huang here for David. I guess, first on Lithium. Can you talk about maybe your updated views on lithium hydroxide versus carbonate? I guess, you previously said you wanted to be in both, but is there an increasing preference for one with the other. And also, if you have any views on vertical integration and further consolidation in the sector?

Okay. I will let John take the first and then I'll talk about consolidation.

Thanks, Luke. So, with regard to preference on carbonate and hydroxide, again, the largest battery and cathode producers, depending on the type of battery that they're producing for the specific application, they have a demand for both carbonate and hydroxide, and they're able to forecast for both types of molecules. Of course, in terms of increasing energy density, there are many battery producers that are going to hydroxide in order to go to the high nickel-based or high metal-based cathode materials. So we do see, on a percentage basis, higher growth in hydroxide. But our long-term agreements have both carbonate and hydroxide in them, and we don't see a decrease in demand for carbonate. We just see an acceleration of demand for hydroxide.

Yeah. And if you look at consolidation, I think that there's a lot of noise out there in the marketplace about consolidations up and down the value chain. And I think that just gives a signal to how tight it is and how people are scrambling to get the supply that they need in order to make their commitments throughout the chain. So we're consistently looking and we believe we sit on the best resources in the world in Salar de Atacama and in our site in Western Australia. We have untapped resources in Kings Mountain, North Carolina as well as an option for resources in Argentina. We feel great about where we are from the geographic diversity as well as the brine and rock balance, where we can go carbonate or hydroxide as the market dictates. So I think you're going to see continual discussion out there in the marketplace about suppliers lining up with our customers and their raw material suppliers. But we love the spot we're in with our resources and with our customer contacts. So we feel like we're partnered in the right area. And if those decisions should change and there would be an opportunity, as I've said before, our balance sheet gives us plenty of firepower to take actions that could strengthen even further our portfolio in Lithium business.

Thank you. And on Refining, how is the traction on FCC price increases? And also, ex the curative impact, are you I mean incrementally more positive on it?

Silvio?

Okay. Good morning. This is Silvio. Thanks for the question. As you know, the price increase for FCC is an ongoing exercise. It's never finishing. But I can confirm that right now we're getting traction. One hand, it's still based on the philosophy that we are trying to get the right price for the value we are providing to the refiner; and on the other hand, the efforts to offset the inflationary pressure that we are facing. But the prices are holding.

Okay.

And our next question comes from the line of Vincent Andrews with Morgan Stanley. Please proceed. Vincent Stephen Andrews - Morgan Stanley & Co. LLC: Thank you and good morning, everyone. Just a clarifying question and maybe it relates to the 3Q La Negra costs. I don't know if you can size those for us at all. And I assume the answer is yes, but do you still expect Lithium margins for the full year to be up 40%? I just ask because it came out of this quarter's slide versus last quarter's.

Yeah. From a Lithium margin standpoint, we still believe that full year we'll be above 40% from a margin standpoint. We've not laid out what the costs are in that third quarter, but we have an opportunity to come in and make tie-ins for that site overall that we're going to need to do at some point in time. As I said in my prepared remarks, we're going to be able to pump at full rates in the fourth quarter. We think it makes sense for us to go ahead and make this tie-in now, so that whenever that brine we start pumping at full rates, those ponds get filled up, we won't have to do it later during 2019 or 2020 when we'll have the full brine. So we believe it's prudent to do that. It's just a movement between quarters. It's not going to impact the year in any way, but it could make third quarter weaker than the fourth quarter. So, that's why we brought it up and let you guys know about it, Vincent. Vincent Stephen Andrews - Morgan Stanley & Co. LLC: All right. Very helpful. And just a follow-up on the now longer tenure contracts that you have, is there anything different about – and I know this is sensitive, but anything different about the terms versus the existing contracts? And I guess, in particular, is there any sort of take-or-pay component to these longer contracts or anything different about your ability to adjust price or anything like that that you can share?

Yeah. Philosophically, we've kept the same approach that we have on contracts, the bigger difference is, it's a whole lot more volume. Vincent Stephen Andrews - Morgan Stanley & Co. LLC: Okay. Thank you very much.

And our next question comes from the line of Laurence Alexander with Jefferies. Please proceed.

Hi, guys. This is Dan Rizzo on for Laurence. How are you?

Well.

So, in terms of – I was wondering how much of the impact the change in refinery activity due to the marine fuel standards will have on the refinery catalysts business?

Silvio.

Okay. Are you referring to the gasoline standards?

Yes. Correct. The marine...

Okay.

Marine.

Oh, the marine fuel. Well, I'll try to stay brief on that one. There is a large amount of fuel oil that could not be used anymore in 2020 when those standards are coming on and there are different tracks to address this. One could be that you have scrubbers in the boats which you cannot install overnight. So there will be a requirement of an additional amount of diesel or hydrotreated mid-distillates that is being added to this pool of marine fuel, so to dilute the specs and to have for the next couple of years the boat sailing on not necessarily pure heavy fuel, but on blended fuels. That's one of the ways to get there. Like I said, the other one is a big infrastructure to clean the fuels on the boat. The future will tell us which direction it will ultimately be, but we can be firm that there will be an additional amount of diesel required around the 2019-2020 period and maybe the year thereafter to address that sudden change in specification.

So, Silvio gave you the detailed answer. At a high level, any time there's a regulation that tightens up the specifications from a diesel standpoint, it benefits the hydrotreating part of our business. So we would expect that to be positive news for our HPC business and clean fuels.

Okay. Thank you for clarification. And then, you mentioned before that part of the Bromine and Catalysts business is really to generate cash for Lithium growth. That would suggest I guess that you're not really going to be spending a lot of CapEx on those two businesses, just maintenance. And I was just wondering how much you have to spend yearly to kind of maintain what you're doing there, or if you're spending more to grow it as well?

Yeah. So, if you look at that business, historically, both of those businesses, we've been able to run those businesses between 4% and 6% of revenue as a CapEx. Sometimes it pops up below, sometimes it pops down below. We always have small projects to de-bottleneck or something that will allow us to get a little extra yield, that our cost improvement projects will really pay back. And we're certainly continuing to do that. And we'll continue to invest in those businesses to allow them to maintain their competitive edge. There'll be de-bottlenecks that are necessary. There'll be new wells drilled and (32:13) that are necessary. There'll be additional FCC capacity that we may need to bring online or some de-bottlenecks to be able to serve our customers. So we're going to continue to do that to keep those businesses strong because they're great businesses with good EBITDA margins, but we're blessed in the fact that they have high margins, low capital requirements, and we're able to harvest that cash and put it in our organic growth of Lithium.

Thank you very much.

And our next question comes from the line of John Roberts with UBS. Please proceed.

Thank you. Can you hear me?

Yeah.

Yeah. We can here you now, John.

Yeah. Sorry, I jumped in late. But the slide with EV penetration in Lithium, obviously, there's no correlation in that chart. Is that more because of the different assumptions on average battery size for full electrics, or is it different assumptions on HEV penetration? Or maybe you can comment a little bit on what's driving that variation, but there's also obviously no correlation there.

John, this is Eric speaking. The answer to your question, unfortunately, is yes, right? I mean, the dispersion that's shown on that slide estimates comes from as we've looked at those models. The penetration differences between the amount of full electric versus plug-in hybrid electric, it also comes from battery sizes depending on the analyst and the firm providing that, and in some cases, comes from lithium content, believe it or not. So it does come from all of the three. That's one of the reasons we put this slide out is because I think it's important for you to know the assumptions we believe which are based on a platform-by-platform, OEM-by-OEM basis that are built up. Does that answer your question? John?

John line has disconnected.

Okay. We'll move on to the next caller. Thank you, Jasmine.

You're welcome. And our next question comes from the line of Arun Viswanathan with RBC Capital Markets. Please proceed.

Thanks. Good morning. Maybe you can just give us an update on – appreciate the update on demand and maybe you can just give us an update on what you're seeing on the supply side as well. There were some issues with weather earlier this year in Latin America and Chile and Argentina. Was that effective negative for you guys or not? And then, secondarily, maybe just update on your projects as well as what you're seeing from competitors. Thanks.

Okay. Thanks. This is John. With regard to the weather comment, no impact on Albemarle operations with regard to weather so far in 2018. We've also taken some added steps as mitigation in the event there are any rain events, particularly in the Atacama. So I think we're well-prepared. With regard to the overall supply dynamic in the marketplace, in 2018, it's as expected, as we track all the projects around the world. Going forward, beyond 2018, nothing new that changes our supply-demand outlook. As we look at the materials that are required for our customers which are EV grade, performance materials, carbonate and hydroxide, we feel that the market remains in balance through 2021 and don't see any increase in supply that gives us any concerns in terms of oversupply dynamic, et cetera. Even if there were issues with regard to oversupply, we have long-term agreements that does not affect Albemarle in terms of its own supply-demand dynamic, as we are contracted with the market leaders going forward. So you're not going to see any impact regarding supply-demand dynamic in Albemarle's pricing.

Great. Thanks. And as a follow-up, there has been recently some plateauing it looks like in carbonate pricings. So, I guess, the right read is we shouldn't assume that impacts you. And even so, maybe just describe what you think that resulted from between carbonate and hydroxide pricing? Thanks.

In terms of the marketplace and the differences between carbonate and hydroxide, hydroxide has always been sold at a higher price, given the cost build-up of hydroxide versus carbonate. Certainly, around the world, as different producers are going into new resources, the cost structure of their products will change. Because every natural resource around the world is different, the cost to mine, the cost to extract, the cost to write (37:15), to refine and the cost to make a specialty product is going to vary. So, looking back in terms of historical norms is a little bit faulty as we go forward and we're bringing on more and more capacity. I don't think that there's going to be any kind of – I don't know if you're alluding to the contraction in terms of hydroxide and carbonate price. We certainly don't see it. And again, our pricing models are based on pricing to value, and also pricing to the specific terms and conditions in terms of our long-term agreements.

Thanks.

And our next question comes from the line of Aleksey Yefremov with Nomura. Please proceed.

Thank you. Good morning, everyone. I think during the fourth quarter earnings call, you were talking about high-single-digit lithium price increase expectations for 2018. Has this changed in any way?

No. It's not changed. What you're seeing, we're higher in the first quarter, but as you go through the year, it'll be lower on a year-over-year comparison. So we'll end the year about where we thought we would.

Thank you, Luke. And Xinyu II 20-Kt hydroxide commissioning in 2019, is there a qualification period or a ramp period? So, in practical terms, how should we think about EBITDA contribution at a full rate? Is it by the middle of 2019, by the end of 2019?

Yeah. This is John. Yeah. You should think that there is a qualification period for Xinyu II. So, as we start commissioning and producing product at quality, then we have to shift quantities to our customers and they're going to have to qualify that production facility. And so I think you should look at mid-2019 in terms of getting the full rates.

Thank you.

And our next question comes from the line of Colin Rusch with Oppenheimer. Please proceed. Colin Rusch - Oppenheimer & Co.: Thanks so much. What are you seeing in terms of the number of potential customers for lithium versus a quarter ago or two quarters ago? Are you seeing an increase, decrease, kind of flattish, just in terms of volume of customers?

Yeah. It's about the same number of customers from a material stand – there have been definitely new entrants into that cathode production. We're dealing with the big players and it hasn't changed over the last 12 months. Colin Rusch - Oppenheimer & Co.: Okay. And then, in terms of moving volumes around and customers taking all the volumes, are you seeing any movement from one customer to another customer or folks not taking volumes or asking for incremental volumes versus their contracts on a regular basis?

Yeah. It's all of the math. As a general rule, we haven't seen a customer who's not saying we don't want what we've committed. All our customers are saying we want more. Colin Rusch - Oppenheimer & Co.: Okay. Great. I'll take the rest of it offline.

And our next question comes from the line of Joel Jackson with BMO Capital Markets. Please proceed.

Hi. Good morning. One of your bromine competitors talked about today that they've been signing one-year contracts for the derivatives and for elemental bromine at double digits. [Technical Difficulty] (40:36-40:43)

We have lost.

I think we lost, Jasmine. I don't know whether or not you may want to go into the next question. Maybe just add him (40:49).

Yeah. Put him back in the queue.

Thank you. And our next question comes from the line of Kevin McCarthy with Vertical Research. Please proceed.

Yes. Good morning. Thank you. I was wondering if you could provide some thoughts on the potential for a shift in the battery market to solid-state technology. Do you anticipate that? If so, what would be the associated timing and your level of confidence and, importantly, what might it mean for an uplift in lithium demand?

This is John. Great question regarding solid-state battery technology. With regard to an uplift in lithium demand, yes, because solid-state battery technology has more lithium molecules in it to increase energy density. And so, yes, we would see an uplift in lithium demand as the market goes to solid-state. Regarding timelines, although we're seeing an increase in R&D activity and product development activity, in terms of commercial application, we see it more as a 5-year to 10-year horizon regarding solid-state.

Very good. And then, I had a question on your Lithium EBITDA margin. If I look at it on a sequential basis, your level of 44.0% improved about 300 basis points from what you posted in the fourth quarter of 2017. And it looks like you managed that notwithstanding a smaller contribution from price. And so I was wondering if you could help us understand some of the moving parts there. Was there a shift in mix or cost considerations that helped to explain that?

Yeah. Well, there are a few things that are always going on in the Lithium business. I mean, certainly, there's a mix issue. There's mix of products, there's mix of customers and pricing. We are always also working on productivity improvements in terms of the ongoing operations and the cost structure. But then you have a couple of different elements. One on the natural resource side, where as we do exploration efforts, there are certain costs that cannot be capitalized and so we have to take them to the expense line. Also, on the Refinery assets, there are certain costs that as you are developing and you start the early-stage engineering on different projects, there are costs that again you have to drop to the expense line versus capitalization. So there are a number of moving pieces. And as we've said, from time-to-time we'll see fluctuation in the margins in that low- to mid-40 range, but you should count on us averaging out in the lower 40s.

Thank you very much.

And we do have Mr. Joel Jackson back on the line with BMO Capital Markets. Please proceed.

Hi. Do you hear me now?

Yeah.

Yes. We can hear you fine, Joel.

All right. Great. Okay. So, one of your bromine competitors this morning indicated that they're seeing double-digit price increases on some one-year contracts, as they're signing on elemental bromine and bromine derivatives. Are you seeing similar pick-up on some of your pricing right now on contracts? And I guess there's some cost offsets. Maybe you could talk about both of those.

Hey, Joel. This is Raphael Crawford. We do see an increase in the number of contracts that we have with our customers versus our prior year. So, because of the tighter situation on bromine, not necessarily elemental bromine, but actually a very small piece of our portfolio, but on the derivatives, namely flame retardants, we are signing more contracts with price increases. The amount of the price increase really depends on the specific product in the specific market. But it has been favorable. In these type market situations, we have been able to raise price, get more volume under contract and, where possible, also get more favorable terms with our customers.

I had a second question. It's a bit nitpicky. But in your prior presentation you talked about 2025 lithium demand being about greater than 800,000 tons and now you're saying 800,000 tons. Again, this is nitpicky. This is many years from now. It's a big number. But any reason why you changed that wording, that estimate?

Yeah. It's around 800,000 metric tons, I mean, I can't – within the range of what it is, don't read anything into that at all, okay? Our range is around 800,000 metric tons. And all I can tell you is, if we do it in another year when we come out with these numbers, it'll be different because then what we're so early in the S-curve and it's so early in the adoption that we're giving the information that we have on page 7 of our presentation, so that every shareholder and every analyst understands what's in our numbers, so that you can make your own judgment as to where we are. We believe we're taking the best approach we can, but don't split words or add or over or about or any of that. It's just that's the range that we think it's going to be and there's nothing to be read into that.

Thanks.

And our next question comes from the line of Chris Kapsch with Loop Capital Markets. Please proceed.

Yeah. Good morning. I had a follow-up on the hydroxide versus carbonate discussion, and really in the context of your CapEx plans as you build out your conversion capacity. So, when your customers contract with you in these longer-term agreements, I assume they specify what grades they think they're going to want. And I'm just wondering how much wiggle room do they have to shift? For example, if their demand for the batteries or their models shift more towards those designs that take hydroxide, do they have wiggle room to shift that? And then, how much latitude do you have to adjust your conversion capacity build-out plans?

Well, if you look out to 2021, we've said, and you look at the presentation on page 6 of our earnings deck, you'll see we're at about 85,000 met tons of carbonate and about 80,000 met tons of hydroxide by 2021. So, that gives us – we're very well balanced on hydroxide and carbonate. The contracts specify how much carbonate they want and how much hydroxide they want. So, once they do that, you have to able to do that for planning purposes, because if you're going to build a carbonate plant versus build a hydroxide plant, you need to know in advance. So we're trying to build in some flexibility there. But the customers, they're planning for models that are going to be three and five years out. So they have a good visibility for that period of time, whether they're going to use carbonate or hydroxide. And they don't have a problem in telling us for that amount of time what they expect their demand is going to be for the specific product.

Okay. And then just to follow-up. The notion that some of these agreements are shifting from, call it, 3 to 5 years to as long as 10 years, are those additional battery customers that are coming in and saying, hey, we want a 10-year, or is it the same ones that contracted for 5 years are saying, hey, we have a better understanding of how this market's developing and we'd like to change the terms and extend it to 10 years?

As I said, it's generally the same customers that are extending their contracts. There may be one or two new ones around the edge. But, as a general rule, it's the same customers.

Okay. And then one last one. Any update on the efficacy of your new brine extraction technology?

Yeah. We're meeting the metrics that we anticipated meeting. It's going well. And we still believe that that's a viable project and we'll continue pursuing it.

Thank you.

And our final question comes from the line of Jim Sheehan with SunTrust. Please proceed.

Good morning. This is Pete Osterland on for Jim. What is the raw material involved in the shortage for curatives? And, broadly speaking, who are the main buyers of the impacted products?

Good morning. This is Silvio. If you see that our curatives are all based on toluene diamine, so it's pretty easy to figure out what the shortage is. It has to do – there are a handful of major producers of this material over the world and the shortage is caused by the major turnaround and changes in the upstream manufacturing facilities. So it's something that is temporary. And like we have in our earnings call, we are expecting that it will have an effect of $10 million-ish on yearly basis.

Thank you.

Jasmine, is that all we have in the queue?

Yes, sir. There are no further questions at this time.

Okay. Thank you, everyone. We appreciate the questions and look forward to visiting with many of you over the coming quarter. Jasmine, we can end the call now.

Thank you. Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect. You all have a great day.