Ladies and gentlemen, thank you for standing by. And welcome to the Q3 2020 Albemarle Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. [Operator Instructions] I would now like to hand the conference to your presenter today, Ms. Meredith Bandy, Vice President of Investor Relations. Thank you. Please go ahead, ma'am.

All right. Thanks, Mark and welcome to Albemarle’s third quarter 2020 earnings conference call. Our earnings were released after the close yesterday and you will find our press release, presentation and non-GAAP reconciliations posted to our website in the Investor Relations section at albemarle.com. Joining me on the call today are Kent Masters, Chief Executive Officer; and Scott Tozier, Chief Financial Officer. Raphael Crawford, President, Catalysts; Netha Johnson, President, Bromine Specialties; and Eric Norris, President, Lithium, are also available for Q&A. As a reminder, some of the statements made during this conference call including our outlooks, expected company performance, expected impacted impacts of the COVID-19 pandemic and proposed expansion projects may constitute forward-looking statements within the meaning of federal securities laws. Please note the cautionary language about forward-looking statements in our press release and that same language applies to this call. Please also note that some of our comments today refer to financial measures that are not prepared in accordance with U.S. GAAP. A reconciliation of these measures to GAAP financial measures can be found in our earnings release and the appendix of our presentation, both of which are on our website. Now, I will turn the call over to Kent.

Thank you, Meredith, and good morning, everybody. On the call today, I will cover a high level overview of results and strategy and highlight additional actions we are taking to improve the sustainability of and to grow our business. Scott will then review third quarter financials, provide updates on our balance sheet and cost saving initiatives, and review our outlook. At Albemarle, our first priority is the safety and wellbeing of our employees, customers, and communities. Thanks to the courage and dedication of our employees, we've been able to safely operate our facilities throughout the pandemic to meet customer needs. Our cross-functional global response team continues to meet regularly to address -- to assess pandemic related risk and adapt protocols as necessary. Protocols, including restricted travel, shift adjustments, increased hygiene and social distancing remain in place at all locations. Our recent focus has shifted from managing the immediate crisis to building and flexibility to adjust for regional differences and changing conditions. Today, looking at our non-essential workers around the globe, most of North America remains on work-from-home status. Asia and Australia have returned to worksites. Most of Europe returned to worksites over the summer, but have now gone back to work-from-home, given rising COVID-19 cases and rates. And finally, in Chile, improving COVID-19 rates and falling cases have allowed us to trial a soft reopening approach at a worksite at reduced capacity. As we all know, the situation is challenging and continues to evolve. I'm grateful to our team for their continued vigilance and commitment to the working -- to working safely and productively. Turning to recent results. Yesterday, we released third quarter financials, including net income of $98 million or $0.92 per share and adjusted EBITDA of $216 million, down 15% from prior year. Our adjusted EBITDA results are…

Thank you, Kent. Good morning, everyone. Albemarle generated third quarter net sales of $747 million, a decrease of about 15% compared to the prior year and in line with our previous outlook. This reduction was driven primarily by reduced prices in Lithium as expected coming into the year and reduced volumes in Catalysts and Bromine related to pandemic related economic weakness. GAAP net income was $98 million or $0.92 per diluted share. The non-GAAP adjustments this quarter were primarily related to restructuring for cost savings and discrete tax items with adjusted earnings of a $1.09 per diluted share. Lower net income was primarily driven by lower net sales, partially offset by costs and efficiency improvements. Corporate and SG&A costs were lower versus the prior year due to these cost savings initiatives. As Kent stated, adjusted EBITDA was $216 million, a decrease of 15% from the prior year. The success of our short-term and sustainable savings initiatives, as well as timing of equity income from the Callison JV helped us improve margins and beat the midpoint of our Q3 EBITDA outlook by about 20%. Turning to slide eight for look at the EBITDA bridge by business segment. Adjusted EBITDA was down $38 million over the prior year, reflecting lower net sales and lower equity income partially offset by cost savings initiatives and efficiency improvements. Lithium's adjusted EBITDA declined by $31 million versus the prior year, excluding currency. Pricing was down about 17%, partially offset by cost savings. Lower pricing reflects previously agreed battery grade contract price concessions for 2020, as well as lower market pricing in technical grade products. Lithium EBITDA margin benefited from cost savings and the timing of Callison JV shipments to our partner Tianqi. Bromine's adjusted EBITDA was down about $10 million, excluding currency. The decline was primarily…

Thanks, Scott. Economic conditions are improving, but uncertainty remains, particularly if additional COVID-19 impacts lengthened the time to a full economic recovery. We have the playbook established and know how to manage through subsequent waves of COVID-19, as necessary. At the same time, we are confident in the long-term growth prospects of our core businesses and continue to focus on controlling what we can control. That means first and foremost, focusing on the health and wellbeing of our employees, customers and communities. It also means building operational discipline and sustainability into all aspects of our business, including manufacturing, supply chain, capital project execution and the customer experience. We remain confident in our strategy and we will modify execution that strategy to further position Albemarle for success.

All right. Before we open the lines for Q&A, I'd just like to remind everyone to please limit questions to one question and one follow-up to make sure that we have enough time for as many questions as possible and feel free to get back in the queue for additional follow-ups if time allows. Thanks, Marcus. Please proceed with the Q&A.

Thank you. [Operator Instructions] Your first question comes from the line of Bob Koort with Goldman Sachs.

Good morning. This is Tom Glinski on for Bob. So, first question is, you're guiding flat volumes in 2021 for Lithium, even though the battery chemicals market should be growing nicely next year. I guess, this suggests that you're going to be losing market share first, are you okay with that? And then second, if other producers capture that incremental volume in 2021 and get through that challenging qualification process with the customers, do you expect to regain that market share in 2022 and beyond, or is there a risk -- your competitors maintain that? Thank you.

Yeah. Tom. It's a function of our projects and when they're coming on and the capacity is coming on and who has that capacity to capture growth. So, there's not a lot we can do about that at this point. We're on our plan to bring that capacity on, but likely demand will pick up before we have that capacity, so we will lose a little share, but we expect that that'll move back to us as we get that capacity on as the market continues to grow out into the future.

Great. That makes sense. And then, I guess, higher level, looking at 2021, considering the moving pieces between price down in Lithium, volume flat, but capturing some incremental cost savings. Do you think you can grow segment EBITDA next year, or is EBITDA going to be flat to down? Thank you.

Well, frankly, it's going to -- it'll depend on how the market develops over the year. Without having volume, we'll have some cost savings to offset inflation and those pieces, but we'll be close to -- we'll be around flat unless we get a material change in pricing.

Got it. That makes sense. Thank you.

Your next question comes from line of David Begleiter with Deutsche Bank.

Hi. This is David Fong here for Dave. I guess, first, just on pricing, because it's something that's pricing have bought in and even some carbonate pricing started to recover. I guess, if you can just elaborate a little bit more on your pricing weakness on carbonate in 2021, and do you expect that to broaden during the year, would that be like a 2022 story?

Yes. I'll make a comment and then let Eric give you a little bit more detail or his perspective. So, I mean, that's the magic question. It looks like when you look at the indices out there that it's at least bottomed, if not starting to pick up a little bit, but we'd probably need to see that a bit more to have more confidence. But we're anticipating that turns up during 2021. And the question is when during 2021? So, Eric, you want to add something?

Yes. I can add. Specifically relative to carbonate, this is -- when we look at where the growth is coming in, in the coming year, we look at what's happened this year. It's more of a hydroxide growth story. Carbonate is therefore not enjoying as much of that. There is some growth in China. China is where we see more of these low prices and it's a more oversupplied market. Now, so, it is the magic question, as Kent refer to, we have on some reported indices seen it picking up, others see it flat. It's -- even from the price reporting groups, that -- report price around the world and in China specifically, it's murky and well below marginal cash costs. So, the price of carbon has gone well below what we thought it would have gone six months ago. It is trending up in one report. We'll have to see. Our view would be that given the supply dynamics I talked about and the growth being more driven on the hydroxide side that a clear movement above marginal cash costs for the spot prices of carbonate is more likely at 2022 event. I mean, not to say it couldn't happen in 2021, but that looks more favorable in 2022 hydroxide, however will be different we believe.

Thanks. And then, on Catalysts, it looks like the recovery is a little bit slower than expected. So, since you're -- I mean, sales should be up slightly in 2021, I guess, what kind of improvement are we talking about? And then, just given that if we say the current pace of recovery in Catalysts, sales you expect that we can achieve the same level of EBITDA in 2022 as 2019 level?

So, I'll comment and Raphael can also comment. But I think a lot of that -- it depends on demand and the view of -- when driving comes back, when travel comes back and it's really about fuel demand and refinery utilization for us. So, our view, we don't see us getting back to 2019 levels for 2020, until into 2022, probably very late 2022 would be back to that both from a fuel demand utilization and from our perspective as well.

This is Raphael. I think, that's right, Kent. And when we look at the outlook, there's a few things that play in. One is the impact of the pandemic. And when do fuel volumes recovered to 2019 levels and that's a volume component, and the other is refining margins. So, there's a lot of pressure on refineries right now, or just total value of refined products from a margin perspective has gone down. And when that recovers, that's going to be dependent on volume, but also on utilization industry capacity. And so, we wouldn't see that returning $0.10 until sometime 2022 timeframe.

Okay. Thank you.

Your next question comes from the line of Mike Harrison with Seaport Global Securities.

Hi, good morning. Coming back to this idea of that Lithium volumes are sold out for next year, if there is some additional demand pickup or if some of this over supply or inventory gets worked down, could that put you in a position to drive higher pricing? And can you maybe also comment on whether you have any flexibility to move more volume or to maybe accelerate some of your production, if you do see a demand picking up?

Yeah. So, if the market gets tight and the supply is not there, I mean, prices should move up. When we -- we kind of expect to see that around hydroxide less about -- less with carbonate and it's difficult. I mean, we had delayed our projects a bit when the pandemic hit, because we just didn't know what things were going to look like. And as soon as we got some visibility, we kind of tried to pull those back as much as possible and we haven't lost much time on that. And we haven't really lost -- our capital estimates are still kind of in the same range as well. So -- but it's really not possible for us to pull it more forward than our current plans. We wouldn't be able to sell right now to impact when those projects are coming on stream. So, from our perspective, I don't think we're going to have extra capacity to what we are anticipating. We may be a little early with the projects are planned, but it's not going to be a dramatic.

I think everybody's kind of focused on what's happening here in the U.S. from a political standpoint, but can you maybe talk about Chile and whether some of the political news there could impact your relationship with the government or your rights in the Atacama?

Right. So, while -- you know what's happening there, so they're going to redo their constitution. That's going to -- that's a pretty long process that they have in place to do that. And so far that's all been without too much turmoil. So, we don't -- we have to wait and see what that constitution looks like. We don't really expect it to impact our rights in the Atacama, but I mean, I guess that's something we'll have to wait and see. I don't think it would be -- I mean, it's not until our interest to start changing how they work with the international community. Chili's got a great reputation following the rule of law and having a strong economy in South America. It's kind of the example. So, I don't think they want to change that, but it's something we'll have to watch very closely as that plays out.

All right. Thanks very much.

Your next question comes from line of Vincent Andrews with Morgan Stanley.

Thank you, and good morning, everyone. Just wondering, you talk about sort of 60% of your assets, you're going after what the new -- two new projects that are going to come on. What about the other 40%? Can you talk from a medium term perspective? What's it going to take for you to go after those assets, how much money it would require and CapEx spending? And at what point will you start talking about how you'll go after that and how you'll finance it?

I'm not -- Vincent, I'm not sure I'm clear on the question. So, to go after the other 40% of the asset?

Yeah. I guess, my question is, what -- when should we anticipate the other 40% coming online and how much will you have to spend to do it?

From a resource standpoint you're talking?

Correct.

Yeah. Okay. So we have access to those resources. So, it's just about building conversion capacity. So, we've kind of started that process. So, La Negra and Kemerton is part of that. So we're building that out. We'll sell those plants out and then we'll layer in additional capacity to go after. I mean, that's our strategy and our plan longer term. We haven't necessarily laid out a CapEx program publicly over time. But that's the plan as we build capacity and then we sell it out and then we reinvest.

Sorry. As a follow-up then, to the earlier question about market share, how do you think about the medium term in terms of not per se, having a suggested timeline for that other 40% of production versus how fast do you think the market's going to grow? Do you think you'll be able to bring that 40% on -- in conjunction with market growth, or is it possible that it'll lag?

Well, we'd be layering in that capacity. So, what we're trying to do is kind of get it just right. So we add capacity as the market grows and bring that on as it's required. And it's a matter of -- how well we execute and how well we forecast the market, but we think we can. That's what we're trying to do.

All right. Thank you very much. I appreciate it.

Your next question comes from line of John Roberts with UBS.

Thank you. Nice progress on the cost savings efforts. The -- that backstop indicates some uncertainty here in the divestment process for fine chemicals and catalyst additives. Are we expecting one buyer for both or two? And do you think both will be announced before year-end?

Hey, John. This is Scott. So, we're expecting that we'd have two different buyers for those two different businesses. Discussions continue favorably on both of those. A little bit too early to call exactly when would build to announce -- announced a deal on either one of them, but obviously we're pushing hard to do that. The backstop is also related to economic uncertainty. And so, we just got to -- I think we've just got to get through the winter period and the increasing COVID cases and whatever the government reactions to this are to fully understand kind of where we end up in 2021. And that's -- it's really just a safety valve for us, in case things go the wrong direction. And the banks have been very supportive of us in our story. So, really appreciate their contributions.

And then you mentioned in the third quarter, the benefit of a timing, Callison and shipments to Tianqi, was that a catch-up from 2Q? It doesn't sound like it's a pull forward from the fourth quarter, given the strong fourth quarter guidance.

Yeah. You've got it right, John. It was really a catch-up from the Q2 shutdown that they had. And just from an accounting perspective, when Tianqi takes more product, we ended up getting that equity income immediately. So, it helps our bottom line.

Great. Thank you.

Your next question comes from Arun with RBC Capital.

Great. Thanks for taking my question. Good morning. Yeah. Congrats on the results. Definitely nice to see the cost reductions playing out. I just wanted to ask about the contracting side on Lithium. You -- I think you had offered concessions to some of your customers this year in 2020, did you find the need to extend those concessions in the 2021? Could you just maybe comment on the contracting environment out there? Thanks.

So we -- well, we're in the process of having those discussions with our customers. So I mean, you're right. We've made concessions late 2019 for the 2020 period. They were one year concessions. Market price is lower than it was at the time we made those concessions today. And so, we're having discussions about what -- those contracts will look like for 2021. At the moment it is too early to kind of give any -- too much guidance on exactly what that looks like, because we're having those discussions today.

Okay. I appreciate that. And then I guess on that note, I imagine that you maybe extending or rolling over maybe three-year contracts that you signed up in 2016 or 2017. Is that going on? When do you expect to do that? And I guess, would you expect to revert to the prior price umbrella on those contracts, or is there potential for those negotiations to result in pricing closer to market levels at this point?

Eric, do you want to talk a little bit about the contracting strategy?

Sure. So, to answer that first part of that question, Arun, we don't have any contracts -- any major better grade contracts with turnover next year. It's not to the following year in 2022 that we have one that does turnover. That being said, it might be worthwhile to discuss what we're trying to do, right? And with our contracts that just as a recollection of what we shared in the past, we're moving from what previously was a singular fixed price contract for all customers to a more segmented approach. And really putting that into -- I would put it simply into three buckets. One is, there'll be a group of customers that as we talk in the future with them, and we've actually had some new customers come in. So, we have some brand new LTS, one we've signed during the quarter, that is prospectively for the Kemerton volumes when they come online. So that first category our people that really want very little volatility in their price and our will -- and as a result, we are looking at or negotiating a fixed price with them. That's well above current prices and favorable investment economics for us. There's a second category that may want to have a little bit more volatility, but not quite so much. They don't want to have a nosebleed price when the market recovers. And we're insisting on a floor that we have -- we can earn a favorable reinvestment economics over that pricing cycle. That's that second category. And then there's a third, it'll be priced buyers. Now, our aim and the way this is shaping up is that we expect about once we have moved from this old contract structure to the new, and this price concession we gave this year…

Very helpful. Thanks a lot, Eric.

Your next question comes from Laurence Alexander with Jefferies.

Hi. Could you give a sense for your current thinking around inventory management? How much of an inventory build you need to do next year to prepare for the growth curve you expect in 2022 to 2023?

Okay. So, I'm assuming you're talking about Lithium, that’s where we -- all the inventory questions come from -- one to qualify that. So, next year, I mean, we -- the inventory is probably in the channel. We don't think it really changed much from what we said in the last quarter. And we're saying demand has picked up and it feels better, but we don't have data to say that inventory is any less than it was last quarter. So that still has to be worked off. But given the demand profile we see in 2021, and our limited capacity, we got up -- we don't expect to build inventories there. We would expect actually to meet. We'll work those down. And then we're working off of what we would consider kind of standard inventory in the channel. So, we don't see it building at least from our perspective through 2021. We see us working inventories off.

And then can you -- instead for Bromine, given the trends in the end markets, what negative factors do you see keeping the Bromine improvement next year at fairly modest?

Netha, you want to make a few comments on that?

Sure. I think that the biggest impact for us is the overall macro economy. We tend to be driven by global GDP. So that's really the limiting factor for us is how fast this thing's going to come back. And this is going to come back in a stable, consistent way or is it going to be lumpy. And right now it's just a little bit unclear how that recovery is going to take place across the globe in 2021.

Thank you.

Your next question comes the line of Joel Jackson with BMO Capital.

Hi. This is Robin on for Joel. Can you provide some more order of magnitude around the guidance of the Catalysts EBITDA you expect next year? Is it reasonable to be about halfway between 2020 and 2022? Was it more likely to be above or below that level? If you can just kind of walk through some of the key building blocks to get there.

Hey, Robin. This is Scott. Let me make a quick comment and maybe Raphael can give some additional color. It's really going to depend on refinery utilization rates as well as transportation fuel demand. And given what we're seeing in projections right now, it's likely in the bottom half of that range that you just gave versus the top half. But maybe Raphael, you can add some more color as to what you're seeing.

Hi, Robin. I think that Scott characterize it correctly. But over the next six months, I think we'll have a much clearer picture as to what that recovery will look like. As we see demand recovery, we see margin progress as refineries, we will have a better sense of that. But I wanted to at least give you a sense rather than -- while, it's going to be a challenging 2021, better than 2020. The business is still very focused on the right steps to return to growth in the future with a focus on chemicals, with a focus on refineries East of Suez, where demand continues to grow. So, while we have a challenge, we also have good strategies to establish us for long-term recovery and growth.

That's helpful. Thank you. And just as a follow-up. I apologize, did I hear correctly early in the call that it was mentioned that Lithium EBITDA will be closer to flat for next year? I assume the cost savings or Lithium's portion of the cost savings is offsetting that -- slightly little pricing, is that right?

Yeah. Robin, this is Scott. I think, you had about right. It's really a little bit early to call exactly what the number is going to be. But Lithium EBITDA should be flat to maybe down a bit, just given the dynamics that we're seeing.

Okay. Thank you.

Your next question comes from the line of P.J. Juvekar with Citigroup.

Yes. Hi. Good morning. So, it looks like you have some limited capacity growth and you might lose some share next year. Why couldn't you build inventories in 4Q here to sell -- so as to not to lose share? And then secondly, some of your capacity is still idle, like the Wodgina mine and what does it take for you to start that back up?

Kent, would you like to take?

Yeah. I'll start. So, first question about inventory. So, I mean, there's a limit on inventories on hydroxide, and we -- and they're a little more than normal in the channel and we've actually shutdown some facilities to manage that a little bit, because there's a life on hydroxide. So, you want to be careful about how you manage those inventories. So it -- and we'll work through those inventories the next year. So, we'll be able to probably -- we'll sell more than we'll be able to make. So, we are doing that to some degree, but we're limited by kind of the life of hydroxide. And that's where the extra demand comes from. The other question on Wodgina, so our limitation is on conversion capacity, right? So, Wodgina does not producing, but that's because we can't -- we don't have capacity to convert that. So, Kemerton brings us -- gets us going in that direction. And then we would just -- we have to manage between Wodgina and Callison about how that -- what resource we use there. So -- but we're limited more on conversion capacity. So we'd be needing to add additional conversion capacity to take full advantage of our resources.

Yeah. Just to add Kent on -- this year – P.J., we are selling all the hydroxide that we can make. So, we're sold out this year. In fact -- and that's where -- we've made the concessions, we talked about on price and the leverage for that as we're getting the volumes this year that we planned the reason for the upward guidance for the fourth quarter. So, we're getting what we intended. And in fact, we'll be up year-over-year on volumes overall. I mean, we expect industry to be down. So, this will be in that regard, a solid year for Lithium. As you go into next year, Kent hit it, conversion capacity. In fact, our ratio of mining capacity to conversion capacity, mining potential to actual conversion backs is about quarter one. So, it's about more conversion assets. And we're being -- as we talked about in terms of managing our cash flow and managing our profitability, very disciplined about how we bring that conversion capacity to market. Next year will be a flat year, but we'll have significant capacity we bring on in 2022 and be in a position as we ramp those plants to recover any lost ground we have with our customers. And as I earlier said, we've also started to draw up new contracts with customers before that volume in that year.

Thank you for that color. It's interesting you're saying conversion capacity is the bottleneck, Kent, maybe related to that, can you talk about what's happening to conversion capacity in China? I know they -- at some point back in 2015, 2016, they were constrained that they overbuilt. Where do we stand on convergent capacity utilization in China? Can you just give us some update there? And could you -- and also, could you take some of your volumes into the Chinese third party conversion? Thanks.

So, Eric, you want to …

Yeah. Sure. So, in China, as you know these Chinese converters -- now, I assume you're talking not about our integrated competitors, such as [indiscernible] and kind of you're talking about other non-integrated producers, those do not own a resource. They're dependent upon economics, right? And they're net buyer of -- they have to buy their rock. Many of those minds have been curtailed. Alterra being the latest victim of low market prices and been able to operate. So, supply for rock has dried up and they'd been sustaining themselves to available inventory. That's one factor. Another factor is they themselves -- their current carbonate prices are breakeven at desk, and most are operating at a loss as we see the price in China -- spot prices in China below marginal cash costs. So, it's a pretty challenging economic picture for those producers. Market recovery, we expect that capacity to come back. And China's going to remain a very healthy market for Lithium into the future. So, I think there's going to be a place for those producers. In terms of our going in, as you know, we're looking in terms of growing our capacity. We've talked about buying versus building capacity. We still are evaluating that approach. And that means a viable expansion route for us. It's the way we got the capacity we have today, the basis for how we got our current Chinese conversion capacity. We are less inclined particularly for hydroxide, which is the growth part of the market, where there's a lot of process, know-how quality differentiators to teach at a toll producer, how to do that. And that's proprietary know-how that we would be concerned we'd lose, if we were to toll. So, our bias would be to acquire.

Great. Thank you, Your next question comes from the line of Mike Sison with Wells Fargo.

Hey, good morning. Nice quarter. As I recall, you've got $40 million in carbonate coming on and -- I guess in 2022 and $50 million in hydroxide in 2022. How much of that is already sort of contracted out and how long do you think -- how long would you think you'll take to sell those out?

So, your numbers are right. Although, they're not going to -- it's not going to turn on day one at those capacities, right? So, there's a ramp in our manufacturing processes to get us up to those full capacity. So, they won't come on all it, when you just turn a switch. Unfortunately, it doesn't work like that. And Eric, you want to talk about kind of the ramp of sales versus production.

Yeah. So, we're -- I mentioned earlier, Mike, that we are on the -- particularly on the hydroxide side, which the tighter market, we are entertaining. Well, first of all, we already had long-term contracts, actually long-term contracts that had earmarks, if you will, against that capacity when it came on. And now we are having additional -- we signed one recently, as I said, during the quarter to increase that utilization of that plant. And we're in negotiation with still others. So, I don't think -- we're at liberty yet to share the details of exactly how much, but I would say significant portion of the Kemerton capacity is well shared from a sales standpoint. On the carbonate side, a little different. Most of the carbonate market is in -- is increasingly in China. As you know, the China market is a much shorter term contracting market. We have been very diligent to maintain relationships with our existing capacity out of a mega one and two, relationships and ongoing buying relationships, or sales to a number of leading Chinese producers with whom we are talking about growing our business. We are talking with him about committed volumes -- the nature of contracting that was different with those. So, it's going to be a little different with carbonate in terms of -- we'll be closer to bringing that to market before we have firm prices with -- for that volume. Though, remember that we're at the low in the cost curve. So, still very attractive business. Not withstanding the fact that it won't have some of the same long duration contracts that we see on the Kemerton inside.

Right. Great. Thanks. And then a quick one on Catalysts, any thoughts on pricing for FCC heading into 2021?

Raphael, you want to comment?

Sure. Mike, this is Raphael. I think pricing in FCC has been challenged in 2020 for non-contract volumes. Non-specialty non-contract volumes have been under the most pressure in response to -- in decisions by refineries to look for perhaps less special -- less specialty catalysts in order to help their near term economic pain. Going into 2021, I think the trend would continue. I mean, I think, we'll continue to see pressure on non-contracted volumes, but where we create a differential value, namely in areas like high propylene yields, I think we'll continue to hold onto price and remain strong in that area.

Great. Thank you.

Your next question comes from the line of Chris Kapsch with Loop Capital Markets.

Yeah. Good morning. Thanks for taking my question. So sort of a follow-up on Eric's comprehensive comments about the shifting approach to the contracts and really, I guess, against the context of some of the anecdotal commentary about hydroxide versus carbonate. It seems like the oversupply is still a little more acute in carbonate versus hydroxide. So -- and then you obviously have this tension about some customers wanting near term pricing release and others maybe more focused on concerns about longer term supply. I'm wondering if those conversations reflect this bifurcation hydroxide versus carbonate. And if you could take another -- a little bit further, is it -- as this plays out, is it more likely in the context of those buckets that you described, Eric? More likely that the hydroxide guys are going to fall in this bucket where they want fixed prices, security of supply, and the carbonate customers are more likely to be willing to play some of the volatility.

Sure. Any advanced comments Kent, before I dive in?

No. Go ahead.

Okay. So, I think the reflection about -- everything I've described and you asked Chris, is both -- there is a difference between carbonate and hydroxide. More of the carbonate market going forward will be in China. And to date, I don't see that same approach to security of supply in terms of contracting with us or with anybody for that volume. Rather I see that they -- that the market tends to be content to go for short duration on the bet that resources will continue to come online, converse best -- continue to come online and there'll be sufficient capacity. And there's also a bifurcation that based on who's buying, right? More of the purchasing decision is moving closer to the point of views. So it's moving to the battery producers and the automotive producers. And they given the investments they are making in the length of supply chain, whether it be carbonate or hydroxide tend to want longer the surety that they're going to have it, because of the size of investments they're making. Not everybody's doing that, but increasingly more are, and more becoming, I think, appropriately aware of the need to do that. So, it's also who we're contracting with and in these long-term contracts that plays a factor in that.

Okay. Thanks for that. And then just as a follow-up. Could you -- I think the last quarter you characterize the inventories that you saw in the supply chain. Any update on that? And also just any changes to the timeline on the idling of your convert -- your hydroxide conversion facility in North America. Thanks.

Yeah. So we have -- so first of all, I'll just reiterate what Kent said. Look, it is imperfect. The science of assessing how much inventory is in the channel. We can survey our customers and we do, and that gives us a basis for understanding that. We obviously don't know what our competition holds and they -- and some of held quite a bit. If we look at it things net-net, the overall months of inventory in the channel still about the same as it was three months ago, five months of execs, roughly speaking. Though, I think that shifted. There's probably more carbonate than hydroxide now. So, carbonate has built up a bit and hydroxide drawn down a bit. Again, we are probably wrong about that, but directionally correct. It doesn't feel that different. It feels a little bit better because I think that the pull-on hydroxide, but not too different. I'm sorry. Then you had a second part of your question, Chris?

The timeline of your idling of your hydroxide conversion facility?

Yeah. We have -- we are in the process of restarting the Kings Mountain hydroxide facility. Now, employees are returning that's sooner than we thought. And that's based upon the improvement we're seeing for demand next year and some of the earlier questions around, can you please try to get more volume next year. So, we're ramping that plant up. It's a small plant, so it has a very small impact to the overall volume growth, but we're starting that up. And Silver Peak, which is the feedstock plant that feeds that hydroxide plant with carbonate feedstock will restart on schedule beginning of the year 2021.

Your next question comes from the line of Colin Rusch with Oppenheimer.

Thanks so much, guys. Can you give us a sense of how mature the conversations are on the financing side? It sounds like things are going pretty well and there's some pretty meaningful opportunities to reduce your cost of capital going forward. But just curious how far down the road you are on then?

Yeah. No, we're well advanced in those discussions. So, feel comfortable about where we're heading.

Excellent. And then the Lithium mark has been pretty well belabored [ph]. But I'm just curious if you're seeing any consolidation in terms of battery OEMs, given where we're seeing capacity efficient. It looks like there's going to be a handful of folks that really stride out here. And if there's any consolidation kind of below that with some of the cathode producers, as you look out over the next three to five years?

Eric?

Yeah. Sure. Thanks, Kent. So, on the battery OEMs, I don't be interested to see what you see, Colin, because we don't see that. In fact, I've seen the opposite. You've seen new players come into the market not very recently, but companies like [indiscernible] come into the market for Europe, and many other multi-nationals who have played around this space in the past, I think looking to come in to support the growth of the European market. So, I see more players coming into the market on the battery side, not less, and some of that's being supported and driven by the automotive OEMs. So, I think, want more op -- they want some negotiating leverage, right? They want more options, or they want more localized options for in the case of Europe. On the cathode side, it is constantly changing, right? This is the part of the market that has, as I said, is not necessarily directly involved in the person decision as much anymore, is being told what to make either by the automotive OEM or the battery makers. So, they're losing some of their power in the decision channel. And so I do expect some change consolidation. I can't point to any obvious ones now, but there's disruption. There's people gaining share and losing share. And so, I think, we'll continue to see evolution in that part of the channel. And also some backward integration, right? You have some battery makers now are building their own in-house cathode capabilities.

That's super helpful. I'd love to have that conversation offline. Thanks, guys.

At this time, we have no further questions. I will now turn the conference back over to Ms. Bandy.

All right. Thank you all for your questions and your participation in today's conference call. As always, we appreciate your interest in Albemarle, and this concludes our earnings conference call.

This does conclude today's conference. You may now disconnect.