Good morning, and welcome to the Q2 2021 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 and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I will now like to turn the conference over to your host, Meredith Bandy, Vice President of Sustainability and Investor Relations. Please go ahead.

Thanks, operator, and welcome everyone to Albemarle's second quarter 2021 earnings conference call. Our earnings were released after the close of market yesterday, and you will find the press release, earnings presentation and non-GAAP reconciliations on our website under 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 call including outlook guidance expected company performance and timing of expansion projects may constitute forward-looking statements within the meaning of Federal Securities laws. Please note the cautionary language about forward-looking statements contained in our press release and earnings presentation, that same language applies to this call. Also note that some of our comments today refer to non-GAAP financial measures. Reconciliation to GAAP financial measures can be found in our earnings release and the appendix of the presentation, both of which are posted on the website. And finally, as a reminder, Albemarle will be hosting our 2021 Investor Day, the morning of Friday, September 10th webcast live from our Charlotte offices. Registration for webcast is also available on the Investor Relations section of our website. And now I'll turn the call over to Kent.

Good morning, and thank you all for joining us today. On today's call, I'll highlight quarterly results and our recent strategic achievements. I'll also introduce the new operating model we are implementing to support Albemarle's growth strategy. Scott will give you more detail on our results, outlook, and guidance. Our businesses continued to execute well, as global markets improved. Second quarter net sales were $774 million and adjusted EBITDA was $195 million, both of which marked a slight improvement compared to the second quarter of last year. Note that we closed the divestiture of FCS on June 1, so second quarter 2021 included only two months of FCS results. Excluding FCS, net sales increased 5% and adjusted EBITDA was up 13% compared to last year. In our financial release issued yesterday after the close, we revised our guidance for the year, in part to reflect higher lithium performance, but also supply chain disruptions for our Bromine business. We've also updated full year guidance to reflect the sale of FCS. Scott will walk you through those changes in more detail in just a few minutes. We continue to execute on our next wave of growth projects to capitalize on attractive long-term fundamentals in the markets we serve. We recently completed construction of La Negra III and IV, as planned and we are progressing through the commissioning stage. Finally, I want to briefly describe the operating model we are launching to drive greater value, improve performance, and deliver exceptional customer service and you see that on Slide 5. Our operating model, which we call the Albemarle Way of Excellence, or AWE, serves as a framework for how we execute, deliver, and ultimately accelerate our strategy. AWE is based on four pillars: sustainable approach, includes responsibly managing our natural resources and engaging with…

Thanks, Kent, and good morning, everyone. I'll begin on Slide 7. We generated net sales of $774 million during the second quarter, which is a slight increase from the same period last year, driven by stronger sales from our Lithium and Bromine segment. Higher sales, as well as strong operating margins resulted in an adjusted EBITDA of $195 million, which was 5% higher year-over-year. GAAP net income of $425 million, includes an after-tax gain of $332 million related to the divestiture of our FCS business to W.R. Grace. Adjusted EPS, which excludes the gain on FCS was $0.89 for the quarter, up 4% from the prior year. Let's turn to Slide 8 for a look at adjusted EBITDA by business. Excluding FCS, second quarter adjusted EBITDA increased by 13% or $22 million compared to the prior year. Higher adjusted EBITDA for lithium and bromine was partially offset by higher corporate costs related to incentive compensation and foreign exchange movements. Lithium's adjusted EBITDA increased by $19 million excluding FX compared to last year, primarily driven by higher volumes as customers under long-term agreements continued to pull orders forward, and we shipped higher spodumene volumes from our Talison joint venture. Adjusted EBITDA for bromine increased by $16 million due to higher volumes and pricing. End market demand continues to be very strong. Following the winter storms experienced in Q1, we have very limited excess capacity or inventory to meet that additional demand. Catalysts' adjusted EBITDA declined just $1 million from the previous year. CFT volumes were down due to shipment timing. FCC continued to be impacted by a change in the order patterns from a large North American customer, although the FCC demand trend was generally higher. This was partially offset by excellent PCS results, which benefited from a favorable customer mix.…

Okay. Thanks, Scott. On Slide 12, we continue to execute on our strategic objectives for 2021. First, we are growing profitably. Construction is complete at La Negra, and we are commissioning this project with commercial volumes expected in the first half of next year. Both Kemerton trains are expected to contribute volumes in 2022 as well despite the restructuring of our execution plan at Kemerton. As previously discussed, we are making progress on our Wave 3 lithium projects and expediting investments in bromine to meet increasing demand. Second, we are increasing productivity. We are on track to achieve at least our targeted $75 million in productivity improvement this year. We expect to continue to build on these improvement, as we implement our operating model and build a culture of continuous improvement. Third, we are maintaining our disciplined approach to investments and continue to optimize shareholder value by actively managing our portfolio of assets, including the recently completed FCS divestiture. Finally, all of our efforts are being driven with sustainability in mind. In our annual sustainability report, published at the beginning of June, we disclosed initial sustainability targets, including plans to reduce greenhouse gas emissions and fresh water use. We are also working closely with customers, investors and ESG rating companies to make sure, they are up to speed in all of these developments, and have a full appreciation for our efforts. So with that, I'd like to open the call for questions.

Operator, we're ready for questions now.

[Operator Instructions] First question comes from the line of P.J. Juvekar with Citi.

Good morning, Kent and Scott. Congrats on finishing La Negra III and IV. Now that's done, are you looking for new hydroxide conversion capacity either in China or elsewhere, and would you consider building a convergent plant in the U.S.?

So good morning, PJ, and thanks for that. We are - so - we've completed construction, we're still commissioning, so still a little bit to go at La Negra. And then, as you see in the plans that we have, the Phase III is mostly about hydroxide capacity in the near term. So, Kemerton will be coming on in the next year. And then the next wave of investments at the moment are focused on China. And we are - we do look for acquisition of conversion capacity, but it's a bit of a challenge just to find the assets that we want and that are for sale. So, we kind of have a meeting of the mines there, but we're also in parallel are progressing our plans to do greenfield projects as well. And if we were able to find an acquisition, we continue to progress the greenfield plans that we have. So they would - they are not - if we did an acquisition, that doesn't mean we stop our greenfield plans and projects, but we would just do them in parallel.

Okay.

And then the last part, and sorry last part about the U.S. So, I mean, we will look at the U.S., but it's not in the next year or so, right. So it's - there is time. I mean, our view is most of the cathode capacity that's being built and we will be producing for the next several years is going to be in China or at least Asia. And so, we have time before we have to see if we need capacity in North America or Europe.

Okay. And then, next question is, I want to go back to comments that you had made, Kent, I think on the last call about sort of market segmentation of customers that some customers will have a long-term contracts, some will have more market-related contract, especially customers like those who negotiated prices down in 2019. I was just wondering if either you or Eric could add some color on this sort of market segmentation of customers? Thank you.

Sure. So yes, I don't know if we can add much more than we talked about previously, but we are - in the past we had kind of a long-term contract formula and it was - we were trying to use that strategy for all of our customers, and what we've learned is that not all customers want to buy that way. So we're trying to segment on how they want to buy, and actually we think it's good for us as well. So we are - we have longer-term contracts that look more like a fixed price. And ideally, we want those contracts to move with the market that just - slightly with the market, but it looks more like a long-term contract. And on the other extreme, we will have contracts that look more like spot. They are probably, it's not - probably not a one-year contract, but it’s probably more than that, but the - but it moves with the market or closely with the market, still may be dampened a bit, and then you'll have some in the middle where that shakes out from a portfolio standpoint until we settle all that with our customers. I can't tell you, but for lack of anything else, it's probably a third, a third, a third, it's kind of how we see it now.

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

On the delay at Kemerton II, if you're having delays, is the entire industry having significant delays here? I mean, we've got the car companies accelerating their demand plans here, as the supply actually going to undershoot what the industry needs.

Well, I can't speak to other projects, but I mean, if you're building in Western Australia, the availability of labor, the tightness is extreme. And Western Australia is kind of famous for labor market that gets difficult if you're doing large projects just because of the resource industry draws all of the resources. If their prices go up and their prices have gone up significantly for let's say iron ore, as an - is probably the biggest example, and they are drawing all the resources away, that’s always been an issue in Western Australia. But today we have COVID, so they locked down not only Australia, but state by state. So we can't move - not only can we not get resources from China or Thailand or even the U.K., we can't get resources from the east part of Australia. So, we're kind of stuck with what is in Western Australia. So - and I think that will affect anyone doing a big capital project in Western Australia or Australia. I'm not sure that it applies say in China, for example.

And then, when CATL announced its sodium ion battery, all the lithium stocks popped including Albemarle. Is sodium ion something that we need to pay more attention to?

John, good morning. It's Eric. Sodium ion, as you may know isn't a new chemistry. The CATL's innovation is a matrix that may make it more, more effective. It is a chemistry that is lower energy density, heavier material. So it's an applicable product for the low, very low-end of EV ranges and maybe grid storage. I think one of the attractiveness components of it is that - it's - sodium is abundant, right. So it's - so it may alleviate, and – at that low end of the market of - given alternative, if lithium supplies become tight as they have been in the past year or so.

Your next question comes from the line of Bob Koort with Goldman Sachs.

Good morning. Kent, I was wondering, you mentioned that La Negra is completed. It takes six months to commission. Is that a function of just the qualifying process, and can you inventory production while you're doing that, and then have a nice buffer of inventory to start selling from as soon as the qualification is complete or is it a function of making sure the process works properly?

It's both. So, we are commissioning and qualifying in parallel. So we can kind of - we do early commissioning to get qualification samples, but the plant has not been operating at rate, so that it takes us time to get it operating at rate. So we - we're kind of at a long pole in the tent, so to speak, is the qualification process, but we're commissioning during that same time and we run them in parallel, so that we - to save time. So it's - I think the answer is both.

And then - and on Wodgina, we've seen some pretty spectacular spot prices out there some north of $1,000. When do you turn that on and you imagine that would ever feed the Kemerton plants or will you feed Kemerton through Talison for the foreseeable future? Thank you.

Yes. So yes, we'll see how that goes. I mean, our plans are to feed Kemerton from Talison. And then, as we either bring on other capacity or do an acquisition, we would use Wodgina for that. And our strategy about selling spodumene hasn't changed.

Your next question comes from the line of Edlain Rodriguez with Jefferies.

Quick one on bromine. So you've talked about the chlorine issue you have in there, but when do you expect that to correct itself?

So I'll start, Netha can add a little bit. So - and I think there is a broader issue in the chlorine space. But I mean, our suppliers had some equipment failures and we expect that to last, I mean, they're telling us a couple of months, right. So they've got a short-term fix. We hope, we'll get us back up to some higher rates and then the permanent fix is going to take kind of - I think - I think they told us two months to three months. Yes.

Okay.

Yes. I mean, as we look at the - as we look at the broader chlorine market, we think there will be opportunities to get it back and balanced by Q4 that we're hopeful for that.

Okay. Makes sense. Quick - another one. Like in terms of M&A, like you've done the FCS deal, so you - so you monetize that. But when you look at the rest of the portfolio like, is there anything else in there that you think might below - might be below somebody else. Can you talk about the rest of the portfolio, what you're seeing in there?

Yes. So we - I mean we were looking at our PCS business, and we ran a process and we didn't get the pricing we wanted for. So it's performing well. And we pulled that, that is no longer for sale, and we're running as part of the portfolio, we're running as part of our catalysts business. So we've hold on to that. And then for the broader part of the portfolio, the three primary businesses bromine, lithium and catalysts, we see those as core businesses and that's kind of our fundamental portfolio. And now PCS is part of catalysts.

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

Good morning, everyone. My first question, I follow-up on spodumene. Yes, we've seen pretty interesting surges in spodumene prices in the last, why shouldn't we say there is lag, contracts and stuff. But I think what - if we also - it seems like conversion margin, the proxy conversion margin will be extremely strong, so are those - as carbon hydroxide prices have been really strong. So do you see the spodumene price increases more of a lagging indicator or do you think that they're setting often to be another run up in spot prices sparked up, we can deal with the prices.

Look, I'll make a broad comment, let Eric can try a little bit of a detail. It's hard for us to project, where the market is going. And we see prices about spodumene and carbonate and hydroxide prices being up. The only place you really have visibility of spot prices is in China for the carbonate and hydroxide. And so you see that, you see the same numbers that we do. Those have not fully translated into the contract prices, but we do see contract prices moving up. And spodumene, I mean, it has gone up, it come back down a little bit. I don't know that we're in, what you would call a super cycle or headed toward that. But I think - I do think prices will be higher than they have been in the last couple of years.

Hi, Joel. What I would - this is - and I think your question reflects this. This is a China market phenomenon. The China market is very dependent for its growth on imported spodumene. So - and there is a shortfall of available supply to meet demand given the rapid growth post pandemic particularly in carbonate in China. So in that regard, maybe spodumene is a bit of a lead because it's the short supply. But I think what we expect to happen is more supply to come into China from other parts of the world. We've seen prices go up and stay up with demand. It's hard to say what's going to happen with spodumene prices. From a Albemarle perspective, the way we take advantage of that is we don't sell spodumene or yes, it's right. We don't sell chemical grade spodumene, as you say. We sell especially spodumene for the glass market, but for us it's tolling. So you've heard us talk about, looking at tolling opportunities and that's part of our improved guidance. And for that we're able to participate in that spot price market, which is as I've said earlier, very favorable.

Thank you for that. So my follow up would be just looking at out to 2022 for LCE volume increases. I think you talked about maybe gaining about 30,000 tons LCE volume for next year with the different expansions ramping on, Kemerton II is delayed a few months, maybe you've been pushing out a little more tolling now this year. Is it about 30,000 ton, still the right number to think about for next year?

So Joel, I mean, I think it's, you have to break it down. First of all, I don't think we've said 30,000 tons. We've talked about ramp rates on plants. So the Kemerton plant with a start-up in the early part of next year, there was a three month delay to the second unit. We've talked about getting to full run rate capacity by the end of the second year in that facility. Similarly in carbonate, you'd see a phenomenon that is somewhat like that. I would say our run rate for carbonate by the end of '22, we will probably at the 30,000 run rate basis at the end of the year, as that ramps. It's a little bit different ramping brine versus spodumene because brine is obviously a harvested material, but - versus the fixed input, but that roughly should - between those two, we should be able to calculate sort of our guidance. The change would be a slight delay at Kemerton and in a year-on-year growth that we can achieve in tolling and that's going to be - it's harder for us to predict now because it's a function of what's available in the market for us to toll that.

Yes. It's also a function of how fast we ramp up like so how well commissioning goes and then there is we - you'll commission, you'll be able to make products but at lower rates and that will ramp up over time. And it's how well we do in that ramp curve and it's hard to speculate on that.

Your next question comes from the line of Arun Viswanathan with RBC Capital Markets.

Thanks for taking my question. I guess, I just wanted to get your thoughts. We've had some different views, I guess, maybe just provide your color on spodumene, carbonate and hydroxide. Spodumene obviously there were some oversupply in years past, but it seems like most of that is slowly working itself out. Maybe you could just characterize supply demand in each of those areas? Thanks

Okay. And again I'll start, Eric can fill in, where I miss things. But I think in the past, the industry is growing, right. So as the industry grows, you bring on capacity at a smaller percentage of the industry. So I don't think we're going to have those periods of oversupply, under supply as tight, as they were in the past with the extremes showing up in pricing. So that - I think that applies across for hard rock as well as kind of salt - conversion capacity for the salt. So I think as the industry gets bigger, each addition is a smaller percentage of the total industry and it has less of an impact. That said, where we are. I mean spodumene is pretty - spodumene is tight. And I think that the conversion capacity, as the growth rates that we see, which you've kind of seen as an indicator. In fact EV sales is forward looking growth curve for lithium, those are pretty tight. And you've got to make investments and you've got to be good at executing those projects and commissioning them and then, ramping them up to full capacity, which is we think we're good at that, but we're in the process of proving it.

And I would just add, Arun that today as we sit here today, all three are extremely tight. If we had more carbonate that we could produce and sell, we could sell it readily, same with hydroxide. We don't have the disadvantage. We have the ability. We have idle capacity on the spodumene side. So we are not feedstock limited. That's a strength we have going forward. But what we are limited on is our ability to get conversion capacity in the ground quickly. So - and that's part of our plan for next year. As to the long term, my guess would be that our view would be, I should say that hydroxide will probably see their higher rate of growth going forward off a smaller base. Carbonate has done well in the near term based upon the LFP trend for lower end vehicles, particularly in China, and we see that starting to take root in some other regions as well for the low end. But the key to high EV penetration is higher energy density and the key to that is hydroxide and ultimately potentially solid state chemistries. So that's going to require a heavier burden on hydroxide. We see that being the tighter market from a long-term basis going forward.

And just wondering if there is any concern from elevated logistics cost for the next little while. Also maybe you can just address, if there is any concerns on the container shortage issue? Thanks.

Well, I think, across all of our businesses, the supply chain is a challenge and a concern. So ocean-going freight probably the biggest, but well, chemicals supply chain in the U.S. is hitting us and particularly chlorine at the moment, but it's tight and a number of chemicals. But ocean-going freight is a big concern for us and something that we are working pretty hard to try and to manage. We spend a lot of time trying to streamline that supply chain digitizes, so we have much better visibility on it. So we're making progress on that, but it's still a concern.

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

If I just ask in bromine, it doesn't sound like either your sort of electronics sales or your auto sales that you're seeing any, any real volume issues from the shortage of microchip. So is that - that's just something that it's either being offset by other parts of the business or it's just not an issue either year-to-date or into the back half of the year?

Yes. Vincent from where we sit in the supply chain, we're not seeing that at all in - from a demand side. Our demand in those areas have been steady.

Okay. Great. And if I could just ask. You have the Analyst Day coming up, and you're also concurrently working on the Wave 3 projects and looking to move forward those. I mean should we be expecting a material update on those at the Analyst Day or are those two events unique?

So material update, I'd say it depends on the definition. So we'll give you progress on where we are. But we're not, I mean - and - but we are still in the planning phase. We're not moving dirt on any of the projects, yet.

Okay. So no FID - we shouldn't be expecting any FID decisions then?

No. I mean we're progressing as we go, and we'll tell you the plans that we have. But we're - it's not at a - we'll not have a final investment decision by in a month.

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

Eric, couple of questions for you, just on lithium pricing in Q3. Is your guidance for that pricing to be up year-over-year in Q3?

Yes. The second half - I mean, we were down 10%, so to recount a little history here to put in perspective. We're down 10% across the board in the first quarter, 4% in the second quarter, and we're staying flat for the year. So we will be up year-over-year. Another way to think about is our lowest price point over the past 24 months are including the rest of this year. So for 2020 and 2021, we expect to be the fourth quarter of last year. And ever since then, we sort of bottom there, we're seeing as spot prices move up for that small amount of our business is exposed to that such as better grade in China or tech rate. And as concessions to contracts given during the height of the pandemic roll off, we see those prices rising in the back - into the second half of this year. And given the tightness in the market, we expect into next year as well.

Very good. And also, there has been some progress like DLE project near your operations in Southern Arkansas. Can you discuss the viability of a DLE project for you guys in Southern Arkansas going forward?

Well, yes, so I'll say that for us, we continue to look at Magnolia brines, where we operate our bromine operation is being our spot, where we could process lithium and DLEs potential technology for that. DLE just - it's a bandied about term most often here in the U.S., who made the projects, what they're talking about is absorption, resins, and so it's a mechanical operation - for extracting brines, it's a mechanical operation as opposed to an evaporation effort such as we do in Chile. That you would only apply it, you have to apply, meaning you apply it to resources that are of lower quality or have higher impurities present, which is generally true with both oilfield brines, which is what we have in Magnolia or geothermal brines. So it's more capital intensive, but actually it also consumes a lot more water and energy given the price. So it has some drawbacks from it. We're studying what alternatives we could deploy to a resource like that, that could include absorption, that optimize those factors of cost and sustainability. Given where we are with our high quality resources, and then what we can do in the near term to drive our growth in next five years, we put that as a resource later in the decade that we would consider for that given its - given those technical challenge and given its cost profile.

Yes. And I would just add. So we've - we didn't - it wasn't included in our Phase 3 and but it's something that we look at. We are looking at the technology. We have access to the brines, and we have the operation. We're already kind of pumping the brines around. So we'd be in a good position to leverage it if we think that if we get the technology right, and we believe the cost position is right. But it's something that comes probably in Phase 4, if we get that technology right.

Your next question comes from the line of Jeff Zekauskas with JPMorgan.

Thanks very much. In your Talison operation and equity income in lithium, sometimes you are in the 30 million and sometimes you are in 15 million or 16 million. And what's the difference between the two, when we've had some 15s and 16s, are there any service to come?

Jeff, this is Scott. So the equity income in Talison is affected by two things, one is the volume that's being shipped both to ourselves as well as to Tianqi, our partner. And of course that has been either flat or rising over time. The bigger impact that you're seeing through the equity income is coming from the transfer price, which is affected by that - by the spodumene market price that's out there. So when that price is high, you're going to see a higher equity income, when it's lower, you will see a lower equity income. And generally that's going to track on about a six month lag to the market indicators that are out there. So as we talked about in the - some of the prior questions because the spodumene prices higher, are going higher right now, you should expect in the second half that, that equity income would also track to that.

You should just keep in mind though that it's been our input cost for conversion goes up, when that price goes up. So we don't really - it doesn't matter so much to us because it's all - it washes through. But it's the difference between equity income and what shows up in the lithium P&L.

Then for my follow up. I think over the past several years, if you had to describe the contractual terms of your long-term lithium contracts, I think, you would have said that they were above market. Given the changes in lithium market and its tightness or some toughness, is it now the case that your long-term contracts are more comparable to current prices?

It depends on what you call current.

Yes.

Yes. I think it depends on what you're calling current prices. So if you're talking about spot prices in China, which is what everyone can see that's probably correct. But I think if you were to think about contract prices over time, contract prices outside of China that different suppliers have, it's probably in line or above those. I would say probably still above those.

Your next question comes from the line of Ben Kallo with Baird.

Good morning, guys. Thanks for taking my question. Just maybe two on the lithium front and then one on bromine. On lithium, you know, you get this question a lot, but just on recycling we saw redwood materials raise a large sum of money. I want to understand, how you see the players in the recycling as they work with your competitors - you - is number one. Number two, you know on the Tesla call, and then - and I think before that Mark was talking about the LFP and the increase there. Just want to understand and I think you talked a little bit about this, but how you make investments into carbonate versus hydroxide with that background looking like there is a large increase in demand for LFP. And then on bromine, just comfortable - how comfortable you are around the timing of the expansion. I think it's really chemical expanded already earlier. So just want to see how strong you think that market you know, for bringing on new capacity? Thank you very much, guys.

Ben, this is Eric. On recycling, recycling is happening around the world and so the companies you're referring to are largely here in the U.S. There is a set of companies similarly in Europe. It's a regional business model because of the collection and nature of different regulations around the world. As a global player, we're engaged with all of these companies. We view them in almost every case as a partner, not a competitor and we bring process, not the technology and knowhow that's what we deploy in some of our existing virgin brine operations, it could be a partnership approach to helping to remove the lithium and/or take a byproduct that comes out of their operations, which is lithium rich. And so that's the way we work with them. You have to remember a lot of these companies got set up and this is - and then, Europe is a bit - is ahead on this largely go after the nickel and the cobalt, not lithium. Lithium is usually the byproduct of the recycling operation. That's where we fit in. And so as we look at trying to partner with our customers on and drive their success from a sustainability standpoint, we view this as an important part of the value mix we bring is helping them recycle to lithium and recycle it back to them for their continued growth. On the Tesla side, we view what Tesla's described as very - generally very consistent with our market outlook. It's going to continue to shift and I think expand meaning the size of those EV market, which by 2025 might be at one level, but by 2030, I think you're going to have a larger proportion of vehicles that are electrified. There's some news a lot about - some intentions around that here in the U.S. today. And for the lower end, LFP is the applicable technology. I mean, it gives you a lower range. We still believe though that for the mid and higher range vehicles, you're going to need - in order to get, you need higher energy density to get the range. And you can drive good cost, if you can get good technology and then, get the cost - the cost per kilowatt hour down, get the kilowatt hours up per unit weight. So that's the mix we see. And I - it's very consistent way Tesla is approaching the market as well. Turn it over to Netha for bromine.

Hello Ben. If you talk about the timing of our bromine expansions, I think we feel really good about the markets that we participate in and their projections over the next few years. And we're really just executing the company's strategy of building capabilities to accelerate lower capital intensity, higher return growth. And for us what we're doing it at is the Magnolia and that's a great place for us to do it because we have great jurisdiction. We've been there for over 50 years. We know the asset well, and we could produce every product that we make out of that facility. So that leads us to have high confidence in those projects and the timing of execution. And we feel really good about the plan there and their ability to deliver what we want out of those expansion projects.

Your next question comes from the line of Matthew DeYoe with Bank of America.

So as you ramp Talison to meet Kemerton demand, what do you expect your partner to do. I know they have their own kind of hydroxide plans, those have been pushed a bit. Do you expect Talison output to increase by the 50,000 metric tons, you're going to need or will be closer to 100,000 metric tons. And just how do you see that that, that timeline playing out can you move as fast as you think you'll need, if It's a joint discussion versus your singular desires, I guess.

Yes. Well, it's definitely a joint discussion. It's a JV. And I think we'll optimize the supply. So the product that Talison our portion or half of that with Tianqi that - that's ours. But we have JV product at Wodgina. They have their own product in other parts of Australia. And we will swap product to kind of optimize economics. I think way you would think about it is Talison goes to feed our portion and then - and some other product feeds their portion at Kemerton. However, it physically, it probably won't work that way. We will swap product to optimize the economics.

All right. I guessing it more, what you expect Tianqi to do versus [indiscernible] portion about this?

This is Eric jumping in. We can't predict what Tianqi is going to do. I mean, they have some public statements out there around their Kwinana facility, which is really very in terms of its potential over time similar in size to Kemerton at least our - at least our first investment in Kemerton. And the JV is owned by the two of us. So it produces a budget to what we need. So you really need to talk about what's on the ground there, CGP I and CGP II. We feel with CGP II being fully ramped, we will meet the needs of what we have invested in, and allow to ramp at Kemerton. And if they don't have the need on their side, they won't take their share right, is how it comes down to it. So that's how it works. We're always entitled to at least 50%. It could be of what's available. It could be more if they don't need to take more and vice versa on the other side.

Okay. If I could just follow up. So the new pricing approach, you talked about, I understand it's still in the works, but theoretically, I guess if you were to look over the last cycle maybe peaks in 2018 and trough more in 2020. Can you provide some context as to like how much your realized price would have been higher in 2018 had you chosen this path versus how much lower, you would have been in 2020, like how much higher with the peaks and how much lower with the troughs and I would imagine some sort of analysis has been done to kind of get a sense for, if this was a net winner or loser over time.

Yes. So we've not - we've done analysis that we can share about what our price would have been under the new model. But you're right, it would have been higher, higher towards the peak and lower during the trough, so which is the point. We're trying to move a little bit more with the market, but not expose ourselves fully to the commodity price. But I don't have the numbers to share with you exactly what it would be. And the other part - the other part of that question, which we don't really know the answer to is how is the portfolio, what does it look like, how much of that spot type pricing, where we end up with versus that long-term contract pricing because during the last peak and bottom that we're pretty much we're all on the long-term contracts.

I think it's also important that in the last peak and bottom, there were no automotive producers involved at all in the cycle. There are now, and there's a lot more demand now. And I'll a reference of Kent - a remark Kent made earlier that given the size and maturity of - we've only gone through one cycle before really since the dawn of the EV, and now we're moving through the next part of the cycle. It's going to look different and probably won't have the same volatility than before. We don't know. But I think the size of growth is such that it - and supply additions is such that it's going to change with time. So the pricing structure we're putting in place is going to continue to evolve. We have contracts to fit the structure. So we know it works. We have customers paying fixed prices. We have customers, who are only going to - we're only going to give them a year commitment, and they will take, they will - they want to ride the wave and at that point that wave is going up. So it's - how it settles out over time, we'll have to continue to dimension for you, but we're at the early stages.

Your next question comes from the line of Mike Sison with Wells Fargo.

Nice quarter. Just curious what your thoughts on the lithium demand, whether percent or tons in '22 is expected to be for the industry?

Yes. I - it's a question, Mike, that I may have to go back and look at our demand model. We do have a model we put out and it's - we - and it's still consistent with what we think today. And it was some months ago, earlier this year, we did that. We're seeing a much bigger demand here in '21 overall this year than last, because of the post-pandemic recovery. The overall market growth is 25% plus. So we're going to be at least in that order magnitude for '22 I'd say on a year-on-year basis.

And then, I know, there is some timing in terms of getting the volume on for Wave 2, but when do you think roughly, you'll have all the capacity available to sell. Is it '23, '24, '25, just curious on the - when you'll be able to sell it all?

When you say the capacity, you mean, La Negra and Kemerton?

Yes.

Okay. Because we're - I mean, our plan is, we're going to be building plants over time. It's going to be ramping up over time. But La Negra - between La Negra and Kemerton at full rates ramped up selling everything '24 for the full year.

For the full year. Great. Thank you.

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

Just slightly more nuance follow-up on this discussion around the increased volumes implied in your guidance and so it's nice most of that is coming from more volumes from via Greenbushes and that spodumene being converted downstream to via tollers. First, is that an accurate characterization. And then with that in mind, Eric, I appreciate you've stated in the past that you don't rely on toll conversion for battery grade chemicals, but only for technical grade lithium products. But in this case, it seems like the extra volumes are carbonate feeding into the LFP cathode market. So just wondering if that also is accurate, and if that's the case, I guess - should we be thinking of these carbonates grades via tollers as just or maybe just the LFP market being more of a technical grade market. And then finally just, it seems like this is part of the market, you will address once La Negra is ramped next year. But will then - will you then say that the current toll relationships that you're leaning into currently to opportunistically address these volumes?

Well, a bunch of questions there, Chris. Let me go to the first one, which had to do with, help me here. I just stuck on the LFP, but you had something before that, what was that? What was your first question, Chris?

Yes. So the --

Ramp.

The tolling volumes…

Our volume, yes, yes, sorry. Senior moment there, I guess. The - if you look at our produced volumes, we're going to be fairly flat, first half to second half, maybe slightly better in the second half because we have little better production - we have some better production in Chile, in the fourth quarter, seasonally just by a tad. What's the real differences in our volume first and second half, and our volume growth year-over-year is on - the first half, second half is the tooling - increased tolling. Year-over-year is tolling, because we didn't had last year, as well as plants come back online and efficiencies in the plants, better operation in the plants year-over-year. So there's a bit of difference between first half, second half and year-over-year there. On what we're using that carbonate for when we toll it in China, it's going into the LFP market. I think what we - I don't know what we said a years ago, but what we said more recently is that the carbonate market, the tolling network is able to produce sufficient better grade quality to supply the LFP market for batteries in China. So that's where we are selling that material currently. And then, now, I'm going to ask you help again. The last question was --

So since you're addressing that - via the tolling relationships currently, when you ramp La Negra next year, will you stayed those relationships or do you still intend to participate via tolling, obviously this has mixed implications given the higher feedstock costs and the fact that tollers need to make a margin. So curious if you've stayed those tolling relationships or maybe - would there be a bare hub like you've done in the past with tolling partners that you're comfortable with?

It will be a bit of both. I mean our strategy for a lot of what we produce out of La Negra's growth, La Negra III and IV is to put it under a contract commitment in some form. That might be for price buyer only a year and for performance buyer might be a couple of years, but that's our strategy for that volume. Our strategy for the total volume is either to use it as a bridge to build the customer relationships when we have La Negra III and IV. So some of those customers we're currently selling toll volumes, where we will take advantage of selling La Negra III and IV to it as well. But in today's market, which is particularly tight, is also opportunistic to play in what is a pretty tight market and - and they were really playing on a - on a spot basis. So while we have higher cost to produce this whole volume, we're taking advantage of currently higher spot prices than contract.

And our final question comes from the line of Kevin McCarthy with Vertical Research.

Thank you for squeezing me in. Want to ask about your Catalysts business. If we look at margins in the first half of the year in broad strokes, they are running maybe half of historical levels, yet. In the prepared remarks, I think you indicated you anticipate strong rebound in the business. So I was wondering if you could flesh that out in terms of what you're seeing in your refinery catalyst order books. And when might we expect those margins to get back to historical levels might that be as soon as '22 or more likely '23 or later?

Good morning, Kevin. This is Raphael. Just to respond, one, there has been a series of effects. I mean in the first half of the year, we certainly had an impact from the winter storm. We have residual impact from the pandemic, a lot of that pandemic impact was a down trade of high-performance catalyst to maybe more workhorse catalysts that has a effect on margins and as well as on our mix. Looking forward, I think we would see recovery. I mean, some of our best products what we're known, for example is our high performance hydroprocessing catalysts. As the markets recovering, as change out start to occur at a faster clip in 2022, we're going to start to see that come back. Again, we have great partnerships for great performance catalyst, those are the higher margin that will improve our mix. And I think it's that mix impact going into 2022 that you'll start to see that improvement in our margins. We already see it today, Kevin. We have customers that are, they down traded to lower performance catalysts, when they were under margin pressure. We just had a customer meeting this week with a large North American refiner, who is telling us that because they're starting to operate at higher rates, they're needing to run under more severe conditions, they need higher performance catalysts, those command higher margins for us. So we think it's a favorable trend. It will probably start to materialize in 2022, where you will start to see them.

Thank you for that. And then secondly, if I may for Eric. In a prior answer, I think you alluded to the news out today that the U.S. is now targeting 40% to 50% of new auto sales, as EVs by 2030, although I thought - I read that it might be non-mandatory. So just curious about your view on that. Is it incrementally accretive to your demand outlook in any way or are the U.S. automakers already tracking to similar levels or what do you think about the potential market impact of that announcement?

Yes. So - this is Kent. That - it's early news. It's just out today. And I don't - from my understanding it was not mandatory. It's got something that it's trying to lead legislation to something maybe like that. It's - so I'd say it's early days. And then, I'm not - it - and it's probably in the ballpark of what the car companies are already thinking, maybe it's a little more aggressive. But it doesn't shift the model from our perspective, I don't think. I think our view would be that's neutral.

And now we will - I would like to turn the call over to Kent Masters for closing remarks.

Thank you, Carol, and thank you all, again, for your participation on our call today. As you can see, we have a lot to be excited about at Albemarle, and we see extraordinary opportunities for growth. We are implementing a comprehensive operating model that will enable us to execute on our objectives effectively and efficiently. We look forward to discussing this in greater detail during our Investor Day on September 10, and we hope you will all be able to join us then. Thank you, and that concludes our call today.

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