Hello, and welcome to the Q3 2022 Albemarle Corporation Earnings Conference Call. My name is Alex, and I'll be coordinating the call today. [Operator Instructions] I'll now hand over to your host, Meredith Bandy, Vice President of Investor Relations and Sustainability. Please go ahead.

All right. Thank you, Alex, and welcome, everyone, to Albemarle's Third Quarter 2022 Earnings Conference Call. Our earnings were released after the close of market yesterday, and you'll find the press release and presentation posted to 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 of Catalyst, Netha Johnson, President of Bromine and Eric Norris, President of Lithium, are also available for Q&A. As a reminder, some of the statements made during this call, including our 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 presentation, that same language applies to this call. Please also note that some of our comments today refer to non-GAAP financial measures. A reconciliation to GAAP financial measures can be found in our earnings release and the appendix of our earnings presentation. Lastly, I would like to highlight that in January, we plan to host a webcast to provide our full year 2023 guidance and new five-year targets for our restructured businesses. With that, I will turn the call over to Kent.

Thanks. Meredith, and thank you all for joining us today. On today's call, I'll highlight our third quarter results and achievements. Scott will provide more detail on our financial results, outlook, balance sheet and capital allocation. I'll then close our prepared remarks with an update on our structure and our strategic growth projects. We had another excellent quarter as Albemarle continues to benefit from the demand for lithium-ion batteries driven by the energy transition. This, plus growth in bromine, drove a strong third quarter. We generated net sales of $2.1 billion or more than 2.5 times the prior year period. Third quarter adjusted EBITDA of $1.2 billion or approximately 5 times the prior year period, continued the trend of increase -- of EBITDA increasing significantly outpacing sales growth. We are tightening our previously raised 2022 outlook and reaffirming our expectation to be free cash flow positive for the year. Scott will review the key elements of our outlook in his remarks. In October, we completed the acquisition of the Qinzhou lithium conversion facility in China. This, along with the mechanical completion of the Kemerton II lithium conversion project in Australia has us on track to more than double our lithium conversion capacity this year. In response to the growth opportunities ahead of us, we announced during the quarter a new segment structure that is expected to take effect in January of 2023. We are realigning our core lithium and bromine businesses into Albemarle Energy Storage and Albemarle Specialties. Additionally, we completed the strategic review of the Catalysts business. After our work, we determined that the best course was to hold the business as a separate entity with a separate brand identity. Going forward, this business will be known as Ketjen. After the founder of the refining catalyst business, a call back to the business' proud history of innovation and sustainability. Now I'll turn the call over to Scott to walk through our financials.

Thanks, Kent, and good morning, everyone. I'll start on Slide five. Diluted EPS for the third quarter was $7.61 dollar compared to a loss of $3.36 dollar in the prior year period. As a reminder, last year was negatively impacted by a settlement of a legal matter. Adjusted diluted EPS for the third quarter was $7.50 dollar, 7 times the prior year EPS of just over $1.00 dollar. This overall performance was driven by strong net sales and margin improvement for the total company. Albemarle generated third quarter net sales of $2.1 billion, up 2.5 times year-over-year due to ongoing momentum in the Lithium and Bromine businesses. Adjusted EBITDA margins improved from 26% to 57% this year. Let's turn to Slide six for more details on adjusted EBITDA. Third quarter adjusted EBITDA was up $1.2 billion, nearly 450% increase year-over-year. This strong growth continued to be driven by higher lithium EBITDA that was nearly $1 billion higher than last year. In fact, lithium's Q3 EBITDA was more than double what we generated in all of last year. This record performance for the Lithium segment was driven by higher realized pricing, which was up nearly 300% and higher volumes that were up 20% versus the prior year quarter. Lithium adjusted EBITDA margins of 74% were more than double the previous year. Margins are expected to moderate in the Q4 and into next year for several reasons. First, a spodumene shipment from Talison originally expected in the fourth quarter occurred in Q3, resulting in a $100 million benefit in equity income. This benefit is not expected to reoccur. Second, margins benefited from the timing of spodumene shipments and the rapid rise we have experienced in spodumene and lithium prices. It takes up to six months for a ton of spodumene to navigate…

Thanks, Scott. Before we look at the growth projects, I wanted to update you on the separation of our Catalysts business and the reshaping of our core portfolio. We are realigning our core lithium and bromine businesses into energy storage and specialties and expect this to be effective in January of 2023. The restructuring is designed to allow for stronger focus and better execution on our multiple growth opportunities. Energy storage will focus on lithium ion battery evolution and the energy transition. And Albemarle specialties combines the existing bromine business with the Lithium Specialties business to focus on diverse growth opportunities in industries such as consumer and industrial electronics, healthcare, automotive and building and construction. Following the strategic review of the Catalysts business, we determined that the best course was to hold the business as a separate entity with a separate brand identity. This structure is intended to allow the Catalysts business to respond to unique customer needs and global market dynamics more effectively while also achieving its growth ambitions. The business will be named Ketjen, referencing the business' original founder, which draws on our entrepreneurial heritage, our Catalysts business. This business will continue to be managed by Raphael Crawford. Additionally, we have established an advisory board for Ketjen, with Netha Johnson acting as Chair. Its primary purpose is to provide thought leadership and strategic advice to Ketjen senior management. These changes reflect Albemarle's focus on growing our business, our people and our values by being agile and providing innovative solutions that anticipate customers' needs and meet the markets of tomorrow. So, looking at Slide 15. As one of the world's largest producers of lithium, we are well positioned to enable the global energy transition. We are focused on building the structure and capabilities to deliver significant conversion capacity around…

[Operator Instructions] Our first question for today comes from P.J. Juvekar from Citi. P.J. Your line is now open.

Yes. Good morning and Some good information here. Kent and Eric, you just built Kemerton I and II conversion plants in Australia, La Negra III and IV, the Qinzhou plant in China that you just bought. So, you have a good handle on the cost to build a conversion plant. What's your estimate to build a comparable conversion plant in U.S. versus Australia versus China? And do you think the costs are as much as 10 times higher in the U.S. than China to build a convergent plant?

Good morning. P.J. So, no, not 10 times. I wouldn't -- I mean it's going to be more expensive to build in the U.S. than China. So we -- but we built in Australia now, and we're building in China. So, we've got a good handle on that. So, we think North America will be something like Australia and say for, and that might be twice China, but nothing like 10 times.

Okay. And then we know that there is going to be huge demand for lithium hydroxide in the U.S. You have the IRA now and availability of funding and grants. Why wouldn't you go ahead and announce several sites than just rather than building just one mega site? And the reason I say that is that the time, as you know, takes to permit these facilities and build, why not get ahead of the curve if you want to meet that gap that you show on the chart between now and 2030?

Yes. So, we're building pretty aggressively, and we need both elements. We need the resource and then we need the conversion assets. So, I mean, between balancing those, we're keeping less in balance and moving pretty much with the market. We may be half a step behind. I don't know that we wanted to 3 or 4 facilities in the U.S., I don't think we could feed those. I'm not sure that would make sense. We would do -- I mean, our plan is we'll do this large facility that we're looking at in the conversion site in the U.S. That's going to be a big facility and probably do another one at that scale, but we have to have the resource defeated.

Kent, I'd add too, we're progressing our direct lithium extraction work in Magnolia, Arkansas. And so, as that comes to maturity, you could expect a conversion facility in that area as well?

Yes, it's a good point. And that's probably will be a little smaller facility just because of the resource from the direct lithium extraction. But that is a slightly different time frame than the conversion facility in the Southeast.

Right. Just quickly, what was the size of the Megaflex facility? Thank you and I’ll pass it on.

What was the question? What is the site? We have [indiscernible] southeast...

Yes, the size -- no. No, the size. The size, yes.

Okay. Sorry. So, the size of -- we're planning 100,000 for a conversion facility of 100,000 tons. It will come in phases. But the idea is roughly 25% would be from recycled materials, 75% from virgin material.

Thank you.

Our next question comes from Matthew Deyoe from Bank of America.

Good morning every one. So, I wanted to, I guess, tap a little bit more on the equity income side of the equation. If I were to just look at what IGO reported as it relates to the equity income and the internal transfer pricing, can you help us kind of square how that kind of runs through your numbers, how that impacted the 3Q margins and maybe the puts and takes as we bridge to 4Q?

Yes. So, if you look at IGO's report, they show Talison's full equity -- full net income for the quarter. One thing to remember is for Albemarle, once we buy spodumene, we have to inventory that profit until we actually sell it to the end customer. And so that adjustment is kind of the reconciling item. And one way to kind of look at it is because of that six-month supply chain that I talked about in the prepared remarks, you actually go back to first quarter of this year, and that amount versus the amount in the third quarter is about what that inventory adjustment is.

Understood. And can I ask how you're thinking about future investment in China? I know you have Meishan and I remember when the Tianyuan acquisition was initially announced, there was talk about potentially debottlenecking that facility. But -- how do you balance the lower CapEx in market size with kind of what feels like growing geopolitical risk to the region?

Yes. So that -- it's a good question. And what we are -- I mean you get lower capital, we referenced that kind of like half the capital to do that in China. The Qinzhou acquisition was good for us. So, we'll look at -- once we operate that for a while and get a good understanding, we'll look at expanding it. Probably, most likely, we'll expand that. And then we've got the Meishan project that we're doing there. And then we had a project that we were looking at Zhangjiagang, and that's another one that we think about, but we're -- as demand grows. So China is still the largest lithium market in the world, and their growth is quite significant. We've got demand growing in North America and Europe now. So, we're trying just to balance that, manage the opportunity and minimize the risk. So, I think that that's something that we look at all the time. Our plans -- our firm plans at the moment are -- we've done the Qinzhou acquisition, and we're building the Meishan project. And we're planning to do an expansion of the Qinzhou facility but we won't actually have to pull the trigger on that because we want to get a little bit of operating experience with that plant. And then change the design somewhat when we do the expansion. So, we look at it all the time and something that we just adjust to as to what's current.

Our next question comes from Aleksey Yefremov from KeyBanc Capital Markets. Aleksey your line is now open.

Thank you and good morning every one. The lithium volume guidance for this year is 20% to 30% and you posted 20% year-over-year in third quarter, 18% in the second. So, is it fair to say if you're trending towards the lower end of this guidance for the full year at this point?

No, we should be probably in the middle of that guidance range. So, as we're ramping up volume at La Negra, you should see improvement to that growth rate in the fourth quarter. I don't know, Eric, if you have any more.

Aleksey, I'd just add that, that has always been the case, is that because of the nature of the ramp of our plants, both La Negra, Kemerton, Qinzhou coming into the full, we've always been back half loaded. The challenge we had in the third quarter was on the production side, mostly in tolling in China due to brownouts -- rolling brownouts in the region and how that impacted operating rates of our tollers ability to toll convert. As we go into the cooler time of the year where we don't expect and have not seen those, obviously, now with the weather being warmer, we expect higher production rates on the tolling side plus the continued ramp up these plants as Scott referenced, that our owned plants. So, we'd expect to get into the middle of that guidance with a strong volume performance in the fourth quarter.

Very helpful. Thanks. And just pretty fresh news. The Canadian government is forcing some divestments of lithium assets there. Are you potentially interested? And if not, do you have any thoughts on this development? Does it matter for lithium industry in general?

Yes. I mean I don't know if we have specific thoughts on it, but we are always looking at lithium assets. We were kind of comb the planet for lithium assets. So, if they're interesting, we would be looking at them, but nothing to say on those particular assets today.

Our next question comes from Arun Viswanathan from RBC Capital Markets. Arun your line is now open.

Grate, thanks for taking my question. Congrats on the good results here. Just wanted to, I guess, maybe ask you guys to elaborate on some of the market movements you're seeing. You noted there's been some recent strong demand in EVs is moving prices higher. What's kind of the outlook as you look into the next couple of months? And could you also comment on potential elasticity impacts on EV demand, if there are any? What have you observed as far as demand trends kind of accelerating or decelerating on price increases?

This is Eric. As you may know, EV sales through, I believe it's the end of September around the world are up 75%. And that's after a pretty soft part of the year -- early part of the year for China, in particular, because of the lockouts and because of supply chain challenges. The tone within the industry now on the automotive side is one of more concern about supply chain than it is about demand. And so, as the supply chain pressures ease, automotive vehicle stocks are very low. We expect to see continued strong growth through the balance of the year and well into next year as well. So, we remain bullish about those trends. Of course, the second part of your question, we continue to watch the economic impacts on purchasing behaviors. We note that in the COVID time and in other weak periods of economic weakness, EVs have been, by and large, more of a luxury item and have not seen reductions in volumes coupled with just the strong secular trend and government policies now that are reinforcing that. But we'll watch the effect of interest rates on that. A big part of the mid-to-low end of the market is actually in China. And with China is coming out of its COVID lockdowns and recovering, we're seeing strength in that sector. So, we'll continue to watch what the economy -- economic effects and higher interest rates around the world might have on demand, but we don't see any impact nor is history tell us we should expect one.

Okay. Great. And then just on the upstream resource side, we've been hearing reports that in some of the recently announced projects on the spodumene side may be difficult to move ahead just because of the increase in price and the capital that's required to develop those projects. Is that something that you're observing as well? And if so, what impact should that have, I guess, on spodumene and downstream hydroxide markets, if any?

To clarify, you said increase in price was affecting projects. So, you're referring to the capital cost to build the facilities for such plant?

Yes, both. There is -- we've been hearing there's been some increase in spodumene costs, both the capital costs as well as the acquisition costs are prompting some recently announced projects to get delayed. I don't know if that's -- at least that's what we've been reading.

Yes. I mean, I think certainly, the effects of inflation are having an impact on -- we see those in our own capital cost. They can have an impact on our inflation. And it's highlighted for us the importance of our scale and our global procurement strategy to drive down costs. For smaller companies, less experienced in executing capital. It could definitely have an impact. I don't know -- those are longer-term impacts than shorter term. So, we haven't seen that manifest itself yet in a change in market tone. And as we said earlier, the demand is so strong and the balance of supply and demand is such that at the moment, this would only aggravate the supply-demand issue and sustain strong prices at a market basis for lithium. So, we'll continue to watch it, but I think that's -- there might be some truth to what you're referring to that could have a long run impact.

Ultimately, it's another example of how lithium projects take time and effort and challenges to get through it. That's not an easy thing to go through.

Our next question comes from John Roberts of Credit Suisse. John your line is now open.

Thank you. Will the Megaflex plant be hydroxide or carbonate or both? And will the production trainer align campaign specific types of feedstock or -- and then switch back and forth? Or will it run a continuous blend of mixed feedstocks?

Yes, you're way ahead of it, John. I think it is -- will be -- it will run. It will be a blend, right? We'll blend things that come through, but it's going to be designed around Kings Mountain. And then other resources that will feed that and then the recycling. So, it's going to be quite flexible and why we're calling it the Megaflex. So, there's -- there'll be flexibility around it. But I don't -- and it's not specific. We're not designing for a particular or typically. We try and -- we design in flexibility so we can operate on multiple resources.

So that's where -- John, just to add. That's for some of the know-how and the process technology advantages that we have comes into play as we design that. But to go back to the first part of your question, the initial trains were targeting hydroxide at the moment. That's how it's -- we're looking at a 50,000-ton plant, and we're looking at what we've built in China, what we built in Australia. We're taking the learnings in the best and developing that into a plan for execution here. We'll watch the carbonate market development very carefully. With the recently passed IRA, it's very possible that more LFP capacity could come into the U.S. That being -- excuse me, cathode capacity. If that's the case, there could be a justification of future trains should be carbonate. We'll have to watch that carefully.

Okay. And then on the newly combined bromine and lithium specialty segment, it's going to be back integrated to resource and bromine. But I assume you're going to purchase lithium from the energy storage segment? How will that transfer pricing be handled?

Yes, John, we're still working through that. Likely, it will come through at cost, but we haven't sorted through all the details yet. So, we'll let us share that in our January meeting.

Our next question comes from Vincent Andrews of Morgan Stanley. Vincent your line is now open.

Thank you, good morning every one. Are you still looking to potentially change your relationship with Mineral Resources or the JV terms? And could you also provide an update on the Wodgina restart? And do you think that as debottlenecking opportunities or potential to operate sort of above prior nameplate?

Okay. So, first question about the JV. So, we continue to talk and look at opportunities to kind of optimize that between the two of us. So those are ongoing discussions. And if we get to something that's different, we'll finalize that. We'll tell the market as soon as that information is available. Wodgina is operating. It's up and operating and the -- there are debottlenecking opportunities and additional trains that are potential, but it is up and operating today on two trains, I believe. And then we have -- and we're talking about starting -- we're talking about a third train, but it's -- there are two trains today, and they are operating.

What would be -- what's prohibiting you from going forward with the third train?

Well, we need to -- we have designs of it, and we need to be able to have conversion capacity for that.

Our next question comes from Kevin McCarthy of Vertical Research Partners. Kevin your line is now open.

Yes, good morning. Now that you've had a few months to digest it, would you comment on what the economic impact of the IRA would be on Albemarle in terms of direct and indirect influences. And do you think it will influence how you allocate capital beyond the Megaflex project?

So, has it been a couple of months? That's -- but it will -- I don't know that it directly impacts our economics, but it's changed the market a bit. I mean there's more requirement for local supply in the U.S. and then supply from countries with free trade agreements with the U.S. And actually, it works out, we're well positioned for that, and we had planned to have -- we were planning the Kings Mountain facility and conversion in the U.S., but that is accelerating that, I would say, trying to go as fast as we can. We did have plans already on the books before that happened, and this just kind of makes it more critical. So, I know -- now that you translate it specifically into our P&L, but it does drive demand toward North America and to localize supply to as much as possible, and I think it will accelerate EV demand in North America.

Yes. Beyond the effects, Kevin, of the incentives -- on the consumer incentives that are being put in place, there's a manufacturing tax credit that we will be able to benefit from. We're not exactly sure how it's going to work yet because the regulations haven't been put out. But it's a 10% of manufacturing cost for battery materials. So, for us, that's probably in the $10 million range on a full facility. And then the other aspect is the minimum income tax or what some people are calling the new AMT. Again, that wouldn't affect us immediately, but a minimum tax of 15% potentially could affect us in the future.

And finally, Kevin, that's immediate topic you asked, I'll just add that it has an impact on purchasing behaviors. We're seeing a real not surprising interest for those who have U.S. based production to preferentially put a premium in their view on sourcing from free trade countries or from the U.S. itself. So, we'll be carefully sort of segmenting our customer base and looking at how we create the right value for ourselves and for our customers in terms of how we go to market and bring that and price that product in the marketplace.

So, that's really helpful. I appreciate the color and then as a follow-up, Scott, I think you mentioned in your prepared remarks that lithium prices on a realized basis could rise at a double-digit pace in 2023. Can you elaborate on that? What are you assuming in terms of market pricing vis-a-vis the uptick that you referenced in October? Maybe you could just kind of talk about where we're tracking in terms of low double digits or substantially higher than that and what you're baking in?

Yes. So, when I said that it's really based off of market indices that are where they are today, so there's really two big effects happening as we go into next year. One is just the annualization of what we experienced in 2022. And then the second is we continue -- Eric and his team continue to work on those fixed price contracts and convert those to the index reference variable contracts. So that's going to have a benefit for us as well. And while we haven't provided specific guidance, the kind of ranges we are talking about are kind of healthy double-digit price increases next year. So again, contributing to what we're expecting to be another strong year of growth from Lithium. And we're seeing it from all three of our businesses, to be honest, even in the face of potential slowdowns.

Our next question comes from Josh Spector from UBS. Josh your line is now open.

Thanks, take my question. So just on the lithium contracts and some comments you made earlier. So your index references contracts used to be labeled a three to six-month lag. Now they're about three months. You talked about moving more fixed price over to those types of contracts. I guess the duration continues to get a bit shorter. I'm just wondering, should we expect that duration to approach less than three months, say, one month at some point in the future? Or is three months’ kind of the right range that you're finding customers want to two and four?

Josh, I mean, I would think of it this way, first of all, to answer your question, three months is what we expect going forward as the lag. And that's a product of moving from a fixed contract with reopeners that are -- that had been up to six months to a full index where it's looking back three months on a rolling basis. So that is -- that's the standard of the term we're taking into the marketplace, and it's allowing us to benefit from rising prices while dampening the impact to the customer. So that's how we -- that's the strategy and how we plan to drive the portfolio going forward. And as Scott pointed out, we do expect some of the fix in that category of 20% that's on our contract slide to come down as we go into next year as well.

Okay, thanks. And just on the DOE grant that you guys received. Is there a potential for you guys to receive more than one of those? I don't know if there's a limit per company or something else we could consider about additional support if you were to build additional facilities in the U.S.?

Yes. So that was a particular program. So, we wouldn't expect to get anything additional out of that. There was a process we went through and applications. We got that particular grant. So, if there are other programs, we could do that. But under this existing program, that was it.

Our next question comes from David Begleiter from Deutsche Bank. David your line is now open.

Thank you, good morning. Eric, just on Kemerton I and Kemerton II, what are you expecting for production output next year from these two units?

Look, I think -- well, certainly, when we get into our January investor outlook for '23 and beyond, get into more details. But in the meantime, I apply the same rule of thumb we've applied all along, which is it takes up to two years to fully ramp to nameplate capacity. And you would expect that ramp to start with upon commissioning a six-month lag for qualification of the customer base. And in the first 12 months, getting to about half or slightly thereabouts of the capacity of any one of those plants. So -- we are -- just to put that into practical terms, we are now expect to sample for qualification Kemerton I this quarter, and we'd hope to early or during the first half of next year begin sampling for the second train and then you can apply those rules of thumbs I just outlined.

Very helpful. And just on the recent spike in Chinese spot prices, how sustainable do you think this is over the next few months? And thoughts on the spot prices for next year?

I don't -- it's very hard. I can only tell you, I think that the uptick of late has been a recovery in the market in China, in particular, from a demand perspective. And that has caused prices to -- they modulate -- moderated rather a bit in the middle part of the year and to come back up again. Where they go from here, David, hard to say. What we do know is as we look into next year, we still see a tight undersupplied market. So, the dynamics are going to be favorable for strong prices. What that means for a point estimate of Chinese spot prices is a tough one to come up with.

Our next question comes from David Deckelbaum from Cowen. David your line is now open.

Good morning. Thanks, take my question. I wanted to just talk about IRA compliance. You highlighted, obviously, the fact that you have active production and conversion and free trade agreement countries. I just wanted to confirm whether it's your view that would you be selling qualifying materials from Kemerton or La Negra into the United States? Or would Kemerton be feeding U.S. customers? Or is that predominantly going to be feeding the Chinese market?

So, actually answer is different by plant. If you start first with hydroxide and Kemerton, the intent for Kemerton, ever since it was built, long before IRA, long before recent geopolitical concerns was to supply a broad global market and to leverage the China assets we have for a China market. And as geopolitical circumstances have changed and things like the IRA have come along, as Kent said earlier, we're really moving towards a country-per-country or region-per-region-based strategy. So, China for China, Australia would feed Asia and Europe and North America in that regard. And that we believe that to be the efficient route to go. If you look at carbonate, carbonate is a little different. The majority of the carbonate market today is China. And we don't have carbonate assets currently within China. So, a large purchase, chunk of what we make, a large percentage of what we manufacture at Chile goes into China, as the RA develops -- as demand develops in the U.S. and Europe, and I have to say, develops because it's still very, very small. That could change that dynamic, driving the need for us to try to get more out of Chile or other carbonate sources as we go forward.

I appreciate the color there. Perhaps my follow-up, there's a lot to ask here. But with the January update on your '23 outlook in the context of some of the U.S. expansion, the Megaflex site, Kings Mountain, you highlighted, I think before, Kent, that you'd aim to have these perhaps online in '27. Is that specific to just the Megaflex site? Or would that include Kings Mountain as well? And do you expect to have a capital program for those assets envisioned in 2023, perhaps even in January with this announcement and start beginning the permitting process next year?

Yes. So, I mean we'll have capital. We'll definitely have capital in the '23 plan around those facilities. And the date, the '27 date is mine and conversion optimistically. It all depends on the permitting process and the schedule, but that's the thinking.

Our next question comes from Joel Jackson from BMO Capital Markets. Joel your line is now open.

Good morning. You obviously have some visibility now in the types of prices you're getting January, February into Q1 obviously. Can you give us a sense of it -- are February pricing coming in better than January, January price is coming better in December on a realized basis on average?

Well, I mean, Joel, I'd say where the indices are today, that you'd have to say that they're better than what they were a quarter ago. However, recognize that there's room for movement either up or down from that depending on how those indices move.

Okay. You made a comment earlier in the call, I think that if spot pricing stayed the same, that 2023 pricing would be up double digits. I think you said that. What would spot prices -- it's a very high-level question. Maybe you can just give us some color. What would spot price have to do across 2023 for your realized price in '23 to be about equal to '22? It seemed like a linear decline, just a hypothetical scenario. What would that imply in that scenario to get -- where would you need to get to flat pricing in '23 versus '22?

I got to think through the math there because there are a lot of different contracts with different caps on them that we've got an account. I don't know, Eric, have you got a gut feel for it or I have to get back to Joel.

We may get back to you, Joel. But the factors are that, obviously, we've been moving all year long, this year, in 2022 in price. And that's been part of our growth. That's been part of our strategy. That's been part of what's driven some of the upsides to expectations along the way. We'll do a small amount of that to move to -- from fixed to variable next year, but the bulk of that is complete. But what happened during the year, if you just annual -- if you just take where we are now and annualize it in the next year, you've got a big increase. That, I think, is Scott's point. So, you'd have to see decreases that are pretty significant to draw that average down versus 2022. We'd have to do some modeling to see if we can give you better guidance than that.

Our next question comes from Christopher Parkinson from Mizuho. Christopher your line is now open.

Great, thank you so very much. Got two fairly simple one’s for you today. The first, just any quick update on your preliminary thoughts on a China EV subsidy in '23 and onwards?

I'm sorry I missed...

Oh, right. Yes. Well, I don't know that our crystal ball is any better than anybody else's. I mean China has been easing its subsidies of late, and that has not dampened demand. Demand is up over -- sales are up over 100% year-on-year and then now accelerating in the back half of the year. I don't know that they need to accelerate but then they certainly have a lot of capacity in country that could serve that from a battery and cathode standpoint. Hard to say what industrial policy will be, sorry.

Your crystal ball is better than mine, for what it's worth. And then second question, just in the recent acquisitions in China, is that product already spec-ed in? Or what's the plan to have that spec-ed in with customers? Thank you.

You mean qualified, you mean? Yes. So, we've been actually tolling through the facility. So, the acquisition took us a little longer to get some of the approvals than we anticipated. So, we sold our spodumene through it. So, we've qualified that product already.

Thank you. That's all the time we have for Q&A. So, I'll hand back to Kent Masters for any further remarks.

Okay. Thank you, Alex, and thank you all again for your participation on our call today. Albemarle is a global market leader with a strong track record of financial and operational performance. We have a clear strategy to accelerate profitable growth, and we play an essential role in meeting the world's sustainability challenges. We are proud of what we have accomplished, and I am personally thankful for our outstanding employees as we reshape our business for even greater success going forward. Thank you.

Thank you for joining today's call. You may now disconnect.