Hello and welcome to Albemarle Corporation's Q1 2024 Earnings Call. I will now hand it over to Meredith Bandy, Vice President of Investor Relations and Sustainability.

Thank you. Welcome everyone to Albemarle's first quarter 2024 earnings conference call. Our earnings were released after the close of market yesterday, and you'll find the press release and earnings presentation posted to our website under the Investor Section at albemarle.com. Joining me on the call today are Kent Masters, Chief Executive Officer; and Neal Sheorey, Chief Financial Officer. Netha Johnson, President of Specialties; and Eric Norris, President of Energy Storage 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. 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. Reconciliations can be found in our earnings materials. And now, I'll turn the call over to Kent.

Thank you, Meredith. During the first quarter, our team demonstrated its ability to navigate dynamic market conditions with actions that position Albemarle for profitable growth and deliver on the operational steps that we have set out to achieve this year. We recorded net sales of $1.4 billion and adjusted EBITDA of $291 million. We saw continued volumetric growth, driven by Energy Storage segment highlighting the demand growth in the segment and our ability to capture it. We also ramp new conversion facilities, executed on our productivity plans and strengthened our competitive position and financial flexibility. During the quarter, we delivered more than $90 million in productivity and restructuring cost savings consistent with our efforts to align our costs with the current market environment. We are on track to deliver more than $280 million in productivity improvements in 2024, demonstrating our excellent execution. To drive lithium market transparency and discovery, we held several successful bidding events for spodumene concentrate and lithium carbonate in March and April. We are encouraged by the results and level of participation to date and plan to continue these efforts. We continue to advance our in-flight growth projects that are near completion or in start-up to deliver near-term volume growth and cash flow. In particular, we've reached important new milestones at Kemerton I and Meishan. Finally, the year so far has developed as we expected and we are reaffirming our full year 2024 outlook ranges that are based on observed lithium market price scenarios that we included for the first time last quarter. Our operational and strategic playbook positions us well to serve our customers today and for the future. With our focused execution and our continued confidence in the elements we provide, Albemarle is well-positioned to drive sustainable growth and create value. I'll now hand it over to Neal to talk about our financial results during the quarter.

Thanks, Kent, and good morning, everyone. Beginning on Slide 5. Let's jump into our first quarter performance. In Q1 2024, we recorded net sales of $1.4 billion, compared to $2.6 billion for the prior year quarter, a year-over-year decline of 47%, driven principally by lower pricing, partially offset by volume growth. Adjusted EBITDA was $291 million significantly down from the same period last year, when pricing and margins across our Energy Storage and Specialties businesses were at peak levels. Diluted EPS was negative $0.08. Adjusted diluted EPS was $0.26, which excludes primarily restructuring charges and mark-to-market losses on public equity securities held or sold in the quarter. Our earnings decline was driven mostly by margin compression on lower pricing, especially within our Energy Storage segment. Additionally, we had some margin pressure due to timing of higher cost spodumene flowing through cost of goods sold and reduced equity earnings at the Talison joint venture. These factors were partially offset by volumetric growth, primarily lithium carbonate and hydroxide, and we also recorded spodumene sales at favorable pricing. Also, the Ketjen business recorded increased net sales and EBITDA driven primarily by higher volumes. Looking at Slide 6, we'll break down the company's first quarter adjusted EBITDA by driver. Compared to the prior year quarter, the decline in EBITDA was $1.4 billion related to lower lithium pricing in both Energy Storage and Specialties, $90 million in cost of goods sold due to timing of higher priced spodumene inventories built in prior periods and $270 million related to pretax equity income primarily from our Talison JV. Offsetting these declines were improvements of $251 million related to higher volumes as our Energy Storage projects continue to ramp as well as better Clean Fuel Technologies volumes at Ketjen, and $80 million of net improvements mainly due to…

Thanks, Neal. Moving to Slide 12. We continue to believe in the EV transition and the growth in lithium demand, as well as the opportunity it creates for Albemarle. Despite a downshift in demand growth in Europe and the United States, global EV sales were up 20% year-to-date, led by strong growth in China, which represents over 60% of the global EV market. We continue to anticipate 2.5x lithium demand growth from 2024 to 2030. Additionally, we see battery size growing over time, driven by technology developments and EV adoption. These factors all translate to significantly higher global lithium needs. To put all this in perspective, we expect that this industry needs more than 300,000 metric tons of new lithium capacity every year to satisfy this growth. This means, we need more than 100 new lithium projects across resources and conversion between now and 2030 to support this demand. Moving to Slide 13. Albemarle is actively contributing to the progress of price discovery and efficiency in the lithium market. We have conducted four successful bidding events for chemical grade spodumene and battery grade carbonate. These events inform the market of real time physical trading dynamics and promote greater transparency in the evolving lithium market. While the majority of our sales will continue to be on long-term agreements with our core strategic customers, bidding events give us another sales channel to expand our market access. We have partnered with Metals Hub, an industry-leading source-to-contract platform to host efficient and transparent bidding events. On the slide, you can see a few of the ways we've designed these events to promote transparency and efficiency while meeting customer needs, including zero cost to participate, sealed bids and better confidentiality as well as the winning price disclosed to all bidders following the events conclusion. Going…

[Operator Instructions] Our first question is from Aleksey Yefremov at KeyBanc Capital.

I just wanted to ask about your lithium volumes projection on Slide 16. If current prices don't change, can you get to these volumes and capacities, -- was that raising more equity or debt?

Yes. So -- well, we forecast for the year looking out for the year, so 10% to 20%, and we've said we'd probably be at the upper end of that and those -- the volumes that we show are based on the capital program that the long-term volumes we show are based on the capital program that we have in place and the projects that we're executing currently and no need for additional capital for that.

And just as a follow-up, I mean you gave us scenarios for your EBITDA based on pricing. And I was hoping to get a similar idea for your medium-term CapEx. If say prices stay where they are today, would you be able to sustain your current level of CapEx in 2025? Or does CapEx need to come down to balance your cash needs?

Yes. So if prices stayed where they were today, you'd see us ramping CapEx down. It takes us a little bit of time. So it's not -- we have a run rate that we think is kind of a minimum CapEx level of about -- to maintain assets about $1 billion a year. We wouldn't get there in '25, but kind of a run rate in line with that toward the end of '25, we could if we felt prices were going to stay where they are today.

Our next question is from Arun Viswanathan of RBC Capital.

I just want to get your thoughts on maybe fundamentals that you're observing in the lithium markets. These days, it sounds like there was some disruption in some spodumene production. There was some, I think, curtailments in China related to disposal waste altogether that has taken some production off the market and may potentially stabilize the price environment. Could you maybe highlight some of those issues for us and maybe describe the inventory side as well, what you're observing in both the downstream cathode manufacturers and upstream lithium producers.

So let me start -- I'll start with that Eric can give you a little bit more detail on inventories. But I mean, you described the situation reasonably well. We've seen, as we expected, some production come offline, [indiscernible] in China and some higher cost spodumene resources. And we've seen price respond to that marginally, I would say, 15% or so change in price as a result of that. But that's what we thought the market would do. We don't really see it running dramatically up, and we still expect to see other resources coming off if prices stay where they are. So it's going to balance as the market kind of figures out exactly what price is doing and how production responds to that. So I think you'll see new projects that are planned coming off and struggling to get capital if we stay at prices like they are. So I think we're in a balancing mode at the moment. And we do expect to see additional resources come out. Eric, you want to talk about inventories?

Sure. First of underneath that the other factor as important is demand. China stands as a market and start -- first of all, the majority of demand in the world, over 60% of the demand and start contrast to the U.S. or Europe with very strong growth you may have seen reported even in April growth that was quite significant for various automotive producers, BYD being up 49%. So there's very strong growth in China coming off of very low inventory levels. And that's obviously a favorable indicator for price in light of the pressure on producers at these price levels that Kent described. And the inventory more specifically, what we're seeing is inventory is pretty much at very low levels, ending in March, relatively speaking. So less than 2 weeks from a lithium producer standpoint, and about a week for downstream cathode company. That's in China. It's a little higher for battery producers -- or excuse me, for battery inventories. But again, at levels that are very low compared to the average we saw in 2023. So that, coupled with this demand signal we're getting from China, we see it as a positive signal for price going forward. And obviously, we'll have to -- we don't know for sure, but we'll watch that carefully. And should that happen, that will benefit our earnings going forward.

And I know there's going to be a lot of other questions about lithium. So maybe I'll ask one on specialties. Do you see any risk maybe to given we're geographically where some of your resources are in Jordan, I know there's been some activity there, obviously. So -- maybe you can just give us your thoughts on -- is that part of what's leading you to the lower end of guidance for specialties? Or what else would you cite, I guess?

Yes, I think it's a fair assumption. There's always risk in the Middle East. But in terms of our operational, we've seen limited operational impact year-to-date, but the logistics is where the challenge is and we are incurring additional costs to secure those logistics out of that part of the world. So that's what's impacting our business. But that's different than what it was last year. So yes, that's definitely a risk in the second half. As we move into that for specialties.

Our next question is from David Deckelbaum at TD Cowen.

I wanted to just follow-up on the outlook if prices were to stay the same. You've obviously seen the impact of lower near-term production at Greenbushes. And then obviously, you have CGP3 which is still under construction and ramping. We've heard from Wodgina with the third train kind of being deferred a bit. Do you anticipate any more I guess, corrective actions or responses under some of the JV spodumen facilities that you're involved with, if prices were to remain where they are today?

So the -- look, the resources that we operate, and we have made adjustments just to the market condition, but I don't think we make further ones. These are world-class resources and the lowest cost position. So we still operate and make money at the pricing level there. These were investments that were kind of happening in the near term when we had opportunities to adjust the execution profile as we have our own conversion assets as well, and our partners agreed to that. So we've made some adjustments. But Long term, we still expect to exploit these resources because they are some of the best in the world.

I appreciate that. And I'm curious on the second question, just I think you've highlighted some EBITDA margin recovery in the second quarter with increased partner offtake at Talison and some variability there throughout the year. But as we think about your EBITDA margins in '24 versus '25, is there a ballpark range that you would estimate that commissioning new facilities has a sort of a drag on EBITDA margins this year versus next year? .

Yes. David, this is Neal. Yes, absolutely. That's actually one of the reasons why we put that slide in the deck that showed that our range found that. I think that's Slide 17. So the way that we think about it, it's about a 500 basis point drag this year from the ramp-up of these new plants. Now you won't get all 500 basis points back in 2025 because obviously, we will still be working through the ramp of these facilities. But certainly, you can expect over the next couple of years as these facilities come up to full rate that you should start to see that margin expansion from those plants running full.

Our next question is from Steve Byrne, Bank of America.

Rob Hoffman on for Steve Byrne. Out of the $280 million productivity benefits goal that you have set for 2024, given that you're already, I guess, above of $90 million in Q1, is this faster pace of Ketjen results and guidance.

So I think we're using the $280 million and as we forecast that out. It's still early in the year. We're probably a little ahead of schedule, but not ready to call it and build into our forecast that will beat that. But we'll be -- we're optimistic. We're comfortable with the program and the target is a pretty big target for us across the organization, and we feel pretty good on a run rate that we can meet that or maybe beat it, but we've not built that into our forecast.

Yes. And this is Neal. To the point of, can you see it in the financials, maybe just one example I'll give you is if you look at our SG&A line. So -- just remember that on the face of the income statement, our SG&A line includes about $35 million of onetime charges that was related to our restructuring activities that we announced in the first quarter. When you back that out and then look at our SG&A line versus the fourth quarter versus where we ended 2023, you will see about a $20 million to $25 million decline in our SG&A costs. So that gives you an idea that we are starting to see some traction on the productivity and restructuring savings that we already announced.

That's helpful. And just a follow-up in terms of your longer-term volume growth chart here, -- why doesn't the potential tolling volume go down over time? Wouldn't you generate higher margins at your own conversion plants?

Actually your question, just to make sure I'm clear on it. This is Eric speaking. Why would we see tolling volume go down over time?

Why volume go down.

Oh, I'm sorry. Yes, I think -- fair enough. You wouldn't -- it's all a factor of ramp of plants. Right, what it comes down to -- we have a plant in China Meishan that's ramping at a faster speed than the plant in Australia, and that has to do with operating experience. But if you look at this over a long-term basis, ultimately, we will -- our intention is to be fully integrated and to take all the available resources and convert them with company-built assets as opposed to tolling assets. Increasingly, those -- we would target those to be outside of the U.S., we have a considerable basis, as you know, today in China. But again, depending upon the speed with that, tolling always remains a flywheel, an option for us to go on the speed of branch to go to another alternative. But you're right, I mean, in time, that's why there's a plus/minus on that, it should come down. The [indiscernible] for the most part is a bridging strategy for us, sorry.

Our next question is from Andres Castanos at Berenberg.

I wanted to understand better why are you running spodumene auctions now? And to have a sense on what is the percentage of volume that goes in these options? Are in deals with dollars somewhat impacted by this.

Yes. So I'm not sure that is the last part of the question. Let me start on the front and you catch that in the follow-up if I don't answer your question. So we're doing the auctions, both on spodumene and on salts, the health transparency in the marketplace, price discovery to really understand, make the market a little clearer, a little more transparent. We get good information for it. And then we've decided to include spodumene as part of that just more transparency in the market, more knowledge that we get around that. And it's an opportunity for us to participate in a different part of the value chain. So it's not a change in our strategy of being an integrated producer. We'll sell most of our products through these long-term agreements on a salt basis as we have historically. So that strategy didn't change, but it's just it's an adjustment to take -- to try and get more transparency in the marketplace and then to sell spodumene a different value, a different product at a different value in the marketplace. So if there are dislocations, we can take advantage of that.

Right. So I think it's a small percentage of the total volumes that essentially the deals with the tollers are still in place and they take the majority of the excess spodumene. My second question would be on the level of cost of inventory that you have at the moment for spodumene for the ones you take on board from Wodgina? Can you comment on that more or less where you sit versus the index?

So I think the question was the cost of our spodumene inventory versus the index. So as we showed in our first quarter results, we are still working off a little bit of spodumene that went into inventory in prior periods, that is at a little bit higher cost than where it is today, and we documented how much of that was in our first quarter results in our EBITDA bridge. You can expect that there'll be a little bit more of that spodumene that we'll have to work off. But for the most part, you will start to see a spodumene costs rolling through our COGS that is consistent with what is in the market as we get towards the middle of the year and in the back half of the year. And that's built into the outlook scenarios that we've been publishing.

Our next question is from John Roberts at Mizuho Securities.

Last quarter, Slide 13 on Greenbush has discussed the lag and the lower cost of market issue. It projected a spodumene inventory cost for the March quarter of about $4,000 a ton. Does that play out the way you projected last quarter?

John, so this is Neal. We would have to check your numbers. One of the big adjustments we made in the fourth quarter was that LCM, which really collapsed the gap that we previously had, that sort of 6-month lag that we had in the spodumene cost and how it rolls through cost of goods sold. Now even after taking the LCM, we did still -- prices did still come down as we started the first quarter. So we did still have a little bit of higher-priced spodumene that rolled through our P&L. But I think the numbers you're referring to maybe are before we took the LCM adjustment, and we collapsed a lot of that gap with that adjustment.

Yes. All right. And then have your thoughts on the role of catching in the portfolio changed at all since the last call?

I would -- no, I would say. But look, we're -- we've said it's not a core business for us. So we would look to divest that at some point. But -- and we went through a process, which we talked quite a bit about didn't get the value wanted. So we're doing a turnaround. That program is going pretty well, but we would still anticipate doing a transaction on that business when the timing is right.

Our next question is from Christopher Parkinson at Wolfe Research.

This is Harris Fein on for Chris. So I'm not sure if I'm reading too much into this. You left the EBITDA sensitivity is unchanged, but also volumes seem like they're trending towards the high end of the guide. Is it wrong to think that EBITDA will trend to the higher end of those ranges as well, all else equal?

Yes. Actually, it's a fair assumption. Basically, the way that we constructed those EBITDA ranges reason their range is driven by that volume consideration that we have, the 10% to 20%. So I think all things being equal, that's a fair assumption to make.

Then for my follow-up, there are a lot of moving pieces in the cash flow guide. I guess when I look at the reasoning for the lower conversion rate this year, it doesn't seem like those things are necessarily going away after this year, like you'll always be ramping projects. So how are you thinking about the operating cash conversion going forward?

Well, actually, I have a little different viewpoint on that. I do think that our cash conversion should be improving in 2025 for a few reasons. Number one, as I mentioned or as we mentioned in the prepared remarks, our cash taxes are very similar this year to what we had last year, and that's primarily because of Australia, and we're paying taxes based on income from last year. If you assume that pricing is sort of flat for the rest of the year, I think you should assume that our cash taxes will be lower next year, all things being equal. The other part is that our facilities are so far, as you heard in Kent's remarks, ramping quite well. And so we would expect that those will start to contribute as we get into the back end of this year and into 2025. And as Kent mentioned, right now for where we are, the ramp that you see in our volume growth is just based on the projects that we are finishing up right now and are ramping right now. So we won't be ramping plants forever, that will most certainly come to an end and those plants will begin contributing and the back half of this year and into 2025. So I do anticipate our cash conversion to get better.

Yes. And just a little finer point on Neal's point, I mean we are those -- the new plants that are ramping will be as we grow, our business grows, they become a smaller part of the portfolio. So we'll still be building new plant and ramping over time, but they become a smaller percentage of the portfolio. And then at the moment, we have a lot of plants ramping in that particular phase. I didn't necessarily plan it that way, but that's how it's worked out. We've got, I think, 4 plants actually ramping now at the same time. And that's not the plan. Going forward, it won't be that many. And if they were, it would be a smaller part of the portfolio just because we've grown.

Our next question is from Kevin McCarthy at Vertical Research Partners.

This is Matt Hettwer on for Kevin McCarthy. Regarding the spodumene and carbonate auctions that you just touched on, what does the customer feedback been like? And how has the auction participation rates trended?

Matt, this is Eric. We've got very good participation. We're very early in our process. And so we're very -- with a qualification process to make sure we're -- we're inviting people to these auctions that meet certain standards, but that's growing over time. The participation rate we received and the corresponding conversion of those invited versus those who put in a bid has been strong. The interest has been, therefore, good and the outcome has been well received what we think about the market, particularly from a price reporting agency, we found that these through the normal surveying process, the results of these bids have found their way into the price reporting agencies. Of course, they determine how they use that in their next calculations, but it's our anticipation that they're lending there as well. And then as we turn to the -- to our sort of contracted customer base, they appreciate that what we're doing is better understanding in what is a pretty immature market how -- what the drivers are, as Kent was referring to different types of prices, whether that's inside the country, outside of country or an IRA compliant, non-RA compliant product or a spodumene versus a better grade carbonate. It's giving us better intelligence to better segment, understand what's happening in the market and a lot of the same for our customers in the contract side ultimately because that would be reflected in the indices they referenced.

And then as a follow-up, I believe in the prepared remarks, you mentioned expanding the auctions to other geographies and products. What other geographies are you looking at? And in the future, might you include hydroxide in the auctions?

Yes. So I touched on a little bit when I talked about IRA compliant. But just as reference, almost -- actually, all 4 auctions that we've done today have all been inside of China with available inventory on the ground there. We'll be looking for product outside of China shipped on a CIF basis, for example. We'll be looking at that certainly for our Australia product. We'll be looking at it for [indiscernible] compliance ship to the U.S. and across our product range, including hydroxide.

Our next question is from Ben Isaacson at Scotia Capital, Inc.

This is Apurva on for Ben. So we're heading into what has historically been a peak buying season in China just off of the earlier comments on demand, are you starting to see this restocking materialize?

Yes, this is Eric. As I pointed out, we've seen inventories at a fairly low level, ending in March, and I do think a part of the demand is to restock in anticipation of the midyear and into later year seasonality of EVs. It's one reason why it's very hard to look at Q1 sales of EVs and correlate that to real on-the-ground demand because the EVs that are being sold in the first quarter this year were lithium for that was sold late last year -- middle of the late of last year. And we are seeing -- I think it's a part of the demand that I referred to earlier, it's not only fundamental demand for what our increased EV sales that are coming in that -- we see in April and we expect in May and June, but also it's a result of some restocking because some of the levels of which inventory gone to, it just weren't sustainable for these operations to run without taking considerable risk of not being able to meet demand.

Great. And as my follow-up, looking back with your 10-K, you actually published an updated technical report on Greenbushes. With that report, we saw something of a step down in both grades and recoveries and concurrently, costs have moved upwards. Given those technical effects, where do you see the next phase of resource growth coming from for Greenbushes.

Well, that's you're correct. You're referencing a report that we published on our SEC guidelines, which are have a different standard. It's not uncommon in mining for different standards around the world and different standards are more strict and how they should be exercised and that produced some of the results you're describing. This is still even in that report on a relative basis the best spodumene resource reported in the world. And our aims are to continue, as we've described to -- we are now executing with our joint venture partners at CGP3 expansion. There is the possibility long term, although we have not announced this formally or committed to it for further expansion of CGP4 and continued operation of that operation at its current grid reported for quite some years, decades to come. So our intention is to maximize that resource given its low cost potential.

Our next question is from Michael Sison at Wells Fargo Securities.

Good start to the year. You have a slide on sort of minimum capital and I think the line looks like billion. So if hiking kind of stays here, is that where CapEx will go in '25. And what would that mean to your capacity potential in longer term if that has to be the case.

Yes. So I think we've commented on that earlier. So we can -- we would look at the billion that's kind of maintenance capital for us around to maintain our assets and continue to operate there. And we could -- if we -- if prices stay where they are, we could get to that kind of on a run rate by the end of '25, so '26 number, so to speak. '25 would be a little bit higher, but we get to the run rate by '25. That would impact our long-term growth if we went to that level. So the current planning that we have, the projects we're executing at the moment, get us kind of a 20% growth rate through '27 or so. And if we were to cut back to those levels, we'd impact that materially beyond that.

And as a follow-up, your EBITDA margins for any storage, they're pretty good. And I know you think we need -- you need higher pricing for the industry. So I mean, what price do you think lithium needs to be at to support the growth that is expected for the end of the decade, and maybe any thoughts on where you think others around the world who are -- where their margins are because yours are again, from a -- are pretty good, not as good as it used to be, but I think there's still a pretty good margin.

Right. So I'm not going to comment on other people's margins. But if we stay where we are, we can operate at about -- at a 30%-ish type margin rate once we get the noise out of the P&L, that kind of the transition from the big prices and some of the spodumene costs. So on a run rate we could get to around 30% and still grow our business for us. I think that's the good margins that you're talking about. We've had stronger margins than that, and they would be stronger if prices move up. The issue with price is really about returns on new investment projects more than it is about our existing business, P&L and the margins that we can deliver. So prices need to move up in order to develop new projects to get the growth the industry needs to support the EV transition. I'm not going to comment on because it's different by every project and every geography as to what price you need and you need to believe that for 10 or 15 years in order to get a return on the project when you go through FID. So I can't say a number and if I had one, I probably wouldn't say it, but they are different by geography, by region, by technology, what the resource looks like. So it's quite different. There's no way to pick one particular number.

Our next question is from Joshua Spector of UBS.

It's Chris Perrella on for Josh. I just wanted to follow up on Neal, the 2Q Energy Storage EBITDA margin that you guided to, given the puts and takes, you have the higher cost spodumene inventory, which is maybe a $50 million drag in the second quarter, but you also have the one-off from Talison. So how does that bridge together to get to your 2Q margin? And then does it step down with the absence of the Talison one-off in the second half of the year?

Yes. So I think if I -- let's talk about the second quarter first. So basically, the way to think about this, I think your numbers are probably all in the right kind of range. If you do the math based on the first quarter and what we said in the prepared remarks that we expect about a 10-point bump in energy storages, EBITDA margin in the second quarter. You probably will get into the range of about $100 million bump to EBITDA Q2 versus Q1. And that's really just driven primarily by the expectation that all partners are taking their allotment off of Talison plus we have that additional 200,000 tons that is getting offtake in the second quarter as well. And so that's basically what serves as the basis for the 10 percentage point bump. In terms of then going forward, it is sort of a onetime bump up. And then what you should expect in the third and the fourth quarter is that we'll come back down to again, pretty healthy margins. It won't be as healthy as the second quarter. But you can expect that we will, as our plants continue to ramp up and we continue to absorb fixed cost, that will continue to get some margin expansion versus the first quarter, for sure, in the third and the fourth quarters as we exit the year.

That's perfect. And then a quick follow-up. Sequentially into the second quarter, do you expect volumes to be up? I'm just trying to bridge the seasonality to get to the 190 [indiscernible] for the full year?

Yes. So we will have volume -- at least sequentially, what you're asking about is, yes, we will have some higher volumes as we get into Q2 versus Q1. Remember that the peak for energy storage demand is usually in the third quarter. So we're building to that peak. So it won't be the highest quarter of the year. But yes, I would expect that you'll see a little bit higher volume in Q2 versus Q1.

Our next question is from Colin Rusch at Oppenheimer.

Given the dynamics around geopolitical positioning on manufacturing for batteries and some of the evolution of the tariffs that we're seeing on the solar side and other areas. Can you talk a little bit about the importance of refining and your thought process around that importance in North America as you enter into the balance of this year and next year?

Yes. So okay, interesting question. So the politics is playing into the market significantly, and we've got the integrated strategy. So we've got a good resource position, and it's spread around the world, so we have nice diversity around that. And we've built conversion. So we have conversion in Chile, in the U.S., lower scale at the moment. And Australia and China. So we're spread around the world, and we've got nice diversity around that and it allows us to kind of plan for some of these aspects. So our goal would be to have larger scale conversion in North America to satisfy the North American market and we are -- but we've paused on that a little bit, just on some of the issues that you've described, price being a big one, how geopolitics plays into it. And we're going to use that pause to figure out exactly what we do around that.

Okay. Great. And then in terms of some of the evolving cathode chemistries, obviously, we're seeing some activity around Delta LFP, and I'm assuming that the precursor materials are evolving a little bit. Can you talk a little bit about some of the specific adjustments that you're making around some of the refining processes to meet those cathode needs in a more tangible way as you go through the balance of this year and into next year?

Yes. I'll start on that. Eric can fill in the gaps. I think -- I mean the biggest thing for us at the moment is with the primary products around hydroxide and carbonate is balancing that. So as LFP has become more prevalent. It's got stronger demand on carbonate and we've been a stronger -- a larger percentage of our portfolio is carbonate historically. We've been building out hydroxide and then balancing those 2 is understanding where those chemistries go. And then long term, it's going to be about solid state and then how you shift from so much -- be more about carbonated hydroxide to about lithium metal. But that's a longer-term scenario. The carbonate hydroxide is playing out in the assets we're building now.

Yes. So Colin, just a little shed more color around that. I would say that we still see a market that is for hydroxide, high nickel is favored outside of China versus in with carbonate and supporting LFP being a very big part of the China market. The innovations that have been coming out of -- largely out of China and LFP chemistries for higher energy density and efficiencies as well as the cost profile of that cathode are obviously very increasingly now interesting to the West. And so we expect that. Certainly, our Chile position is in a position of power in which we can supply into that opportunity. We'll watch that carefully. As Kent talks about -- had talked about earlier about pausing the investment here in the U.S. or North America to figure out in this uncertain market direction and develop our own strategy there. One of those -- one of the components of that has to be on the assessment of LFP in the U.S., and that will be will be part of that equation as well.

Our final question is from Patrick Cunningham at Citi.

In the past, you've talked about the marginal cost of production being $20 [indiscernible] and maybe new projects pushing that curve up over time. Do you still believe that to be the case given we've seen relatively tepid supply response at current prices?

Yes, it changes -- it changes over time with volumes in the industry. But most new projects come on are going to be higher on the cost curve and moving that up. So we still think that within a $1 or $2, the accuracy of that. But I think we still believe that fundamentally is about the target of marginal cost today.

Got it. And then just a quick follow-up. Did price floors play a meaningful impact with price levels in the low teens for a good part of the quarter?

I'm sorry, your question was -- the price floor impact on our realized price for the quarter? Or was that the question?

Yes, yes. Was there meaningful impact.

Let's put it this way. We don't disclose a lot of our price floors, and they tend to range because often based on age of contracts. At current prices, some of those floors, some are being tested, floors have held. And so we certainly are seeing the floors come into play for some of our business.

Thank you. That's all the time we have for questions. I will now pass it back to Kent Masters for closing remarks.

Okay. Thank you, and thank you all for joining us today. We continue to innovate, adapt and lead the world in transforming essential resources into the critical ingredients for modern living with people and planet in mind. We are focused on continuing to be the partner of choice for our customers and investment of choice for both the present and the future. Thank you for joining us.

This concludes today's conference call. Thank you for your participation. You may now disconnect.