Albemarle Aktie

Hello, and welcome to Albemarle Corporation's Q1 2026 Earnings Call. I will now hand it over to Meredith Bandy, Vice President of Investor Relations and Sustainability.

Thank you, and welcome, everyone, to Albemarle's First Quarter 2026 Earnings Conference Call. Our earnings were released after market closed yesterday, and you'll find the press release and earnings presentation posted to our website under the Investors section at albemarle.com.

Joining me on the call today are Kent Masters, Chief Executive Officer; Neal Sheorey, Chief Financial Officer. Mark Mummert, Chief Operations Officer; and Eric Norris, Chief Commercial Officer, 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 strategic initiatives 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 also applies to this call.

Please also note that some of our comments today may 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. I'm pleased to report that Albemarle's performance is off to a strong start for 2026. For the first quarter, we reported net sales of $1.4 billion, up 33% year-over-year. We also delivered adjusted EBITDA of $664 million, more than double the same period last year, reflecting higher pricing and volume in both Energy Storage and Specialties, as well as cost and productivity improvements.

We continue to see strong end market demand, which I will discuss in greater detail as we get into the presentation. Our business is well positioned in resilient end markets. We are maintaining our outlook for strong lithium market growth led by energy storage demand, which is up 117% year-over-year. We remain focused on the areas within our control and made progress during the quarter, enhancing operational excellence, focusing on cost and productivity discipline and driving cash generation to enable long-term volume and earnings growth. In the first quarter, following the successful sales of our Eurecat joint venture and the controlling stake in Ketjen, we repaid $1.3 billion of debt, further strengthening our balance sheet and reducing interest expense.

As Neal will share shortly, we are raising our 2026 outlook for Specialties net sales between $1.3 billion and $1.5 billion and adjusted EBITDA outlook between $225 million and $275 million, reflecting higher pricing and volumes in our Specialties business. Moreover, year-to-date, we've delivered $40 million in cost and productivity improvements and remain on track to hit our full year target of $100 million to $150 million. We're able to maintain our corporate outlook scenarios as these improvements offset supply chain disruptions.

Now I'll turn it over to Neal to discuss recent results and outlook. I will then cover recent market trends and growth projects before we open the call for Q&A.

Thank you, Kent, and good morning, everyone. I will begin with first quarter performance on Slide 5. First quarter net sales were $1.4 billion, up 33% year-over-year, driven by higher volumes and pricing in both segments. Energy Storage pricing increased 51%. Volumes for Energy Storage and Specialties were up 14% and 7%, respectively. Adjusted EBITDA for the quarter was $664 million, up $397 million year-over-year, reflecting higher volumes and price as well as ongoing cost and productivity improvements in both segments. Both segments also saw strong adjusted EBITDA growth with Energy Storage up 196% and Specialties up 30%. Our adjusted EBITDA margin increased by more than 20 percentage points compared to the prior year quarter due to higher pricing and our continued focus on cost and productivity improvements. We reported diluted earnings of $2.34 per share.

Turning to Slide 6. I'll go over the key drivers of our year-over-year EBITDA performance. Q1 adjusted EBITDA increased by 148%, primarily due to higher pricing and volume in both Energy Storage and Specialties segments. In addition, cost of goods sold benefited year-over-year from cost and productivity improvements in both segments. By segment, Specialties EBITDA increased 30% year-over-year due to higher pricing and favorable product mix. Energy Storage EBITDA increased 196%, driven by higher lithium market pricing and increased volumes. Both segments' results were bolstered by cost and productivity improvements as well. The corporate EBITDA change reflects favorable foreign exchange impacts and the fully consolidated results of Ketjen prior to the divestiture.

Turning to Slide 7 and our outlook. As usual, we provide total company outlook considerations based on recently observed lithium market pricing scenarios. We are maintaining our total company outlook for 2026 across all 3 price scenarios despite global supply chain disruptions related to the Middle East. We estimate that the unmitigated full year cost impact of these supply chain disruptions would be approximately $70 million to $90 million, and expect it to be offset by the following: Reduced interest expense following our debt reduction actions in Q1, and stronger-than-expected pricing and volumes in the Specialties business, which gives us the confidence to increase our full year Specialties outlook, which I will cover on Slide 8.

The Specialties segment had a stronger-than-expected quarter. Net sales increased 12% year-over-year and adjusted EBITDA increased 30%, primarily due to higher pricing, favorable product mix and cost and productivity improvements. For the second quarter, we expect net sales to increase sequentially due to higher pricing for bromine specialties. EBITDA is also expected to increase modestly as favorable price and volume mix are partially offset by higher costs due to supply chain disruptions. Additionally, operations at the Jordan Bromine Company joint venture have fully recovered from the flooding event in late December 2025, and continue to operate despite geopolitical tensions and disruptions in the region.

Looking ahead and taking all these factors into consideration, we are increasing the range of our full year outlook considerations for the Specialties segment. We are raising our guidance for net sales to $1.3 billion to $1.5 billion, and for adjusted EBITDA to $225 million to $275 million, and we now expect EBITDA margin in the high teens. While outlooks for end markets such as petrochemicals and oil and gas remain volatile due to geopolitical tensions, this increase in outlook reflects bromine price and volume opportunities that we see, coupled with our strong operational execution and the success of our cost and productivity improvements.

Moving to Energy Storage on Slide 9. First quarter sales volumes were 53,000 tons lithium carbonate equivalent, or LCE, with an average realized price of approximately $17 per kilogram. The gap between our average realized price and market price is primarily driven by 2 factors: the 1 quarter pricing lag in our long-term contracts and sales of spodumene, which dilute our realized price on an LCE basis. First quarter net sales increased 70% year-over-year due to higher pricing and volumes. Adjusted EBITDA nearly tripled, supported by the same price and volume factors as well as the timing of consumption of spodumene inventories.

For the second quarter, net sales and EBITDA are expected to be up sequentially, assuming flat lithium market pricing due to increased volumes and pricing lags in our long-term contracts. EBITDA margin is expected to decrease sequentially due to the timing of spodumene inventory consumption and higher costs due to supply chain disruptions related to the Middle East. On a full year basis, we are maintaining our Energy Storage outlook scenario ranges even after including the impacts of cost increases due to geopolitical tensions in the Middle East. Our volume guidance also remains unchanged.

Turning to Slide 10. We continue to be successful in driving productivity improvements and converting earnings to cash. We are on track to deliver our full year 2026 cost and productivity improvements of $100 million to $150 million. Year-to-date, we have achieved $40 million in savings, primarily related to manufacturing and supply chain, including debottlenecking projects such as increasing spodumene utilization at our lithium conversion facilities in China and ramping new assets to their full production capability. We generated $346 million of operating cash flow and $248 million of free cash flow in the first quarter.

Capital expenditures were $99 million in the quarter. We continue to expect full year CapEx of $550 million to $600 million. At the $20 per kilogram lithium price scenario, full year operating cash flow conversion is expected to be within our long-term target range of 60% to 70%. As previously noted, there are select headwinds to our cash metrics this year, including recognizing deferred revenue related to the customer prepayment we entered in 2025, which will benefit EBITDA, but not contribute cash, and cash costs related to idling Kemerton Train 1, of which approximately $25 million occurred in the first quarter.

Turning to Slide 11. We took advantage of our successful cash and portfolio management actions to pay down debt and further strengthen our balance sheet and financial flexibility. During the quarter, we repaid $1.3 billion of debt, reducing our weighted average interest rate to about 3.1% and lowering our annual interest expense by approximately $60 million. We ended the first quarter with a net debt-to-EBITDA leverage ratio of 1x. And from a debt profile standpoint, we have no major maturities due until late 2028. Together, these factors offer us substantial flexibility and resilience to navigate the current environment.

I will now turn the call back over to Kent to detail our market outlook.

Thanks, Neal. Turning to Slide 12. Before we dive into the details of the lithium markets, I wanted to take a moment to look at the company more holistically. Our overall portfolio is well positioned in resilient end markets, and that gives us confidence in the long-term outlook for our business, even with the current geopolitical uncertainties. As a market leader with globally diverse operations, we can pivot to meet dynamic market needs. More than half of our net sales are in new energy end markets like electric vehicles and energy storage with strong secular growth trends. Both Energy Storage and the Specialties segment benefit from these trends.

Our Specialties segment end markets are diverse, including electronics, semiconductors, building and construction, and energy. AI demand strength continues to drive strong electronics demand, particularly in Asia and the Americas. Building and construction demand continues in line with our forecasts. While less than 5% of our net sales are in oil and gas markets, we anticipate near-term demand growth as investments shift away from the Middle East towards other regional markets.

Now turning to Slide 13. Global lithium demand is tracking in line with our forecast. So far this year, lithium consumption is up 37%, towards the upper range of our 2026 forecast of 15% to 40%. We are holding our outlook steady due in part to geopolitical uncertainties. That said, our early estimates suggest that lithium demand will be relatively resilient to the situation in the Middle East. For example, demand could be slightly up due to greater emphasis on energy storage or electric vehicles, or slightly down due to broader supply chain disruptions. Either of these scenarios falls within our 2026 forecast range. Importantly, lithium demand continues to diversify with 2 key end markets, energy storage and electric vehicles.

Now turning to Slide 14. Strong growth in the energy storage sector more than compensated for weak EV sales volumes during the first quarter. In China, seasonal weakness during the Lunar New Year and prebuying in December ahead of subsidy changes led to reduced EV sales in the first quarter. 2026 Chinese subsidies have shifted support to premium vehicle segments in Q1 leading to a 20% increase in average Chinese battery size and increased demand for lithium hydroxide. Due to the increased average battery size, global EV sales were up 3% year-over-year on a gigawatt hour basis despite a 6% drop in unit sales.

In the United States, EV sales were lower year-over-year, largely attributed to reduced incentives. However, I'll note that the U.S. market now represents less than 10% of the global EV market. Developing markets in other regions such as Brazil, India and Australia have collectively grown 74% year-over-year as EV penetration continues to diversify globally. European EV sales continue to show robust growth as well, driven by greater policy support, particularly in Germany, France and the U.K. Overall, we remain on track to hit our 5-year CAGR for energy storage volume growth of 15%. We achieved 25% CAGR over the first 3 years and expect to deliver moderate growth over 2026 and 2027 as our large projects complete their ramp. It's important to note that completing this phase of growth requires little to no additional CapEx. Our scaled, low-cost, world-class resources are performing well today with capital-efficient brownfield opportunities to fuel future growth.

Turning to our joint ventures on Slide 16. Operations at both Wodgina and Greenbushes are operating well and in line with our expectations. At Wodgina, we have a clear line of sight to operate all 3 trains at full capacity. Ore quality is expected to drop slightly over the next 2 quarters before improving in the December quarter as the Stage 3 pit deepens and availability of higher quality ore increases. Greenbushes is a world-class asset, and we are confident in the path forward and strategic direction. The CGP3 investment there is operational and ramping as planned. Our team is working closely with Talison's management team on value optimization studies to unlock the additional value as part of a multiyear transformation.

As a result of these studies, the team has identified productivity improvements, including lower waste movements and a smaller truck fleet operating at higher utilization, helping to reduce the impact of fuel price increases. To date, neither operation has been disrupted by global fuel supply interruptions, with good visibility of ongoing supply. Having access to both of these high-quality hard rock resources plus our low-cost brine position at the Salar de Atacama positions Albemarle well for global growth.

Slide 17 shows our progress as our longer-term projects at the Salar de Atacama in Chile and Kings Mountain in the United States. At the Salar de Atacama, we have initiated the environmental permitting process for a commercial DLE project. While the permit evaluates up to 6 trains of DLE, I want to stress that these investments would be phased in a prudent manner, contingent on approvals and investment decisions. Our pilot plant at La Negra has now operated for over a year and has achieved quality and recovery targets, including greater than 94% lithium recovery. We are evaluating numerous adsorbents and membranes, including proprietary and third-party technologies, and we've been able to incorporate findings from the pilot operation into our early engineering for the commercial plant.

At Kings Mountain, we are currently obtaining the required permits and conducting comprehensive economic and environmental predevelopment evaluations prior to making a final investment decision. The project recently received federal mining permits, a meaningful milestone, and we continue to engage with local and state entities to obtain their respective approvals. As we continue drilling and engineering work, the more we learn about Kings Mountain, the more confident we are in the long-term strategic value of this asset. We look forward to sharing our progress as there are further developments.

To summarize, we're off to a strong start in 2026 as we continue to demonstrate operational excellence and capitalize on the secular growth opportunities supported by our end markets across mobility, energy, connectivity and health, including the global need for long-term energy security. We are continuing to take disciplined actions to enhance our long-term competitive advantage and leveraging our strengths, including our world-class resources, expertise and innovation to position us for sustainable growth and value creation over the long term.

With that, I'll turn it over to the operator to take your questions.

[Operator Instructions] Our first question comes from David Begleiter with Deutsche Bank.

Kent, have you seen any -- at this higher level of lithium pricing, have you seen any change in buyer behavior either getting ahead of or whatever else to deal with the higher pricing in the lithium market?

Thanks, David. So I don't know that we've seen a real change in behavior. I mean, it is evolving. So we have to -- it's only been a few months, right, since price has changed. And I wouldn't say we've seen a change. The conversations may be a little different. Eric is a little closer to it. So maybe you can comment.

Yes. David, I would say that -- I'd substantiate what Kent said. It's fairly new. Most of the growth has been on the ESS side, as we described in the call here. There's a lot of interest in the sort of the carbonate supply chain. That contrasts with EVs outside of China, which are a little weaker on the hydroxide side in terms of sentiment. All in all, though, we've got a pipeline of customers who are very interested in talking with us about certainly spot bids, but also contracts, and we're being very cautious as we look at that in terms of how we think about where we want to take that contract mix over time.

Very good. And just on the DLE opportunity in Chile, any early thoughts on potential cost improvements or benefits from this route versus your traditional solar evaporation route?

Yes. So it's more about being able to access more lithium in the Salar at the cost position we're at rather than trying to do -- it's not really a cost improvement program, it's about being able to access more lithium in the Salar under kind of the environmental conditions there.

Our next question comes from Patrick Cunningham with Citi.

Kent, you seem to hint the broader deployment of renewables as a result of the crisis could be a potential positive for lithium demand. I guess, is that anything that you've seen already? And how would you expect the market to respond to higher embedded risk premium in oil, concerns around energy security?

Yes. So there's a lot there, and it's difficult to see that in the market. I mean, we think that may have an impact on both EVs, but also Energy Storage segment, as we're calling that now. It's difficult to see. But I would say energy security and grid resiliency is probably one of the bigger drivers around that. I'm not sure that's about the Middle East crisis, but it's clear that's a big driver around the world.

Got it. And then just on Greenbushes, I think one of your JV partners noted some issues around grade recoveries and production stability, maybe even suggesting that they're more systemic. I guess, is this in line with your assessment? And how does it affect the ramp-up at Greenbushes?

So look, Greenbushes is operating in line with our expectations and the outlook considerations that we put forward. So every year, we look at all of our assets, and we make a risk-adjusted forecast around that, and we're fully in line with that. And the ramp of CGP3, so we started that up at the end of the year, and we expect it to ramp through this year. And I would say that ramp is on schedule. So it's fully in line with our expectations and our plan.

Our next question comes from Mike Sison with Wells Fargo.

This is Abigail on for Mike. So as you look further ahead to your brownfield projects, what are the hurdle rates for these? Is there any scenario which any of these don't happen? And then how much capacity do you think these would add beyond 2027?

So look, we look at it as -- so we are now kind of ramping investments that we've made that gets us through that profile that we showed you there. So it slows down a little bit of growth into '27. That's ramping the kind of bigger investments that we've made over time. The next phase would be those brownfield investments, and we think that gets us somewhere in the high single-digit growth rate maybe for that period of time. And those are at existing assets. So that would be, for example, Greenbushes, Wodgina, and at the Salar de Atacama.

And we think of over time, after that, we think there are more significant investments we could make on resources that we own, Kings Mountain, for example, and then further trains at the Salar de Atacama. So we have a pretty good line of sight for growth. But the first tranche of that would be those brownfields. The returns would be -- I mean, it's hard to say what the -- we would look for hurdle rates. It would be traditionally the way we look at that, and we'll make those decisions at the time depending on how we see the market growth, pricing, what the costs look like from those assets.

Okay. Got it. And then for the 2026, 2027 projects, you're talking about requiring minimal additional CapEx. Can you just give us a feel for size there? Any color you can give would be helpful.

Yes. Well, I think for '26 and '27, it's really just ramping up the projects that we've built and done. Probably the most significant one there would be the full ramp of Greenbushes, CGP3, and then getting Wodgina operating on 3 full trains. We're operating 3 trains today, but we anticipate working through a more difficult part of the mine. So the quality of the resource is not as good. We expect that to improve in the fourth quarter. That's the thinking around that. And that's kind of where those incremental volumes come from, plus just the normal productivity things that we do with better recoveries, Salar yield at Salar de Atacama, for example, the project we've invested in, and we're still working to get more and more out of that.

Our next question comes from Josh Spector with UBS.

It's Chris Perrella on for Josh. Can you unpack the puts and takes to the 1Q energy storage margin? Given the $20 a kilogram spot price you guys experienced in the first quarter, I would have thought margins would be closer to 50%. So just kind of why were they so much better?

Yes. Chris, this is Neal. Sure, I can take that. Really, the main driver of that is the traditional lag that we see in spodumene costs and how we consume spodumene through our supply chain. So really, there was a small uplift in margin because essentially, we're consuming spodumene that we purchased from our mines in the fourth quarter, which was obviously a lower price than what you saw in the first quarter. But it's minimal.

I think you see that our full year outlook, if you assume kind of flat pricing across the year, we've guided to Energy Storage potentially being in that mid-50% range. So there was a little bit of an uplift in the first quarter due to that. But obviously, that will start to normalize as we go through the year, assuming pricing stays consistent for the rest of the year. And that's why we gave you guidance that we expect margins to come in a little bit in the second quarter as, all things being equal, assuming that, that normalizes.

All right. And then just as a follow-up there, the Specialties outlook, you did $75 million, $76 million in the first quarter EBITDA, higher in the second quarter. What's causing that to drop off in your outlook in the back half of the year?

Yes, I can start with that, Chris, again. It is really, at this point, just the uncertainty that Kent mentioned in the opening remarks. Right now, the visibility that we have is at least through the middle of the year, and we are driving some price and volume initiatives that give us that confidence around the second quarter. I think we'll continue to give you updates as we go through the year. There's obviously a lot of uncertainty around the world, of course, stemming from the situation in the Middle East, and we're just watching that very closely.

Our next question comes from Vincent Andrews with Morgan Stanley.

Just wanted to follow up a bit on the brownfield opportunity and just color a few things in. Kent, were you saying that these assets could potentially start up as early as 2028, or would the timeline on that be a bit longer? If you could just help us understand what the lead time would be?

Yes. So well, none of the projects are finalized. So there are opportunities now. So I'm not sure we even call them projects. But there are things that we've talked about and discussed over time and we'll bring those on when we think it's the right time, right? And obviously, a couple of those are with our joint venture projects, so we need to align with our joint venture partners as well. So somewhere in that -- it's definitely clearly after '27, in that time frame, but we think that is the next leg of growth for us in that phase. And we say that because the bigger investments and bigger projects like Kings Mountain would be after that, right? So it fills the gap in between those two.

Okay. And Neal, can I just ask you, on Slide 10, you talk about it, at $20/kg, the free cash flow or the operating cash flow conversion would be 60% to 70%. As prices ramp higher than that, how much of that drops down to cash flow versus how much would go up to working capital? So would we stick with the 60% to 70% range? Would it be higher than that? Would it be in the lower end of the range? How should we think about it?

Yes, Vince, look, I think it, of course, always matters in the shape of how that pricing moves up. If it's a very sudden move up in pricing, particularly if it's towards the end of the year, then I would expect that our cash conversion will compress in the immediate just because of how sharply the working capital runs up and how quickly we can get that back in terms of cash. If it's a little bit more gradual, look, I still think that 60% to 70%, when we've done our benchmarking and our modeling, that seems to be the right place for us to be from a steady-state perspective. So if it is a little bit more of a ratable kind of movement up, I would expect us to be able to still be in that range.

Our next question comes from Arun Viswanathan with RBC Capital Markets.

Congrats on the strong results. And apologies if this was asked earlier, but did you discuss the reduction of output at Greenbushes? It looks like it's about 10% to 15%, and how that affects kind of your own operations?

Okay. So we had said that in an earlier question. So Greenbushes is operating in line with the plan that we have, right? And as we look at that every year, we build our plans, we look at all of our resource assets and we risk adjust those. And so what we've built in our plan for Greenbushes this year, the mine is operating to those plans, including the ramp of CGP3. So we're on our plan for the ramp of CGP3. And we started that project, first ore at the end of '25, and we felt like we could ramp it throughout the year. And then it's a schedule according to that ramp, but we should be at full capacity by the end, and we think we're on that schedule.

Okay. And then you noted that ESS demand could be a little bit stronger, I guess, and we did notice kind of stronger EV demand also in the last month versus the first few months of the year. So are you seeing demand improvement? And obviously, I think you're still guiding to about flattish volumes. So is there any way you can address that upside on demand, if there is any? Or would that be unlikely this year and potentially likely next year? How should we think about your opportunities to capture some of that extra demand, if there is any?

Yes. Eric can talk about maybe a little bit more detail. But I would just say, look, the market is growing, it is strong, but we're working through the seasonality, right? The early part of the year is always difficult to figure out what exactly is going to happen with the Lunar New Year, China is such a big market. That has a big impact, and we're off of that now. Demand is strong, but I'm not sure we're ready to kind of say it's at a different level.

Yes. So this is just to add, on a demand basis, our customers, the battery companies around the world, particularly in Asia, who produce for this market, their order books are full from now through the beginning of '27. So demand is very strong in Energy Storage, driven by the factors of grid reliability, renewables in various parts of the world, as well as AI and behind-the-meter storage. So there's very favorable trends that are driving that kind of an outlook.

And Arun, this is Neal. I think you had asked about our demand forecast -- sorry, our volume growth forecast for this year, which is flat with last year. Look, underneath that volume forecast was an assumption, as Kent highlighted, about how we see our resources ramping through the year. That's one part CGP3 and the other one being the improvements that are getting driven at Wodgina. Everything is going according to our plan, which is why we're still holding on to that volume outlook. But obviously, as we go through the year, if we start to see upside, we'll continue to give you updates. I think our volume growth potential this year, in particular, is really driven by how well those resources continue to move in their capacity expansion.

Yes, it's about availability of product from our perspective rather than market. Market is pretty strong.

Our next question comes from Laurence Alexander with Jefferies.

Two questions. First, can you talk a little bit about whether there's any advantages or disadvantages for you if the LFP producers need to switch to yellow phosphorus to reduce their sulfur consumption, and also how higher sulfur prices are affecting your economics versus your peers? And then secondly, just longer term, if you do undertake something like Kings Mountain, what would you see as like the desirable range for your balance sheet? And what balance sheet metrics would you use as boundary conditions?

Okay. So maybe, Eric, you can talk about the LFP chemistries a little bit, because...

Yes. So you might have to expand a little bit on your question, Laurence. Let me answer the part of it that is clear to me and I think is important to understand. We talked in the call about raw material costs rising $70 million to $90 million across the enterprise, and we have a variety of ways we're mitigating that. One of those drivers, a fairly big driver, is sulfuric acid. I don't think we are advantaged or disadvantaged versus anybody who buys sulfuric acid around the world, particularly in Asia, where a lot of the conversion activity happens for hard rock conversion. So that's a cost that's affecting supply. In fact, frankly, any acid roast and leaching process is going to be impacted by that. Your first question was not clear to me, maybe you could restate it.

So my understanding was that one way to offset the cost on sulfuric acid for the LFP producers is for them to switch to yellow phosphorus. And that if they did, I was curious as to whether there's any issues with the contaminant profiles of the lithium from different mines. Like I mean, my understanding is you have an advantage in terms of being able to reformulate your product. But maybe I'm just overthinking kind of the dynamics there.

Well, I think one of the advantages of those LFP producers, the cathode producers who reside almost entirely in China that they have is their upstream capabilities to access phosphorus in various forms of it. I've had some discussions with some of these companies about how they do that. I understand any trade-offs are not impacting their ability to deliver quality. And that's, at the moment, the best I could say. If we learn more, we'll certainly share more.

And then, Laurence, this is Neal. Maybe I can start with your question on Kings Mountain. Look, what I would say, as you can see as a company, because of the extreme volatility that we've seen over the last 5 years, we are obviously in a position of balance sheet strength. And we are on purpose taking a conservative stance right now just because of the volatility we've seen in general. But as we look at Kings Mountain, and I want to highlight, we're nowhere near a final investment decision.

Our next question comes from Joel Jackson with BMO Capital.

The first question is, you're talking about Q2 margins guidance or commentary as if spot prices hold Q1 levels. Our prices or market prices are actually higher in Q2 than Q1. So can you talk about that? I mean what quarter-over-quarter price increase would you need to hold Q1 margins? Or how would you frame it?

So I think -- let me start, Neal, and then you can talk a little bit more detail. But I mean, look, there is -- a portion of our volume is on contracts or about 40% on contracts, and there's a lag on that, right? There's typically a 3-month lag on how pricing moves through that. So that will move up slightly just as we go through the quarter if prices stay where they are. So we're not forecasting prices, but that's just a function of the way our contracts work. So it will move up, and that will impact margin as we move forward through the quarter. Then it becomes more steady state as it will catch up as long as prices are flat.

Yes. Just to add to that, look, if you hold everything flat, essentially to get to that higher margin that you're assuming, basically, from our $20 scenario to our $30 scenario, everything basically scales linearly. So to get to the higher margin, you have to make an assumption around just a higher price realization in the second quarter, all other things being equal. So it really comes down to pricing.

Okay. And Kent and team, if I circle back to the Greenbushes question, which is, I've heard your answer a couple of times now on what you're saying about Greenbushes being the plan. But one of your JV partners really went public the other week and talked about safety, and it was in the prepared remarks, and it was very aggressive in wanting to call out to the public what they feel should be happening or is happening at Greenbushes. It is a different commentary that you're giving today. Why do you think your JV partner is wanting to do that? Is this just about negotiating how the mine plan should go forward, production, throughput, concentrate grades, and you have different interest being a customer of the spodumene as well? Like why do you think your partner is so aggressive in the market talking about safety and Greenbushes issues?

Yes. So I guess I would -- look, I'm not going to comment on their perspective of what they're doing. I would say they're our partner's partner, right? So as we go through that -- but we do have -- we're not happy with the safety position at the mine. We've had lots of conversations with the management team and our partners around that. We have a plan, and it's improving, and we're working toward that. Safety is not something that you move overnight. It's a long-term program. We feel that we're on the right track there. But the mine is operating to the plan that we thought they would during the year, and we don't see exceptions to that. So the way we view it is that we are on plan. The CGP3 project started up last year, and it is ramping through the year, and we're on that ramp plan. So we don't see a variance in our plan, and I can't comment on what our partner is thinking when they talk publicly.

Our next question comes from Colin Rusch with Oppenheimer & Co.

As we look at some of the NDA compliance deadlines coming up at the start of 2028, I'm just curious about how you're planning to meet those and what we can think about from a CapEx perspective if there is any to meet some of those requirements?

I'm not sure I understand that question. Can you just say that again?

Yes, so NDA requirements for military batteries. We're looking at having to have entire supply chains in North America to meet some of those requirements. I'm just curious about your ability to meet those volumes and any CapEx plans that you have here over the next 2 years to be in line with them.

Okay. Look, that's a segment of the market that we would want to serve. We actually have probably the only lithium produced today in the United States comes from Silver Peak and processed at Kings Mountain. So that's the only kind of pure lithium processed in the U.S. today. We have that. It's a pretty small volume. It's not a big piece of the market, but we can serve that through other locations with allied countries like Chile as well. So I mean, it is an opportunity for us. And as we look going forward to make investments, obviously, Kings Mountain, the mine itself would be one of the opportunities to serve that particular volume. Look, I would say we're not over-indexed on it. We think about the total market overall, but military applications in the U.S. is definitely an opportunity for us.

Great. And then as you look at the European demand for EVs and seeing that grow, is there any concern that there's new regulations coming out of Europe in terms of compliance around supply not being able to come from China for any of those OEMs or through the EU properly from a regulatory perspective?

Yes. Look, so there is a lot of conversation going now around critical minerals. And when we hear that, we think lithium, and around diverse supply chains, global supply chains, allied countries, that's going to move a lot over time. From our standpoint, we have a diverse portfolio, so around the world, so both brine and hard rock, but in a variety of different countries, and we think we'll be able to satisfy that one way or the other. So if it's tighter regulation, it just makes a different opportunity for us. If it's not as tight, we have our full portfolio to work with. So we see it as an opportunity, not a concern. And then we have to wait and see exactly how it plays out.

Our next question comes from John Roberts with Mizuho.

I have just one. Assuming this year plays out according to plan, where do you think your debt level should be this time next year? What would be a targeted debt level?

Yes, John, this is Neal. Look, I mean, I guess there's a lot of estimating and forecasting to get to that number. But look, if you -- I'm sure you're doing this math on your side, if you just take flat pricing from where we are today and just run that across the end of the year, we exited first quarter at 1x net debt-to-EBITDA. And you can imagine that at these kind of prices, we'll probably trend down from there below 1x. So obviously, like I had said before, our stance right now is to be in a little bit more conservative balance sheet position and for all the volatility and uncertainty that we see in the world, and that's our posture for the year.

Yes. I would add to that. Look, we've brought ourselves through a tough period, and we clearly want to be a little more conservative as we go through that. We haven't worked out all the details around that, but we're trying to -- our overall goal, we're building a company that will be able to work through the cycle regardless of where it goes and that we would still be -- can be opportunistic at the bottom of the cycle. That's what we're trying to do. The balance sheet is definitely a part of that strategy.

Our next question comes from Kevin McCarthy with Vertical Research Partners.

I was wondering if you could speak to the quarterly cadence of your lithium sales volumes. You're guiding flat for the year. I think in the first quarter, you had 53 kilotons, which was up appreciably. It looks like your comps are a little tougher in the back half. So maybe you could speak to how you would foresee that flowing through in the second quarter and the balance of the year?

Yes. Kevin, this is Neal. I'm very happy to start. So the first quarter is typically our softest quarter, of course, because of Chinese New Year and just general seasonality. You should expect volumes to pick up here in the second quarter and the third quarter. I would not expect our fourth quarter volumes to be as strong as they were last year, mainly because we had inventory reductions that we did at the end of the year, as we saw that kind of strength in demand come through in the fourth quarter. And so that's the reason why we've been guiding to this overall sort of flat volume year-over-year. It's exactly what you said. We have tougher comps on a year-over-year basis as we go through the year. And so that's why you saw some volume growth here in the first quarter. That was the easiest of all the comps. Those will get tougher as we go through the year just because of the elevated sales volumes that we had last year.

Very good. And then I'm tempted to ask, does Albemarle have any visibility at all into whether your lithium molecules end up in an EV versus an energy storage system? And if you do have any visibility, do you care? In other words, is there any strategic or commercial effort to influence your mix in one direction or the other? How do you think about that?

So I mean we do see where it goes. I mean it's not 100% transparent, because a lot of times it's the same customers, but we have those discussions. We know where they're going. We understand order books and one versus the other, because they have different profiles. So I think it is important that we understand that. We think we have pretty good visibility of it. It's not perfect, because it is the same customer base, but it relies on customer conversations and their transparency with us. But we feel like we have a pretty good handle on that. Eric, do you want to comment on that further?

No, I think that's right. I think that's right. Clearly, someone buying carbonate for LFP production, that could go EV or ESS, but it comes down to the knowledge we have on the ground to be able to ascertain the difference. And to the second part of your question, it does matter in that we want to make sure we're close to understanding what's driving growth, so we can plan our own capacities and approaches to the market accordingly.

Our next question comes from Mazahir Mammadli from Rothschild.

I just wanted to ask about the lithium market. So if we assume that the current market conditions persist, what kind of supply response would you expect over the coming year or so? And particularly, would you say that the current price is high enough for some of the unconventional supply that we saw in 2022, 2023 to come online?

So I guess, first, I would say, it takes time almost for anything to come back, right? So if you've idled capacity and you've kept it in the right shape, condition, you can bring it back in pretty short order. But if you really put it in care and maintenance, it's going to take some time. And when you talk about mines, you have to think about things like yellow equipment and all of that, which is not sitting on the shelf. And even brownfield mines, it's a couple of years. And if it's greenfield, it's further than that.

And then some of the unconventional. I don't know that we're at prices where things get a little crazy. I think also people learned a lesson in the last cycle about the nature of the market. I don't think we're going to see a massive supply adjustment to this, at least that's not how we're thinking about it at prices where we are now. If you think about a lot of the projects that were on the books and maybe even still happening, we're now getting to the point where their financial forecasts are in the market, so to speak. It's not that we've gone way above them, that we're just getting back to the numbers they were using to justify projects. So I don't think you see a huge supply response.

And just a follow-up on the specialties business. So the bromine price in China, if you look at the current prices, almost as high as the peak in 2022. And in 2022, this segment generated EBITDA of over $0.5 billion. Is that a trajectory we should expect if the bromine price stays at this level? Or are there other moving parts that we should think about?

Yes. So there's a bit in there. So prices, they did peak. They've actually come off fairly quickly recently, but they were at a higher level, and we're below the performance level we were. But we recognize that we have some operational cost issues we need to address around that, and we're working on that. We've got projects around that. And I guess the other piece, and Eric can talk about this, but that bromine price you see, there's a small amount of our bromine that we sell on that basis. But it is the most visible index that you can see. So I understand why you watch it. We watch it as well, and it's indicative in the market, but it's actually a very small part of our bromine that we sell on that index.

Yes. Just to add to Kent's comment, this is Eric speaking. As you look at our overall Specialties sales, which, of course, includes lithium specialties and bromine specialties, it's 20% or less of our sales that are exposed to that kind of index, which is prevalent in China for upstream bromine. If you go around the world, regional markets behave differently. If you go down our value chain into derivatives, there you're going to get more of a specialty chemical type approach to pricing. So it does vary.

And the pricing this year has been driven, we believe, by what has been a lot of anxiety at the beginning of the year around supply. But we had our own issues at JBC, which we resolved quickly. You have the Middle East crisis, which has created anxiety. In the midst of that, we've been able to position ourselves as a very reliable and diversified global supplier. That's helped us on the one hand. But on the other, as the Chinese seasonal production comes on, that has led to some price easing in China, too. So this all comes back to the question on the second half of the year and our visibility that Neal answered the question on earlier. So this is why we're a little cautious, but those are the factors that have contributed to what we're seeing right now in bromine.

Our next question comes from Rock Hoffman with Bank of America.

I understand not wanting to take a view on near-term market pricing. But just with current Chinese spot near $27/kg, is there upside to that $20/kg market scenario guide if pricing stays at current levels? And maybe just on the other side of the market balance equation, how would you assess any near-term supply shocks either in Zimbabwe, Jiangxi province or elsewhere?

Yes. So I guess -- I think the first one, if I understood the question, it's a pretty easy answer. If the Chinese price stays at $27, there's upside to our $20 forecast. I think the answer to that is yes. There's not a lot -- I don't think I'm taking a lot of risk in saying that. And the supply, I mean, what's happening, look, there's in and out moving. I think you're always going to have that in supply in the lithium when you're coming, there's African resources. Zimbabwe, we don't see that as a supply that comes off long term. I think that's a short-term issue, probably, call it, a negotiating position, if you will. So it has taken some product off the market, but we see it coming back in months or quarters as part of that.

The lepidolite in China is a little more difficult to call. Some of those have been offline, and offline for quite some time, almost going on a year for the CATL mine, I think we understand that to be more about permitting rather than operations, but then that still has to play out. I don't think we can answer that, but I don't think this is like an extraordinary thing. This is going to happen in the lithium world where supply comes in and out on a regular basis. The market is big enough now to where 5 years ago, a mine coming off like Zimbabwe or a couple of mines would have been massive. The market is big enough now to where it influences, but it's not a huge supply shock.

Understood. And just as a follow-up, any updated views on the 2 major contracts, which roll off at the end of this year? And more broadly, how should we think about potential shifts of that product mix from the current 60% spot, 40% contracted?

Yes. So we don't have anything to update on those. I mean -- and this is kind of business as usual as we've done these. We have conversations with our customers, and then we tend to adjust as we go through the year. But we have no update on those particular contracts at the moment. Eric, anything?

No, business as usual, we continue to evaluate a path forward with those customers. We also have a pipeline of many others who are prospective contract customers, and we're evaluating the terms and whether those meet our objectives, and we'll update you when we have a better view of that towards the end of the year.

Yes. And we're always talking about contracts with our customers. And you can imagine the conversations are different today than they were a year ago just because of where the market is. But we continue to talk to them, and we don't have any updates on that, but we will provide them once we have some clarity.

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

Thank you, operator, and thank you, everyone, for joining us today. We've managed through a challenging period and actively positioned the company for future growth and resilience. As we look ahead, I'm deeply optimistic about our company's trajectory. Our team is dedicated to delivering operational excellence and sustainable growth, and our efforts are bearing fruit. Together, we will continue to leverage our competitive strengths and world-class resources and process chemistry expertise to capitalize on the opportunities created by the energy transition. I look forward to sharing more milestones and successes with you in the coming quarters. Thank you.

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

Hello, and welcome to Albemarle Corporation's Q4 2025 Earnings Call. I will now hand it over to Meredith Bandy, Vice President of Investor Relations and Sustainability.

Thank you, and welcome, everyone, to Albemarle's Fourth Quarter 2025 Earnings Conference Call. Our earnings were released after market closed yesterday, and you'll find the press release and earnings presentation posted to our website under the Investors section at albemarle.com.

Joining me on the call today are Kent Masters, Chief Executive Officer; and Neal Sheorey, Chief Financial Officer; Mark Mummert, Chief Operations Officer; and Eric Norris, Chief Commercial Officer, 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 strategic initiatives may constitute forward-looking statements. Please note the cautionary language around forward-looking statements contained in our press release and earnings presentation that same language also applies to this call. Please 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. For the fourth quarter, we reported net sales of $1.4 billion, up 16% year-over-year with double-digit volume growth. We also delivered adjusted EBITDA of $269 million, up 7% year-over-year, reflecting strong growth in energy storage and significant cost and productivity improvements.

Turning to the full year. We achieved net sales of $5.1 billion and adjusted EBITDA of $1.1 billion. As expected, these results were at or above our previous outlook considerations. Significant cost and productivity improvements, volume growth and sales channel mix contributed meaningfully to our full year performance. We are providing an update to our lithium demand outlook to incorporate stronger lithium demand growth for stationary storage. As a result, our estimated range for global 2030 lithium demand is up 10% versus our previous forecast.

That brings me to our new full year 2026 outlook. We are using the same methodology as we have the past 2 years, providing outlook ranges for various lithium market price scenarios. This year, those earnings reflect both our operational improvements and higher lithium pricing. We are also targeting additional cost and productivity improvements of $100 million to $150 million and stable capital spending in 2026. As a result, we see the potential for meaningful positive free cash flow at current lithium pricing.

Since 2024, we have successfully executed actions to reduce costs and capital intensity, generate cash and enhance financial flexibility. In 2025, we achieved approximately $450 million in run rate cost and productivity improvements and reduced CapEx spend by 65% year-over-year.

In January 2026, we closed the sale of our stake in the Eurecat joint venture. We now expect to close the sale of a majority stake of Ketjen to KPS Capital Partners in the first quarter, slightly ahead of our initial schedule. Together, these transactions are expected to generate approximately $660 million in pretax proceeds, improving financial flexibility, streamlining our operations and enhancing focus on our core businesses.

As we turn to Slide 5, yesterday, we announced the difficult but necessary decision to idle operations at our Kemerton lithium hydroxide plant to improve financial flexibility and preserve optionality. Unfortunately, recent lithium price improvements alone are not enough to offset the challenges facing Western hard-rock lithium conversion operations. This action is expected to be accretive to adjusted EBITDA beginning in the second quarter with no impact to sales volumes.

Our investments in top-tier mining resources at Greenbushes and Wodgina and our exploration interest in Western Australia remain important components of Albemarle's strategy and are not impacted by the decision to idle operations at Kemerton.

Now I'll turn it over to Neal to discuss recent results and outlook. I will then cover recent market trends and growth before we open the call for Q&A.

Thank you, Kent, and good morning, everyone. I will begin with our financial results for the fourth quarter as presented on Slide 6. Net sales for the quarter of $1.4 billion increased from the prior year, primarily driven by higher volumes across all segments, particularly Energy Storage and Ketjen, which grew 17% and 13%, respectively. Adjusted EBITDA for the fourth quarter was $269 million, up 7% versus the prior year. This improvement was driven by higher lithium market pricing and increased Ketjen in sales volumes.

Our adjusted EBITDA margin decreased by approximately 150 basis points compared to last year, driven by less favorable FX and lower specialties margins, partially offset by higher margins in Energy Storage and Ketjen. We reported a net loss of $3.87 per diluted share. Excluding charges, the largest of which included tax-related items and a noncash impairment related to the expected Ketjen transaction, our adjusted diluted loss per share was $0.53.

Moving on to Slide 7 and the factors influencing our year-over-year adjusted EBITDA performance. We reported sales volume growth across all segments and higher pricing for Energy Storage. Equity income, net of foreign exchange impacts, decreased year-over-year due to the Greenbushes inventory lag.

Turning to other segments. Ketjen delivered solid year-over-year adjusted EBITDA growth of 39% due primarily to higher sales volumes. Specialties' EBITDA decreased slightly due to margin compression, notably in our lithium specialties business, where prices began to adjust lower from previous peak pricing. The corporate adjusted EBITDA change primarily reflects unfavorable foreign exchange hedging impacts, largely driven by the strengthening of the Australian dollar and Chinese yuan.

Turning to Slide 8. We are introducing our outlook considerations for 2026. As usual, we provide ranges of outcomes for our Energy Storage business as well as the enterprise based on recently observed lithium market pricing. This year, we've updated our ranges to be inclusive of recent pricing trends. We've defined our scenarios using the following 3 observed market price cases.

Full year 2025 average market pricing of about $10 per kilogram lithium carbonate equivalent, or LCE, January 2026 average pricing of about $20 per kilogram LCE and the 2021 to 2025 5-year average price of about $30 per kilogram LCE. Within each scenario, we have provided ranges based on expected volume and product mix. All 3 scenarios assume flat market pricing across the year in conjunction with Energy Storage's current book of business, of which we expect about 40% of lithium salts volume to be sold through our long-term agreements.

Production volumes are expected to increase year-over-year due to growth from [ CGP3 ] and Salar yield improvement, offset by inventory drawdowns, which increased sales in 2025. As a result, we anticipate that Energy Storage sales volumes will be roughly flat year-over-year.

In addition to the metrics we have shown historically, this year, we have included our expected average realized price for consolidated salts and spodumene sales for each scenario. This realized price is simply our net sales range divided by our sales volume expectation, particularly in the $20 and $30 scenarios, you will notice a difference between market price and our average realized price. This is primarily due to product mix. For example, spodumene sales, which are growing dilute our average realized price on an LCE basis. These scenarios also clearly demonstrate the impact of the cost and productivity improvements we made over the course of 2025 and remain focused on going forward. As illustrated in the $10 scenario, if lithium market pricing were flat from 2025 to 2026, we expect our energy storage adjusted EBITDA margin to improve year-over-year into the low 30% range from the 25% margin achieved in 2025.

Turning to Slide 9. We provide Albemarle's comprehensive company roll-up for each energy storage market price scenario. This outlook assumes the Ketjen transaction closes in Q1 2026 which all else being equal, reduces full year net sales and EBITDA versus the prior year. Here, once again, you will see that for the $10 scenario, we expect to deliver a slight improvement to our overall adjusted EBITDA margin due to improved energy storage margins and our focus on cost and productivity.

As Kent mentioned, we achieved $450 million of cost and productivity savings in 2025, a significant portion of which was delivered in the year as you see in our metrics. Going forward, a small portion of this savings run rate will carry over into 2026. This benefit is reflected in our scenarios. And of course, we also have significant upside potential as market pricing improves with total company margins lifting to the low 40% and mid-50% range for the $20 and $30 scenarios, respectively.

Turning to Slide 10 for commentary by segment, starting with Ketjen. In January, we closed the sale of our stake in the Eurecat joint venture. We expect to close the sale of a controlling stake in Ketjen in the first quarter. Together, these actions are projected to bring in about $660 million in pretax proceeds, and we expect minimal tax leakage on the transactions. As we've said before, we intend to utilize the proceeds for deleveraging and other corporate purposes.

Operationally, Ketjen closed the year with a strong fourth quarter. Net sales were up 14% year-over-year and adjusted EBITDA grew 39%, driven by CFT shipment timing and higher FCC volumes. Full year results also reflected year-over-year improvements, including adjusted EBITDA up 15%. I am pleased to highlight that 2025 represented the third consecutive year of adjusted EBITDA improvements at Ketjen as part of our multiyear turnaround plan for the business. Looking ahead, once the transaction closes, earnings for our remaining share of the refining catalyst business will be classified as equity income. Our share of the refining catalyst business and the retained PCS business will both be reported in corporate. We expect the contribution from these businesses to be relatively immaterial to equity income and adjusted EBITDA going forward.

Moving to Slide 11 for an overview of the specialties business results. In the fourth quarter, net sales increased 5% year-over-year. Adjusted EBITDA declined 6%, primarily due to margin compression in our lithium specialties business where we began to see pricing move lower following previous peak conditions. For the first quarter, we expect lower sequential sales and EBITDA due to a temporary production interruption at our JBC joint venture in Jordan, following a major flooding event, which resulted in an estimated $10 million to $15 million in lost revenue. The site is now back to full operating rates.

Looking ahead to 2026, we are introducing full year outlook considerations for the Specialties business, including: net sales of $1.2 billion to $1.4 billion, adjusted EBITDA of $170 million to $230 million and EBITDA margins in the mid-teens. Bromine Specialties volumes are expected to be flat to slightly down, reflecting the early year disruption at JBC. Adjusted EBITDA is expected to fall year-over-year due to product mix impacts driven by soft demand from the oil and gas and elastomers markets and lower pricing in lithium specialties.

Moving to Energy Storage on Slide 12. Full year volumes reached 235,000 tons LCE, up 14% year-over-year, exceeding the high end of our outlook of 10% growth. This was driven by record integrated production, strong spodumene sales and inventory reductions. Q4 net sales increased 23% year-over-year. Adjusted EBITDA was up 25%, supported by higher lithium pricing and ongoing cost and productivity improvements. While we expect first quarter volumes to be lower sequentially due to typical seasonality during the Lunar New Year, we expect both net sales and EBITDA to increase year-over-year, assuming current pricing persists for the remainder of the quarter.

As Kent mentioned, idling Kemerton Train 1 will have no impact on volumes. We expect to meet customer demand for lithium hydroxide via our other conversion plants or [ tolling ]. The Kemerton action will benefit adjusted EBITDA beginning in Q2. Regarding sales channel mix, we expect approximately 40% of our 2026 salt's volumes to be sold under our long-term agreements.

Turning to Slide 13 and some new disclosure we will provide going forward. This table documents quarterly metrics for the Energy Storage business, including average lithium market price observed, our net sales, our sales volumes and our average realized price, which is defined simply as our net sales divided by our consolidated salts and spodumene sales volumes on an LCE basis. Going forward, this table will be included in the appendix of our earnings deck for easy reference. As you review this data, I will again remind you of the impact of spodumene sales in our mix which dilutes our average realized price on an LCE basis.

Slide 14 highlights our success in turning earnings into cash. We ended 2025 with an EBITDA to operating cash conversion of 117%, driven by our actions to manage working capital, and receipt of a customer prepayment in January of last year. Even after adjusting for the onetime benefits, we still estimate our underlying 2025 cash conversion to be at or above the top end of our long-term range of 60% to 70%. Additionally, we generated significant positive free cash flow of nearly $700 million due to our solid cash conversion and our rightsized capital expenditures, which declined 65% year-over-year.

Looking ahead to our cash generation and conversion in 2026, we are focused on our underlying cash improvements. But want to note select headwinds to our cash metrics in the year, including recognizing $88 million in deferred revenue related to the customer prepayment we entered in 2025 which will benefit EBITDA but not contribute cash; and approximately $100 million in cash costs related to idling Kemerton Train 1 and placing it in care and maintenance. Of course, pricing has a large impact on our ability to generate cash, and we expect measurably positive full year free cash flow potential if current lithium pricing persists.

I will now turn the call back over to Kent to detail our updated lithium demand forecast, capital allocation priorities and our growth outlook.

Thanks, Neal. Slide 15 shows our global lithium demand expectations. We are seeing a diversification of lithium end markets with stationary storage becoming an increasingly significant demand driver for lithium, in addition to strong electric vehicle demand growth, most notably in Asia and Europe.

2025 global lithium demand was 1.6 million tons, up more than 30% year-over-year and in line with the midpoint of our previous forecast range. 2025 lithium demand growth outpaced supply growth, leading to tighter inventories and increased pricing by year-end. Now we are introducing 2026 global lithium demand expectations of 1.8 million to 2.2 million tons, up 15% to 40% year-over-year, driven by stationary storage and electric vehicle demand growth. We are also increasing our 2030 global lithium demand outlook to 2.8 million to 3.6 million tons, up about 10% from our previous range. This increase is driven by higher expected demand from stationary storage.

Turning to Slide 16. Let's take a closer look at each of these end markets, starting with EVs. We continue to see EV demand growth globally in line with our expectations, with sales up 21% year-over-year, with the highest growth in Europe, up 34%. European EV demand was driven by continued policy support for electrification, which we expect to continue to drive similar growth in 2026. As expected, U.S. EV demand slowed in the fourth quarter following the removal of the 30D consumer tax credits. However, the U.S. is also the smallest of the regional markets with just 10% of global EV sales. China remains the largest EV market with 60% of global EV sales and growth continues on trend as EV penetration reached approximately 50% during 2025.

Slide 17 expands on the fast-growing stationary storage demand trends, up more than 80% in 2025 with strong growth across all geographies. China represented 40% of ESS shipments in 2025, growing 60% year-over-year with demand driven by policy support and strong economics for stationary storage projects. North America saw a 90% increase in shipments in 2025 to support grid stability as energy demand rises in part due to increased demand from data centers and AI.

European shipments more than doubled in 2025 to support renewables as an alternative to energy imports. Stationary storage demand continues to diversify globally. Demand outside of the 3 major regions represented more than 20% of stationary storage shipments and grew 120% year-over-year. This growth is due to strong demand across Southeast Asia, the Middle East and Australia, driven by policy support, the need for energy resilience and growing international battery supply chains.

Turning to Slide 18. Thanks to our own disciplined cost and capital actions as well as improving underlying markets, we closed the year with $1.6 billion in cash. In addition, in the first quarter, we expect to receive approximately $660 million in combined proceeds from the recently closed Eurecat transaction and the soon-to-close Ketjen transaction.

We repaid our $440 million Eurobond in November and are committed to maintaining our investment-grade credit profile. We continue to evaluate additional opportunities to delever, return capital to shareholders through our quarterly cash dividends and make disciplined organic growth investments.

Now turning to Slide 19. We've reset the baseline for lower sustaining capital through capital efficiency, project selectivity and scoping. Our 2026 sustaining capital is essentially flat year-over-year after assuming the sale of Ketjen in the first quarter. We're confident we'll be able to maintain these lower levels of spend while also prioritizing health safety and environmental, continuity and productivity projects. Cost reductions, portfolio simplification and capital discipline also allow for targeted growth spending on our world-class resources including investments in early-stage development at the Salar de Atacama and Kings Mountain. We are committed to being disciplined in our approach to value enhancing growth while preserving optionality and solidifying our competitive position.

As we look ahead on Slide 20, we are on track to deliver a 5-year CAGR of 15% for Energy Storage sales volumes with minimal additional investment. This includes a 25% CAGR over the past 4 years, with growth expected to moderate as large projects complete ramp up. Over the next 2 years, several projects provide growth with minimal incremental capital spending going forward.

At the Greenbushes spodumene mine in Australia, the JV is currently ramping the CGP 3 expansion, which adds about 35,000 tons per year to our capacity on an LCE basis. We also see multiple opportunities to continue productivity initiatives at the Salar de Atacama based on results of the Salar yield improvement project. Finally, at Wodgina, the JV is currently operating about 2 to 2.5 trains on average and could potentially operate 3 full trains as ore availability continues to improve. We will also continue to evaluate longer-term growth opportunities to leverage our global footprint of world-class resources.

Turning to Slide 21. Albemarle has a strong and differentiated competitive position, led by a growing lithium and long-lived bromine resources. The figures shown on the slide summarizes the changes made to our mineral resources, inclusive of mineral reserves as part of our annual [ SK-1300 ] report included in our 10-K filing.

Our bromine resources decreased slightly year-over-year. At JBC, this was due primarily to updated modeling and sampling. Our JBC operations continue to produce some of the lowest cost bromine in the world with significant long-term expansion options. Magnolia resources are down slightly due to reduced pumping rates. Albemarle benefits from large, low-cost bromine resources with resource lives in the multi-decade or even multi-century range.

Our lithium mineral resources were up 10% year-over-year, led by improvement at Greenbushes. At Greenbushes, we increased our reserves and resources due to mine design improvements and the inclusion of underground resource. At the Salar de Atacama resource growth was mainly attributed to expanded hydro geological drilling activities. We anticipate further enhancements in reserves and resources at this site.

The DLE [indiscernible] plant has been fully commissioned and is now operational, yielding promising data for scale-up purposes. Additionally, by next year, the Salar yield improvement project is expected to have enough operating history to support upgraded mineral resource and reserves estimates. At Wodgina, our updated NPV materially increased, driven primarily by yield improvements. Kings Mountain just completed a successful drilling campaign with potential for updated resource next year.

On Slide 22, I will summarize the actions we have taken to enhance our position and maintain our competitive edge to capitalize on the growth trends I've discussed. In terms of optimizing our conversion network, as I mentioned, we delivered strong full year '25 Energy Storage volume growth and record production, and we made the important decision to idle Kemerton. Looking ahead, we will continue to maximize the value of our resources and adjust product mix through conversion and tolling networks.

We continue to improve cost and efficiency in 2025 with greater than 100% adjusted EBITDA to operating cash flow conversion. We are targeting an additional $100 million to $150 million in cost and productivity improvements in 2026 from a combination of projects across manufacturing, supply chain and corporate. We see further opportunities for cost and productivity improvements as we simplify our processes and continue to embed technology and AI across our organization.

As a reminder, we are targeting flat CapEx as compared to 2025 with a focus on disciplined investment that enhance our optionality and provide fast returns. And finally, we will continue to enhance our flexibility, building on the Ketjen asset sales in 2025 and strong free cash flow achieved during the year. Importantly, the actions we have taken and continue to take to optimize our portfolio, reduce cost, improve capital efficiency and enhanced financial flexibility are all geared towards preserving long-term growth optionality and supporting our strong competitive position.

In summary, on Slide 23, Albemarle delivered strong fourth quarter and full year 2025 results, thanks to the actions we have taken to optimize our asset portfolio, reduce costs and strengthen our financial flexibility. Looking ahead for 2026, these efforts are expected to continue to drive year-over-year margin improvement, independent of price changes. Our durable competitive strengths, including our assets, expertise and innovation, combined with the long-term secular growth opportunities around energy resilience position us well for sustainable growth and value creation over the long term. We have the team and discipline to execute well and realize that potential.

With that, I'll turn it over to the operator to take your questions.

[Operator Instructions] Our first question is from David Begleiter with Deutsche Bank.

First, thank you for the additional disclosure, it's very helpful. Kent, on your lithium volumes, they'll be flat this year in '26, how should we think about volume growth beyond '27 -- in the '27, '28, '29 time frame?

Yes. Thanks. So I would say we probably grew a little faster than we had anticipated. It's Kind of why we're running into a flat spot this year. That, and I think the headwinds from pulling inventories down [indiscernible] were able to sell those last year and not this year. And then -- and we still have growth opportunities at Greenbushes, at Wodgina, and then we have longer-term growth from Kings Mountain and then the Salar de Atacama. So I think we'll continue on a growth profile. We pulled back on our capital spending. So we're -- it's not as prolific as it once was.

But I think we still continue that growth profile after '27, and we'll have to start investing once we see how the market looks for that. But we have we have opportunities. We have the fundamentals for it, the resources that we have, the technology basis we have for that, it's just a matter of executing against that.

Understood. And just on Kemerton, Kent, how much higher cost is that asset than your Chinese conversion assets? And what lithium price would you need to see to restart Kemerton?

Yes. So in the Ketjen, I think -- I mean your point, I think you made it, as we've idled the asset, not a shutdown, its idle. So we keep it in a position where we can restart it if we get into those conditions. But the cost structure between China and, say, Western supply, but particularly Western Australia, I mean it's across the industry. It's across areas like reactant tailings disposal, it's a big difference. It's a big industry in China that kind of works through tailings, and we don't have that in the West. We've made progress in Australia with government support around taking those costs down, but it's still significantly different. Labor is higher power.

So there's a -- there is a gap there between China and the West and Australia, it's probably $4 or $5, something like that. And that's going to have to be addressed if you're going to build out a western supply chain. We either need differentiated prices to cover those costs from the West, and we've not been able to get that support so far.

Your next question will come from Jeffrey Zekauskas with JPMorgan.

Can you comment on how much Chinese lithium capacity you think was closed down from about the middle of 2025 today because of various actions? And do you think that the Chinese government or steps that the Chinese government took were key to that capacity coming off-line?

So I'm going to let Eric get into some of the specifics around maybe the mines or the capacity that comes around it. But I think there is -- I mean the Chinese government has been paying attention to this. So I think it has had something to do with that. It's not all driven there. So you've had some capacity come on. We've also been surprised to the upside on demand, particularly the fixed storage applications have been much stronger. So if we're demand didn't grow -- I mean supply did not grow as much as we had anticipated, it did still growing, but it's not as much as we've anticipated and demand grew more than we thought. So that's where it's gotten -- it's getting tighter. And I think the Chinese government looking at environmental regulations and some of the permitting, they're getting a little bit tighter on it, and it's had, I would say, some influence. Eric?

Yes. So Jeff, we would say that just a bit an update. There are about 7 lepidolite mines that continue to operate even while they await permits. So it's not that lepidolite capacity in China has completely disappeared. There's still a good amount that is online. The one large facility you may have heard about is owned and operated by CATL, that is still off-line. In total, we think about 30,000 to 50,000 tons of capacity came off in 2025. We'd expect that that's possible to come back on at some point in the coming year. Effectively, we've modeled that.

So we -- now your question about the regulatory environment, there is an increased oversight on waste, tailings, generation and general environmental operating conditions in China is probably too early to say how that will play out. Safe to say if implemented, it would affect all operators and the [indiscernible] all operators because it hits all elements of how to manage, handle and dispose of mine tailings and environmental waste.

Great. And then, I guess, on Slide 27, you have your forecast of Specialties adjusted EBITDA for 2026 which you put in a range of $170 million to $230 million versus $276 million. What's behind that decrease?

Just to clarify, Jeff, this is Eric again. Your question is what's behind the decrease in Specialties here on your earnings?

Yes, for 2026.

Indeed. Okay. So a couple of things that are there. Number one, as Kent described in the call, we're not getting much of a lift from demand growth year-on-year, so that's not a helpful tailwind. Just to clarify that, the issues there are that in certain markets such as process chemical industries, oil and gas elastomers, that's a part of your coverage universe. You know that that's an industry that's not particularly healthy and that's impacting our demand growth in those areas. There's some offsets, pharma, semiconductors, those are performing well. I think the big driver is lithium prices, lithium specialties prices in particular.

This is a business that does not contract or move like the Energy Storage. It's not very commoditized, it's Specialty, but it does echo the price curve of LCE over time. And we were successful in the past years of getting long-term contracts based upon very high LCE prices at that time, and those have now come off. And we saw a step down of that a little bit in the fourth quarter. Neal mentioned that in his comments, and we're going to see more of that to come this year. Obviously, now that's turned, but it's too early for the turn in LCE prices to affect a subsequent series of contracts. We just have to wait and see.

Your next question will come from Josh Spector with UBS.

I wanted to ask on just your approach on how you're thinking about investing in this cycle. You guys did a lot of work over the last couple of years to get free cash flow to where it was last year. So how long do prices need to stay at the 20-kilogram plus level before you think about started spending? Or are you going to harvest cash for longer than what you might have in a prior cycle, just given what we've learned here?

Yes. So we probably will be a bit more conservative than we -- than you've seen us be in the past around that. But we have -- we do have projects. I mean we've been mindful as we've cut capital -- we've taken out some of the big pieces. We've tried to get our sustaining capital in a place where we think we can hold it and we're investing in our assets, but not over-investing. But also looking for incremental projects, smaller capital, quick returns. You've heard us talk about that in the past and over the down cycle, particularly focused on that.

And then the growth programs are more -- they are a little more incremental, like we said before, you can see us ramping up CGP 3 at Greenbushes, for example, at Wodgina, we've got a third train there that when we get to better ore, we can operate that without significant capital and then we can build Salar de Atacama. Salar yield project is still ramping, but it's going very well. It's generating good data. So we think that's going to really help our efficiencies and recoveries as we go forward. So we have the opportunity to make smaller investments and still get some growth.

The bigger ones are to come, Kings Mountain, from other projects, DLE, for example, in the Salar that would give us additional volumes are bigger investments, those are -- they're not right in front of us, so we'll have the opportunity to see how the market responds before we make commitments on things like that.

Okay. So just quickly on Kemerton. I mean you talked about the $100 million shutdown costs. Can you just go through other pieces? I guess, how quickly is the payback on that cost? And then are there any ongoing basically costs to keep the capacity idle?

So there are ongoing costs to keep it in the state -- in a ready state, so to speak, idled. And they're not dramatic, but they are a significant cost, and it's something we can do for a period of time. We don't want to -- we can't keep it here forever, but we can keep it here long enough to see if we can bring it back, the market changes. And really, the change we're looking for is probably a bifurcation where Western prices are different than prices in China. That's really what we're looking for and to see that that's sustainable over time to cover those costs. And so -- and the payback on that, I mean I don't want to -- I'm not going to tell you exactly what the savings is around that, but it's a reasonable payback.

Your next question will come from John Roberts with Mizuho.

Could you talk about the differences between China and ex China lithium market pricing? I know you don't want to discuss your own contracts, but what's the market doing ex China?

Well, I'll take -- I'll make a broad comment, Eric, you could jump on that if you want. But I don't -- there's not a big difference, right? For the most part, everyone wants the China price. There are some circumstances where you can get that a little bit of a differentiation. But for the most part and the way it's been for the last several years, it's more or less the same price. There is -- there are some incentives in the U.S. where some of that will flow through to lithium from resources outside of China or material outside of China, but it's not -- it doesn't characterize the whole market, I would say.

John, yes, this is Eric, just adding. There are -- so structurally, you would know that in the past there's -- when China has been a big and has been a big producer of lithium, the general difference has been a 13% VAT, so price has been about 13% higher outside versus in. That's just a structural difference. I think, though, however, what Ken is alluding to is important. The market is dynamic and it's changing. The growth and maturity of the [indiscernible] [ Futures Exchange ] is increasingly becoming the benchmark. There's a -- given that it's traded every day, there's great transparency to that number or one can see it very clearly. And outside of China, people have tended even our contracts -- contract relationships that tend to rely on PRA's, price reporting agencies. And with the dynamic change of what's going on with the [indiscernible], if the challenge is are the PRAs keeping up with that rate of change. So I think it's getting -- the -- there's a structural difference, is my first point. Second point is there are some difficult -- maybe some inefficiencies because of that dynamic with the [indiscernible] going on.

Okay. And then I think you said you modeled CATL capacity coming back this year. Could you share when you've modeled that back online?

I mean, I think we've probably -- we've taken an assumption to [indiscernible] in slowly. Again, John, we're talking about 30,000 to 50,000 tons. You look at the scheme of what -- of the demand growth, the supply-demand balance and where inventory levels are, I don't think it's going to make that much of a difference.

Your next question will come from Laurence Alexander with Jefferies.

First of all, can you discuss the -- whether there's any material difference in contract structures developing between [indiscernible] storage and automotive in terms of the [indiscernible] degree of emphasis on reliability of supply or consistency of quality control or products formulation?

Yes. So for us, the material goes through the same supply chain, right? So we're selling it into the same supply chain that we do for automotive and we do for fixed storage. Probably the biggest difference is, by definition, all the fixed storage is carbonate. And we tend -- hydroxide tends to be go to the West. So those tend to be where our long-term contracts are. Carbonate tends to be more on the spot market and the China price. So that's the biggest difference, but it's really driven by the product mix that goes into fixed storage versus -- there's a combination for the EV market, and it's pretty much all carbonate and LFP for fixed storage.

And just a couple of characteristics add to that, that make it important, maybe to get at the root of your question, Laurence. On -- fixed storage is largely carbonate, that's largely LFP, and that's almost entirely China. And carbonate has a pretty harmonized spec, it's closer to being like a classic commodity and hydroxide. Hydroxide has a lot more requirements that the automotive producers put on it for the life of battery and the safety they're looking to get. And there's -- as a result, given the challenges of making consistent grade hydroxide, there's much more of a variation across producers. So it's a more detailed qualification process. Some of it is the user. Some of it is the chemistry, I guess, at the point.

And then just on the -- in terms of how you think about the lessons learned about balance sheet management against strategic [indiscernible] longer term, how are you thinking about the development of solid state as a solution in the battery market and the potential competitive threats from sodium ion batteries?

Yes. So okay, 2 ends of the spectrum there. So look, on solid state -- I mean it's still -- it's lithium, and we still -- the driver will be EVs. So the intent that the lithium intensity for solid state goes up a little bit, it gives us a kicker, but it's really driven by the EV penetration and that growth in that. So that things -- from our standpoint, it's just -- it's a positive. It's going to grow that a little bit. But we're going to -- again, we've got time because we don't see it becoming mass market immediately. So we have time to understand, allow the market to mature. So we're early in the cycle, probably earlier than we'd anticipated from lithium. We just -- we think we've just been through the second cycle since the advent of EVs. So that's still immature from a commodity cycle perspective. So we're still watching that and learning and making sure we understand that.

On fixed storage and sodium ion, look, we think it's going to be relevant. It will be a technical player in the market, but it still has to develop technically, and it has to scale. So it's not impacting us, we don't think much this year. And our forecast, as we kind of build out the forecast, I think we built early on 10% sodium ion fixed storage and that growing to 15% maybe toward the end of the decade.

Just again, to add some context. I think it's important. One, as Kent said, solid state, a good news story, a solid-state battery as 2x the amount of lithium in it that a cell would for lithium-ion battery. There's some different tech involved. There's a different supply chain involved. So it's going to take a while. Similarly, sodium is going to take a while as well, and that's obviously a drawback. And it's part of the reason we have such a variation in our ESS forecast in the deck that we presented is because there are some things that have to happen.

Sodium Energy has to get more energy dense to be cost competitive with LFP. At the range of prices we shared in these scenarios, LFP is always more cost competitive today than is sodium ion battery. So there has to be innovation. We expect innovation to happen. The second is scale that Kent said. And then the third is it will be limited because in the end, it will never have the volumetric energy density that lithium would, whether that's lithium iron phosphate or lithium metal. So it's limited in storage spaces to where space is not an issue. So think a corn field versus New York City. New York City is going to work so well. Corn field will work out in Iowa. And then obviously, [indiscernible] has the same limitation, volumetric energy density is critical for EV. So we see very limited penetration there. So it's 2 different ends of the spectrum, as Kent said, those are all the drivers.

Our next question will come from Vincent Andrews with Morgan Stanley.

Just thinking through sort of shipments versus consumption, early in the cycle, there tends to be sort of a reload that helps prices move higher. And ESS, obviously, is a big driver. And some of the data would show that ESS shipments are moving kind of a 2x the level of ESS installations, which, to a certain extent, makes sense, right? It's a very growing part of the market. So as it grows, inventory needs to grow in between. But how do you assess sort of where customer inventory levels are and where customer behavior is sort of as prices have gone up and then maybe come off the bottom as you think about what actual demand or consumption is going to be in 2026?

So look, there's a couple of different supply chains you have to think through. But I mean a kind of across the board, we think inventories are at a pretty low level, particularly from a lithium side that's sitting in batteries everywhere, the inventory levels are pretty low. Now we're in the Lunar New Year period. And we -- as we come out of that, that's where we'll get information to see exactly what demand is going to look like this year, but everything seems to be pointing in the right direction.

And we see installations on fixed storage kind of continuing the trend and keeping up. We follow that versus what goes in. So we're -- the batteries are probably where -- we ship probably 6 months ahead of where it gets shipped to the -- an installation -- 6 months to a year before an installation happens. And we see that reasonably balanced. So it looks pretty real from our standpoint.

That's very helpful. Neal, could I ask you to fill us in on some of the other cash flow statement items on working capital. Just thinking through, you got higher prices, your inventory is at low levels. But what should the makings of AP, AR inventories look like in 2026 just given what's happening from a price perspective, both for your revenue and your spodumene costs?

Yes. Vincent, thanks for that question. So maybe I won't go through every line of working capital. But I will say, first of all, on inventory, Obviously, we saw very strong demand at the end of the year of last year, and we capitalized on that and we're able to bring down our inventories a little bit. As you can expect in 2026, our production levels are up, some of that will go towards restocking our inventories and making sure that we have the right amount of inventory to supply the demand. But in a rising price environment, you do bring up a good point that in a rising price environment, working capital could be a short-term cash flow headwind. The way we think about it is, generally speaking, for the company, our working capital balance sits at about 25% of sales. That's usually a pretty good rule of thumb. So maybe that is helpful as you think about in a rising price environment, how to model the working capital piece.

Your next question will come from Joel Jackson with BMO Capital Markets.

I just want to follow up on slide, I think, it's 8. So you talked about your sensitivities and your margins. And if you look at Q1, you're talking -- $20,000 a tonne, [indiscernible] the spot price and you say [indiscernible] price is. So should you be delivering mid-50s EBITDA margins in Energy Storage in Q1?

So well, you have to consider the lag on the way our contracts work. So we'll get the benefit of the current market price on the spot business we do, but our contract volumes all kind of have about somewhere a couple of months lag, usually 3 months lag that works through that. So we have to have the opportunity for that to work through our P&L. Otherwise, once we get that, that should be the case.

Okay. Just following up on that then. So you should have been -- if spot price stays exactly where it is, you should be achieving mid-50s EBITDA margins in Energy Storage in Q2? [indiscernible] question. And also, just clarifying, Kent, you talk about $4 to $5 a kilo of conversion costs now in Kemerton. Were you talking about [indiscernible] your absolute costs you see that conversion costs were in Ketjen or Western Australia? Are you saying that $4 to $5 a kilo was how much higher the costs are in Ketjen versus China? It's just a 2-part second question.

Yes. So it wasn't a Kemerton answer. It was a general broader answer, and it was like a $4 to $5 difference between China and or, I would say, to be clear.

Your next question will come from Kevin McCarthy with Vertical Research Partners.

Kent, I'd welcome your latest thoughts on potential to acquire lithium capacity versus build it? It seems to me you've delevered the balance sheet quite a bit. You've got more cash coming in from Ketjen. We're talking about price recovery and positive revisions to ESS demand. So if we zoom out the lens and just think about where you are financially and where we are fundamentally in the cycle, might we see more inorganic growth from Albemarle in the years to come?

Yes. So I mean we'd be talking down the road if you're thinking from that perspective because we still have -- but one, we want to make sure we're in -- we've got really good footing, understand where the market is going as we go forward because we -- price has moved up. We just want to make sure that, that consolidates, so to speak. And we also have pretty good opportunities within the portfolio for, I'd say, it's incremental growth. It's lower capital than building greenfield facilities, and it's mostly around resources, but -- and it's the incremental capacity at our conversion facilities, whether that's at [indiscernible] or our conversion facilities in China. And then we also have tolling opportunities as well.

So we're -- I think we've got good organic growth opportunities, but we'll look at acquisitions as they come up, but that's not our focus. And we would have to see the right opportunities for that. The right fit at the right price, it would -- we would look at it. But that's not really our focus at this point in the cycle.

Your next question will come from Colin Rusch with Oppenheimer.

I wanted to just follow up on the cash question. You're really in a fundamentally different place from a balance sheet perspective. And I'm curious about rather than acquiring new assets, looking at optimizing your cost of capital on the balance sheet, in some of the instruments that you have if there's real opportunities to streamline things?

Colin, thanks for that question. This is Neal. So yes, I think one of the key things that we're focused on is making sure that we have the right kind of headroom to navigate through the cycle. And you saw in our capital allocation slide today that in addition to making sure that we meet our dividends, we are also focused on ensuring that we have a strong balance sheet, which is deleveraging opportunities. So we're going to continue to look at that.

If you're looking at other parts of the capital structure, look, the best thing I would say is we evaluate where is the best economic place for us to delever and strengthen our financial profile. And I think our comments today really highlight where we see the best opportunities. I really think the best opportunities are in the deleveraging space. But we do look at all of our options. And certainly, with our cash position where it is today, those are -- that's kind of our first and foremost priority right now.

Okay. That's super helpful. And then for Eric, I'm really curious about customer behavior here. I mean getting to deposit is a pretty big signal to the market about where folks see overall supply-demand balance on a multiyear basis. As you look at EV versus stationary storage and increasingly robotics, end customers, can you talk a little bit about the different behavior and concerns around regional nuances, tariffs and security of supply and supply chains between those 3 buckets of customers?

Sure. Happy to, Colin. It is a very dynamic time to be sure. And I think so much has happened so fast. It's going to be hard to draw hard conclusions right now at this moment. I would say that when it comes to the EV market, it depends on who you're talking to. If you have someone whose market is largely in the United States, it's a very different picture than someone whose picture is or view is Europe or China. When it comes to grid storage unanimously, that's an area of interest. Remember though that in some levels, it's the same customer for us, depending on [indiscernible] the supply chain. Obviously, we do have some contracts with OEMs, the balance of our contracts with battery producers. We do some -- a lot of spot business with [indiscernible].

So we see the whole supply chain -- different eyes. And the further up you go, the more bullish you get because it [indiscernible] focused on any specific end market. We have seen a lot of customer dialogues come forward with the rise in prices, but it's way too early to say where that's going to go. I mean at this point, again, depending on who you're talking to, they have a very different view of their needs. And so we're just going to have to see how that plays out over the long term in terms of our contracts. But right now, it's just too early to call.

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

Thank you, operator. In closing, I want to thank you all for your continued support and trust in Albemarle. Our strong results this quarter improved outlook for 2026, and ongoing focus on operational excellence position us well for the future. With our world-class resources, strong track record of cost and productivity improvements, leading process chemistry and commitment to customer success, we're confident in our ability to create lasting value for our shareholders and sees opportunities ahead. We appreciate your partnership and look forward to connecting at our upcoming events. Stay safe and take care. Thank you.

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

Hello, and welcome to Albemarle Corporation's Q3 2025 Earnings Call. I will now hand it over to Meredith Bandy, Vice President of Investor Relations and Sustainability.

Thank you, and welcome, everyone, to Albemarle's Third Quarter 2025 Earnings Conference Call. Our earnings were released after market closed yesterday, and you'll find the press release and earnings presentation posted to our website under the Investors section at albemarle.com.

Joining me on the call today are Kent Masters, Chief Executive Officer; Neal Sheorey, Chief Financial Officer; Mark Mummert, Chief Operations Officer; and Eric Norris, Chief Commercial Officer, 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 strategic initiatives 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 also applies to this call. Please 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. In the third quarter, we reported net sales of $1.3 billion, including another record production period from our integrated lithium conversion network. Adjusted EBITDA reached $226 million representing a 7% increase as cost and efficiency improvements more than compensated for lower year-over-year lithium pricing.

We generated $356 million in cash from operations during the third quarter, marking a 57% year-over-year increase, driven by higher EBITDA and disciplined cash management. We are enhancing our 2025 outlook considerations. Based on our year-to-date financial performance, prevailing lithium market pricing and stronger-than-expected energy storage sales volumes, we now anticipate full year 2025 corporate results to be toward the upper end of the previously published $9 per kilogram scenario ranges.

Overall demand for lithium remains robust, up more than 30% year-to-date, supported by the energy transition and rising global demand for electric vehicles and grid storage. Notably, global EV sales have increased 30% year-to-date led by China and EU battery electric vehicles. Grid storage growth was even more pronounced, climbing 105% year-to-date, with strong growth across all major markets globally. Additionally, we have made significant progress implementing cost and productivity improvements while reducing capital expenditures.

Capital expenditures for the year are now projected to be approximately $600 million. We expect to achieve full year cost and productivity improvements of around $450 million, surpassing the upper limit of our initial targets. Considering these factors, we now project positive free cash flow of $300 million to $400 million in 2025.

Turning to Slide 5. Recent portfolio actions further demonstrate our commitment to long-term value creation and enhanced financial flexibility. We recently announced 2 transactions. First, a definitive agreement with KPS Capital Partners to sell a controlling 51% stake in Ketjen's refining catalyst business; second, an agreement to sell Ketjen's interest in the Urca joint venture to Oxone. Both transactions are expected to close during the first half of 2026. Together, these transactions are expected to generate approximately $660 million in pretax cash proceeds giving us greater ability to delever while also retaining exposure to future potential gains in the refining catalyst business.

This new structure positions the refining catalyst business to leverage KPS' manufacturing expertise and access to capital to accelerate its growth opportunities. At the same time, we will be able to shift our attention to our core businesses, energy storage and specialties to set Albemarle up for long-term success. This transaction reinforces our commitment to boosting shareholder value. improving financial flexibility and maintaining Albermarle's strong competitive position.

Neal will now provide additional details regarding financial performance and outlook.

Thank you, Kent, and good morning, everyone. I will begin with our financial results for the third quarter as presented on Slide 6. Net sales for the quarter totaled $1.3 billion, a decrease from the prior year, primarily driven by lower lithium market prices. This decline was partially offset by higher volumes in both Ketjen and energy storage.

Adjusted EBITDA for the third quarter was $226 million, representing a 7% increase year-over-year. This improvement was driven by disciplined cost management and productivity actions which more than offset lower lithium market pricing. Our adjusted EBITDA margin improved by approximately 150 basis points compared to last year. We reported a net loss of $1.72 per diluted share. Excluding charges, the largest of which was the noncash goodwill impairment related to Ketjen. Our adjusted diluted loss per share was $0.19.

Turning to Slide 7. I'll cover the drivers of our adjusted EBITDA performance year-over-year. We saw solid growth in sales volumes in both our energy storage and Ketjen businesses and our consistent focus on cost discipline and productivity yielded positive results. By focusing on the actions in our control, we were able to offset lower pricing for lithium and spodumene.

Turning to other segments. The Specialties team delivered an impressive 35% increase in adjusted EBITDA, largely due to cost improvements across the board in raw materials, manufacturing and freight. On the corporate side, we benefited from cost savings and favorable year-over-year foreign exchange movements.

Turning to Slide 8. As usual, we're sharing outlook scenarios based on recently observed lithium market prices. This slide shows a full company summary for each price scenario. Our outlook ranges remain the same as last quarter. but we've updated a few key points. Specifically, we now anticipate our full year 2025 results will approach the upper end of the $9 per kilogram lithium price scenario for total company sales and EBITDA. This reflects our strong performance so far this year, including cost controls, productivity gains and slightly better market pricing. We expect lithium market pricing to average about $9.50 per kilogram this year based on year-to-date actuals and assuming current pricing persists for the remainder of November and December.

Turning to Slide 9 for additional commentary by segment. First, in energy storage, sales volume growth is expected to be up 10% or more year-over-year, thanks to record integrated production, higher spodumene sales and reduced inventories. We are seeing most of that volume upside coming from a strong demand environment in China, where sales are at local market prices and not on long-term agreements. As a result, we now expect approximately 45% of our 2025 lithium salt volumes to be sold on long-term agreements with floors, primarily due to the mix impact of stronger-than-expected volumes in China.

Our long-term contracts continue to perform in line with our forecast. Q4 EBITDA for energy storage is expected to be slightly higher sequentially. First, in terms of product mix, Q4 will have a greater proportion of higher-margin lithium salt sales versus spodumene sales. Second, Q4 is expected to benefit from current higher spodumene prices in JV equity earnings. In specialties, we continue to expect modest volume growth year-over-year. Q4 net sales are expected to be similar to Q3, but EBITDA is expected to be lower primarily due to weaker demand in oil and gas applications.

Finally, at Ketjen, we continue to expect a stronger Q4 due to higher CFT and FCC volumes. Please refer to our appendix slides for additional modeling considerations across the enterprise.

Slide 10 highlights our focus on running the business efficiently and converting earnings into cash. Year-to-date through Q3, our EBITDA to operating cash flow conversion has been over 100%. In Q3, conversion was strong due mainly to inventory reductions along with a modest sequential uptick in dividends from the Talison joint venture. We continue to expect our full year cash conversion to average over 80%. The implication of that is that we expect Q4 conversion will be lower, mainly due to the timing of interest payments and higher working capital needs from increased revenues.

Our strong cash conversion performance and reduced capital expenditures forecast mean that we now expect to be well into positive free cash flow territory this year, between $300 million and $400 million.

Slide 11 provides a comprehensive overview of our cash position and capital allocation plans in the near term. We closed the quarter with $1.9 billion in cash. Moving forward, we intend to repay with cash on hand, our euro bond debt that matures later this month. Based on our free cash flow outlook, we expect modestly negative free cash flow in Q4.

Moving into 2026. We expect to receive approximately $660 million of gross proceeds from the 2 transactions related to our catch in business. Considering these major cash items, we expect to have approximately $1.4 billion available for deployment across a set of disciplined and focused priorities as shown on the slide.

With that, I'll turn it back to Kent to discuss the market outlook and provide updates on our operational execution.

Thanks, Neal. The 2025 global lithium supply-demand balance has started to tighten with global lithium consumption growth up over 30% year-to-date, driven by robust demand from both EVs and grid storage, while supply growth has slowed in part due to recent lipid-like curtailments in China.

On Slide 12, EV demand growth for 2025 continues led by China and Europe. China EV sales are up 31% year-over-year, even after reaching over 50% market penetration driven by strong growth in BEVs due to incentive supporting low-cost options. Europe is also up over 30%, supported by EU emissions targets. North America posted 11% growth, supported by prebuying ahead of the 30 tax credit expiration.

Turning to Slide 13. Global battery demand for stationary storage is up 105% year-to-date. China remains the largest market for stationary storage installations with 60% growth year-to-date and further policy support announced in the 15th 5-year plan. Europe has shown similar policy support as the commitment to decarbonization drives demand for renewables paired with storage. North America is the fastest-growing region for stationary storage, up almost 150% year-to-date.

As rising data center and AI investment in the United States increases the demand for electricity and grid stability. Globally, data center electricity use is expected to more than double by 2030. With the increasing need for grid resiliency, LFP batteries are well positioned to continue meeting ESS demand, thanks to their low-cost energy density and established manufacturing base. As a result, we expect lithium demand for stationary storage application to increase more than 2.5x by 2030.

Advancing to Slide 14. I want to provide an update on our initiatives to sustain our competitive advantages through market cycles. First, on optimizing our conversion network. We set an energy storage sales volume growth target of 0% to 10% at the start of the year. We now expect to finish at or above the high end of that range with record production across our integrated conversion network, increased spodumene sales and inventory reductions.

Second, our cost and productivity programs continue to deliver. We began the year with a goal of $300 million to $400 million in improvements. Today, we've achieved a $450 million run rate, exceeding the high end of our initial target. Recent projects have further reduced manufacturing costs and improved supply chain efficiency.

Third, at the start of the year, we targeted a 50% year-over-year reduction in 2025 capital expenditures by focusing on high return, quick payback projects and optimizing existing scope, we now expect 2025 CapEx of about $600 million, reflecting a 65% reduction year-over-year.

Finally, our announced asset sales are expected to generate approximately $660 million in cash, providing significant additional financial flexibility. We continue to adapt in a dynamic environment, adding new measures as needed. We're building a culture of continuous improvement and the mindset to identify opportunities to achieve savings and efficiencies.

These actions are contributed to positive financial results, as shown on Slide 15. Our commitment to cost discipline is clearly reflected in our financials. Sales, administrative and R&D expenses are down $166 million or 22% since last year. Cash flow has strengthened driven by targeted cost and capital reductions and strong cash management. As of Q3 2025, we're generating positive free cash flow year-to-date, and we expect $300 million to $400 million for the full year. Our efforts have allowed us to shore up and maintain healthy corporate EBITDA margins in the 20% range even as lithium prices declined. Thanks to these focused actions, we are well positioned to expand margins further as the market recovers, with potential for adjusted EBITDA margins reaching 30% or more at $15 per kilogram lithium pricing.

In summary, on Slide 16, Albemarle delivered strong third quarter performance while continuing to act decisively to maintain the company's industry-leading position through the cycle and capture upside as markets stabilize or improve. We are maintaining our full year 2025 company outlook considerations with notable enhancements to energy storage volume growth improve cost and capital savings and strong free cash flow generation. With our world-class resources, process chemistry expertise and a strong balance sheet, we are well positioned to generate shareholder value through the cycle. I'm confident we're making the right moves to stay ahead and capitalize on long-term growth opportunities.

With that, I'll turn it over to the operator to take your questions.

[Operator Instructions] Our first question will come from Aleksey Yefremov from KeyBanc.

I wanted to ask you about Dynamics at Alison, you mentioned you'll have better profitability because of higher spodumen prices. But how do you think this would evolve in maybe first half of '26, would you see higher spodumene costs? Would that be again offset by higher equity income or not. If you could mark us through that dynamic for your lithium margins?

So maybe I'll start, Neal, you can a little bit of color to that. But we're not going to -- we won't predict the price. So for lithium for salt or spodumene -- but I mean the market is tightening. It is tight. It has moved up a little bit.

So we're optimistic about that, but we don't plan on that. And I don't -- from a spodumene standpoint, I mean it all depends whether if prices move up, the margin will either stay with salt or it moves over to spodumene. And we're a bit indifferent because of the integrated network that we operate. So I don't know that there is a big difference between the 2 recently in the recent past when prices move, most of the margin moves to the resource of spodumene. And then I think the other part is a little bit about the Talison and inventories and the way that, that gets cost. Neil?

Yes. Aleksey, I think you're thinking about it right, that in a rising spodumene price environment, we get 1 immediate benefit, which is obviously any sales or that Talison makes to our partner. We get some of that benefit immediately through our equity earnings. But then, of course, our portion of the profit does go into inventory and it comes out over time as we consume the spodumene.

So you're right, there will be some lag. It's usually 6 to 9 months that some of that comes through in our cost of sales. But whether it leads to margin compression or margin improvement really depends on what happens with salt prices 6 months from now. But I think you're thinking about it right. There is 1 component that we realize right away. And then there's another component that has to flow through our inventory.

Our next question will come from Jeffrey Zekauskas with JPMorgan.

You used the price as a reference point. In China today, are we closer to 11 -- 10 or 11?

So yes, you're probably closer to 10% today. But as we look at it on a full year basis, it's kind of a 900, 950, something like that.

Are you giving any consideration to starting up any of your plants where you've paused production or mothball the plant.

So no, no, I wouldn't say so. So we haven't bought that back. So we're just forecasting to the end of the year. So that's couple of months. So -- and it would take us longer to bring those back on. So they're not in that scenario. And it would depend on the market and how that works. So that that's not really the plan as we think about it for next year either.

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Our next question will come from Colin Rusch with Oppenheimer.

It looks like we are having some technical difficulties with Colin. Your next question will come from Vincent Andrews with Morgan Stanley.

Just a quick question. When you talk about the full year adjusted EBITDA margin potential of 30% or greater, at $15 a kg. Are you speaking of the energy storage segment or the company overall?

The overall company.

And then if I could ask on the capital allocation slide, you talked about with the $1.4 billion paying down or deleveraging, but then there's also some other language about liability management opportunity. What does that refer to?

Yes, Vincent, I can cover that. I don't have specifics to share today, but we are obviously looking at a combination of things. not just growth delevering, but also anything else that we can do with our debt towers just across our entire debt stack. So that's what is meant by liability management. It might not always be gross debt deleveraging, but it might be actually just thinking about our debt towers and being responsible with that.

Our next question will come from John Roberts with Mizuho.

This is Elan Wabag for John. So when you look at EV demand, do you have a good sense of how much is energy storage versus EV? And how do you see those percentages move in over the medium term?

So yes, we do -- we have a pretty good view and those are reported independently. So we're so -- and the numbers that we're showing are independent of those. So -- we think that -- I mean, there is some mix because it is kind of the base -- it's the same base technology that goes into both. But we feel like we understand where it's going and what the markets are doing.

So it's -- I think energy -- the fixed storage is about 1/4 of the market today, and it's growing at a couple of times the rate, but it's -- we still see it probably being long term, the market is more EV oriented than fixed storage, but that's the dynamic, and you just look at the math, right? If it's 1/4 of the market, maybe it gets to half, I'm not sure. And over time, -- it will depend a little bit on substitute technologies. I think fixed storage is more exposed to substitutes than BEVs. So I think that has to play out over the next decade to see where that really ends up.

Our next question will come from David Begletter with Deutsche Bank.

Kent, for you and Eric, on Chinese Lepidolite, how much supply do you think are being currently curtailed and versus the high opiate production, how much is the production down today versus that high?

So Eric can give us some details on it. Look, overall, it's not been a huge impact. There has been some impact. They've come out of the market and come back in. That's probably been the bigger piece -- there are a number of plants that are looking for permits, but they are operating through that. That's our understanding of that they need to get new permits. They've applied for those, and they're allowed to operate through that. So Eric, maybe you can give some numbers or some the scope of what has come out and not come back on.

Yes. I think since the middle of the year, David, about 1/3 of the production was impacted to a repermitting exercise and/or as idle for a period of time. Some of that is -- we don't know all the causes for that. I mean there's a lot of discussion about what's happening in China around policy. But nonetheless, that's what we've observed. It's about different petalite operations, including the largest, which is CATL. That's a reduction of about 30,000 tons annually. But I think the question is how long they remain down as they go through permitting it's -- in the scheme of the market, if they -- should they come back, you're only talking about a couple of percent of supply over the course of a year.

So it's a minor blip, and we'll continue to watch it carefully.

Very good. And just on lithium demand. You didn't include -- you did not include your slide from last time looking demand forecast. So 2030, has there been any change to your looking demand outlook if it hasn't been, as the buys moved to the upper end of that range, i.e., 3 million tons or above 3 million tons or above, given what you've seen in the last maybe 6 to 9 months here?

Yes. So actually, we didn't show that. I would say it hasn't really changed, but it has probably moved up a little bit within that range. If you recall, we had a pretty big range because of some of the uncertainties. And then I think the both on both EV and on fixed storage. It's probably more demand. I think it is a demand story and that's higher than we were thinking about at the beginning of the year. So it's been a positive surprise. The range stays the same. It's well within that range, but I would say it has moved up a little bit.

Our next question will come from Josh Spector with UBS.

It's Chris Perella on for Josh. As I think about the ramp of the extra training Greenbushes and your production in La Negra, how much could your resource production be up in 2026 with just the scheduling of those ramps? And then also, do you have a first right of refusal on Wagina -- and are you guys discussing the future of that asset and the ownership with your partner down there.

Okay. So first, just on the asset. So La Negra is pretty much ramped at capacity today. We have some marginal improvement. We can do that as a result of Salar yield has that worked its way through the process in the Salar. So we'll see better feedstock at Lenegra, and that will give us a little more capacity, but it's incremental compared to the overall ramp that we've been through the last couple of years. And then at Talison will start up at the end of this year, and then we've got a kind of plan to ramp through next year.

So it's kind of a ramp through the year. It will depend on how well we execute on that, and that's how fast it comes up. But we kind of -- we tend to straight line it through the year to kind of more or less full capacity by the end of the year and then you can do the math to see what that gets you throughout the year.

So you're asking about lag. So look, I'm not going to comment on the process that's happening down there. You probably -- you can read about it in the Australian press that's doing that or what's happening there. So we -- we talk to our partner, we're aware of what they're doing. So we'll see. We'll let that -- that has to play out.

Think another feature to bear in mind as we look to next year, Chris, is that a good part of our growth this year, as referenced in the prepared remarks, has been that we've taken a lot of inventory out of our supply chain this year. And that would largely be spot inventory in the case of energy storage. -- that has fed growth that is onetime in nature. And so we don't get the benefit of the inventory reduction next year.

So the factors that have been described are going to help to offset that. It's important to keep in mind as you think about next year.

Your next question will come from Christopher Parkinson with Wolfe Research.

This is Harris Fein on for Chris. Just curious maybe if we could talk about the stronger volumes this quarter. How much of that was just you being opportunistic on spot sales because of price volatility and I guess dovetailing off the last question, how should we be thinking about the impact on volume growth next year versus the higher baseline?

Yes. So look, it's -- I mean there is some us being opportunistic Eric just described that inventory reduction. So that's part of our cash management initiatives. We were doing to drive that, but it did give us a little extra growth this year, and we won't have that opportunity next year because we've driven inventories down. But the market has been -- the market is strong, right? But demand and pricing is a little stronger than it has been. So we're optimistic about that. We're not counting on it, but we're optimistic about that. And it's been a bit of a demand story I think over the last quarter or it may be even a little bit longer, but it's stronger in both and that's both EVs as well as fixed storage. Fixed storage has been the big upside surprise this year and it's been very strong, and we see that continuing.

Great. And -- also I just wanted to touch on. There's been a lot of news flow about critical minerals support. We saw what happened with Lithium Americas. Just curious to hear what the latest you're hearing is and in the event we start to see maybe the government engage a little bit more concretely on the localized energy storage infrastructure. Maybe just some thoughts on the scenario planning you're doing in terms of how that might shift your strategy either way.

Right. So I would say, look, we're very happy to see the government focused on critical minerals, the U.S. government, but other governments around the world, we think that's important. We've been saying that for years, that it's important to build out a globally diverse competitive lithium supply chain and to see governments focused on that is fantastic.

Not going to speculate on what could happen with the governments. We're talking to governments all over the world, all the time everywhere that we operate. But there won't be 1 solution. So it will be a mix of things that will help help the market in the West get to reinvestment levels. So tax incentives, trade policy, direct investment may be. I mean, I think it will be a mix, and there'll have to be a combination of some public private partnerships to drive this because it's a big problem, but we've been talking about it for a couple of years now, and we're happy to see governments focused on it.

Next question will come from Laurence Alexander with Jefferies.

So as you look at the way policy is shifting both in Latin America and in the U.S. What do you see as kind of the appropriate return hurdles for you to engage in new projects as opposed to just focus on your existing assets and/or opening up Kings Mountain.

Yes, I don't think our return criteria has changed, right? We've been pretty consistent about that. the issue has been with the pricing that we see in the market, we can't get those returns, which is why you don't see us investing.

So we -- and we've been focused on kind of balance sheet cash driving cost out of the business so we can compete at that lower level. And look, our view is -- and we've said this, we don't -- we're not able to predict the lithium price, and we're not going to depend on that. So we have to be able to compete through the bottom of the cycle, which is why you've seen us so focused on cost and cash and getting our business in a position to do that.

We're getting there. We still have room to go. And if the market -- our view is we plan for the bottom of the cycle, but stay agile so we can pivot when the market gives us that opportunity to invest. We still have good investment opportunities. You mentioned Kings Mountain -- we have very good resources that we can still leverage as we go forward. And conversion is still a possibility, but the economics are -- they're still not there today for Western economic. For conversion -- Western conversion economics.

And is your cost structure at the point where if prices do not improve next year, your cash flow -- your free cash flow positive?

So we're not forecasting next year yet. So we'll do that next quarter. But we are in a -- look, we've driven cost out. We -- I feel pretty good that we built a cost-out mentality. -- around productivity, particularly in our operations. I think we can be better at it from an overhead and back office, but we're working on that.

We've made good strides around that. and we'll continue to drive that. So we'll continue to drive cost and work on our cost position. it's still a new market, and it's going to be volatile and dynamic, and we have to be able to ride that on -- to capture the upside but work our way through the downside. So I don't want to forecast -- we're not going to forecast next year. Today, but we're continuing to stay focused on that cost out, and that will drive the results for next year and years going forward. But I think you should think of our business as that we make sure that we can ride through the down cycles and then take advantage of the up cycles.

Your next question will come from Patrick Cunningham with Citi.

Just a couple of related follow-ups to your last comments. I guess anything else you're looking at in terms of productivity savings program into next year? And what would be the size of sort of the incremental carryover? I know you reached run rate sometime in the middle of the year.

Yes. So Neal can talk about the run rate carryover, but we're going to -- we continue to have productivity programs. and they go across the breadth of our business. We are -- our programs around operations are the most mature and it's not surprising given our legacy as a specialty chemical company, but we are that's pretty mature, and we go down the range.

Our supply chain is a little less mature. Back office is even less mature than that. But we're building the capability and leveraging off of the program we have in manufacturing. So you'll always see it have productivity programs and goals. Even if the market is hot and on fire, we're still going to be pushing to take cost and productivity out of the business. That's just -- I think that's just going to be a feature of our business, and that should be a feature of a healthy business.

Yes. And Patrick, maybe the other thing I can add is just to reiterate. So we see line of sight to a $450 million run rate in cost and productivity savings this year. Obviously, we'll have to see how we finish up the year in terms of the actual savings, but you're already seeing those savings come through in our S&A line and our R&D line and so on. But obviously, some of those will continue to roll into 2026, and we'll give you an update on that with the next quarter once we finish the year. But let me give you an example of what you can expect to hear as you get into 2026.

Just a small example, though, is that we continue to ramp our facilities to full rates. That's a perfect example of the productivity measures that we're really working on. Ken kind of highlighted that in Chile. We're almost to the kind of top end of what we could do with La Negra. Our Mason facility in China is, I think, about a year ahead of schedule in terms of its ramp and it's getting almost up to full rates as well.

So you can expect that kind of continuing to sweat the assets as kind of a key theme in our productivity on top of any other additional cost actions that we can take as well.

Got it. That's helpful. And then maybe just a quick one on amen. It seems like there's some strong demand there in areas like electronics, but maybe some offsets that have pulled performance down and seen some normalization in prices how sort of the promine supply and demand trended throughout the balance of the year? And what sort of outlook are you seeing for the fourth quarter?

Yes. So this is Eric. First, on the demand side, you're right. We still a mixed market, reflecting probably many of the GDP-oriented markets, growth markets that we serve. So for instance, you mentioned electronics, Pharmaceutical, those have been stronger markets. weaker markets have been building construction and oil and gas of late, stronger in the earlier in the year, but with a drop in the price of oil, a little weaker in the second half of the year.

We saw -- if you look at the supply side and the tightness or balance of supply and demand middle of the year, we saw some tightness you may have seen if you follow bromine bromine prices, particularly out of China, there's an index you can follow you've seen that price rise, now starting to come down again as the market has become more balanced. On the 1 hand, on the other hand, we were headed in the time of the year where seasonally production, some seasonal production in India and in China that comes offline due to the winter months. And as that happens, I don't think we're going to get to a tight situation, but we'll remain fairly balanced.

So we -- we're not looking at this as being supremely oversupplied or undersupplied therefore, dynamic from a price standpoint on elemental bromine at the moment, fairly balanced as we go into the end of the year.

Your next question will come from Rock Hoffman with Bank of America Securities.

I guess does the energy storage volume be contain the pull forward? And just given the stronger near-term volume assumptions, where would you expect the contract spot mix to shift in 4Q and thereafter?

Yes. So the -- so pull forward, as you described that's mostly inventory, right? So we had inventory that we were able to use that. The market is strong. So we're selling into a strong market. but it's not we're pulling next quarter's volume forward, but we are bringing to some degree, capacity forward by selling inventories that we had. It's also just us being leaner on cash and inventory Yes. So us being leaner and operating around that, that's the piece. The other piece, I guess, we saw from a pull forward would be the expiration of the 3D tax credits in the U.S. So -- there was a bit of a rush for people to buy EVs in the U.S. It's 10% of the market.

So it's not going to be dramatic overall. But that is one where demand did get pulled forward a little bit.

Understood. And just as a follow-up. And Rock I'm sorry, Rock, I think you had asked about contract spot mix going forward. I just wanted to add 1 point, which is Look, I think Kent had mentioned in the prepared remarks that our contracts continue to perform. We don't have any major contracts that are rolling off until you get towards the end of 2026.

But look, the demand has been so strong in China, in particular, where we don't sell volume on long-term contracts. So if that trend continues into 2026, just based on mix alone, you can probably expect that our 45% that we're at this year will tick down just because of where the product is going and the fact that it's not going on these long-term contracts. But it's not a shift in our long-term contracts. It's really more about geographic mix of sales.

Makes sense. Just as a quick follow-up. Any preliminary thoughts on 2026 CapEx? And I guess, more broadly, when you would need to turn on CapEx, in order to incentivize any meaningful volume growth after 2026?

Yes. So I think, I mean, look, we've been -- we've worked our CapEx down, and we I'd be very thoughtful about that. So we would anticipate, unless we pivot to do some investments we're not -- I'm not thinking of right now. We will continue at that run rate or maybe a little bit lower. We'll continue to work on that to get it down. we don't think we're shorting our assets with the cuts that we've made.

We're just getting -- we're getting more efficient at it, but we're being thoughtful and careful. That's why we lagged down slowly, I would say, particularly on maintenance capital. And so without forecasting -- not forecasting some investment that we might make as a result of the market taking off you see us in a range where we are maybe another leg down. But the legs are incremental now, we're not going to make 50% reductions within -- that's not in the cards that there may be 10%, something like that.

Next question comes from Arun Viswanathan with RBC Capital Markets.

I guess I'm just curious to get your thoughts on spodumene and the impact on pricing. So it looks like prices are -- for both carbonate and hydroxide are kind of settling out at marginal cost levels. Would you agree with that? And would it take spot maybe to go up to 1,200 or 1,500 to see some more robust activity in lithium salt pricing. And if so, what would drive that? -- spodumene, do you feel that supply/demand is balanced or tight or loose or maybe you can just comment on that relationship.

Right. So we commented on it just a little bit earlier, but I think you're probably right. So conversion right now is at basically marginal cost of conversion and in China. And then when you see price move, most of the value and the price movement the conversion stays at that cost -- that marginal cost and it moves to the resource, the margin moves to the resource.

So that's kind of what we've seen in, I guess, for at least a year now. Most of the value moves to the resource because you have overcapacity for conversion in China primarily. It's a little bit different when you start talking outside of China, but the majority of the market is in China. And -- but the market is getting a little tight. And I think that's why you see prices move up. It's probably a bit more is a demand story, but supply has not kept up demand stronger than we thought and supply growth is less than we thought and that's tightening it. Inventories are coming down in both Salt and in spodumene in the system. -- throughout the system.

So I think it's a demand story. I guess maybe it's both because supply has not been as strong as we were originally thinking and demand has been stronger. So the market is tightening. So it's a supply-demand piece, but all the value at the moment does move to spodumene.

Great. And then could you also comment on your potential commercialization in the energy storage market. What are you seeing there? And what do you kind of expect over the next few years from a demand standpoint?

Well, it's the same supply chain and value chain as it is for batteries for EVs for the most part. I mean there are people specializing in that and the core technology, pretty much the same thing from our standpoint, it's about the same. We sell the same material. It's just a thing which value chain it goes to.

Many cases -- in most cases, it's the same customer. That's playing in both energy storage and the electric vehicle market. But the growth has been very strong. A lot of that is grid stability. Well, it's about renewables and storage to go with it in Europe and China to some degree. But it's also about grid stability and data centers, you could say, artificial intelligence -- but that system is what's driving it, particularly in North America. So it's a pretty dynamic market. you always get the question or you think about it is lithium-ion technology, the right technology for that? I mean it's what's available today at scale. Supply chain has been built out. and it still has a significant cost advantage over other technology like sodium ion. So they don't have scale at sodium ion yet, and the cost is still significantly higher.

So I think in the near term, it's going to be mostly LFP technology. Long term, you probably see sodium coming into the mix. But I think we're kind of forecasting about 80% of that stays with lithium-ion technology.

Your next question will come from Joel Jackson with BMO Capital Markets.

Kent, you talked about for a while and today about really being able to ride out the cycle here. What do you think Abema is going forward? If you're not really doing any growth beyond CGP 3 and some conversion in China and you're looking at taking CapEx gone down a level economics don't justify new builds or new capacity. What is in this growing rising sector, EV and ESS -- what will Albermalbe? Are you worried about not growing proportionately with the industry?

Yes. So look, we -- a lot of the work that we're doing is to preserve that growth optionality as we go forward. But we need to see good business cases in order to do it. So my view is we're being disciplined.

Look, we probably are risking some of the upside by being taking the approach that we have, but we are making sure we can go through the bottom of the cycle and then take advantage of that uptick. So we will capture growth. We have opportunities. We think resource is the key to that, and we have some of the best resources on the planet. So it is about optionality. And we're having -- and we have to manage our balance sheet and the market opportunity out there, and we don't want to get caught flat-footed. But I think we're -- what we're trying to build is a business that is agile, and we'll be able to pivot to do those investment projects when we see the right economics.

Okay. And the second question is maybe a little strange. But I mean, we've seen a lot of good data, a lot of the industry sources about the acceleration in growth rates in ESS. Can you talk about on the ground, what you're actually seeing is the high real? Is it being exaggerated? How much tangible evidence do you have of accelerating growth rates in DSS you can share?

Well, Eric can comment on that. I think the most tangible is the volumes that we see going into it. I mean, that is not -- I mean they are shipping and going into battery. So that's not forecast, that's legitimate. That's real. So -- and some I think -- I mean that market is there, Eric, you can comment on more specifics?

Yes. It's a kin Joel to the last question that came up around where what's going on in this market? Is it a different channel? It's not. It's the same big battery names that are in the EV space. And I guess there are a couple of things we see certainly in China, which is the largest market and where and really the home of LFP technology, we're seeing a lot of -- in all of our discussions with both cathode, particularly LFP cathode and battery producers in China, those cell lines are at full utilization now to meet the demand, both domestically in China and abroad.

The interesting thing about the grid storage market is it looks a little different from a global perspective in the EV market, meaning it's not all just about Europe China and the U.S., it's the rest of the world and the grid demand, grid stability, renewable power are important, whereas in North America, of course, the big driver is more about AI data centers -- and even now pivoting to the U.S., we have a great number of battery partners -- partner with OEMs here in the U.S. who are taking those same facilities and looking to retrofit them to make ESS technology, whether that's moving to a lower nickel technology or to an LFP technology, and then finally, we're seeing a big uptick, and this is both an EV driver and an ESS driver amongst all cathode produced, certainly in China metros, but now outside of China, the Koreans the Japanese, they're all aggressively pursuing their own LFP in-house technology programs. And it's both EVs, but probably more importantly of late, that's ticked up because of ESS.

So those are a little bit of on-the-ground commentary of what's driving this enthusiasm for the space.

Your next question will come from Abigail Ebert with Wells Fargo.

I understand you're not guiding to 2026, obviously, but I was just wondering about your expectations for underlying EV demand as we look to next year.

We're curious about underlying EV demand for next year. I think we continue to have. Go ahead. Sorry, that I could.

Okay. This is a part and parcel of the long-term forecast. We did not put in the slide deck we have in prior decks. It's a growth in the market. We see it 2.5x between now and 2030 of the total market consumption for lithium. And while we've spent -- in the last question, a lot of time talking about AI, data centers and grid storage demand, that's about 25% of demand. The well over close to 70% of demand in the space or more for lithium is driven by EVs, weaken China continues to be strong. The unrest thing about China is that it is now over 50%. It is well below the tipping point from a cost standpoint.

So the pack costs are well below $100, and in some cases, half that level. And so that's producing a car that's now more competitive than an internal combustion engine with an incredible amount of vehicle choice to consumers there and healthy demand for both battery electric and plug-in hybrid vehicles.

Now that market gets bigger, the percent growth rate obviously gets smaller because it's just the law of large numbers, if you will, the growth is still -- the penetration, we still expect to continue. We're encouraged most recently and expect the continuance into next year in Europe. Europe has -- there's a lot of discussion about the long-range emission targets, and we have to just remain vigilant as to what the policy decision there is.

In the short term, there's been a commitment to the next step in that CO2 reduction across the fleet on average. And while some benefit was given to go slower this year, they still have to an average 3-year target, which means they're going to have to go faster from a supply side to produce such vehicles in the coming years.

Probably our most -- not questionable, but difficult to predict market wood for EVs would be the U.S. All of those technology trends that I described should be favorable to cost and adoption. Even here in the U.S., we're at that tipping point on pack costs. However, policy and other things are -- may not be supportive of that. So we just have to wait and see. However, that is the smallest of the 3 major markets. It's only about 10% of the lithium or EV -- or lithium demand are that right EVs are in the U.S. So that outlook we see flowing into next year as well.

Your next question will come from David Deckelbaum with TD Cowen.

I did want to follow up and maybe with Neal, just post-ocean Ketjen partial monetization, obviously, a significant amount of capital coming in. One, I'm trying to think about how much capital you'd be saving on the CapEx side, $26 million just from divesting those assets. But more importantly, once the proceeds come in, in the first half of '26. I think you've talked about increasing your ability to delever. What do you see doing with those proceeds near term? Or has this just become a cash hoard to opportunistically look at the balance sheet?

David. So let me -- if I hit all your questions here. I think in terms of -- I think you were asking what is the CapEx from Ketjen. I think on a going-forward basis, you should think about roughly 10% of our CapEx is related to catch-on, and that will be what would potentially come off as we get into next year.

Now we obviously have to see when the transaction will close. So there might be a little bit of Ketjen CapEx in our numbers next year, but maybe just for the first half of the year. This year, Ketjen CapEx admittedly was a little bit higher than that. That was mainly because Ketjen was finishing its own growth investment called DSM 5. That project is done. But we did have a little bit higher CapEx through the year related to Ketjen. In terms of -- I think the second part of your question is sort of what are we going to do with that cash?

Look, I think we have always said that delevering is 1 of our top priorities as a company, and we're at that point now. We obviously have enough cash on hand to take out or repay the debt that's coming due here in a few weeks. That will happen in the normal course. And I think what you can expect is that once we have line of sight to getting to the proceeds around Ketjen.

Look, I think that's when we'll get a lot more serious about acting with that cash. We're not going to necessarily let it sit on the balance sheet for too long. And we have some thoughts around how we want to do that with regards to delevering as well as the other capital priorities that we have on our slide in the deck.

So I can't give you any more specifics around timing, but obviously, we're developing our plans now.

Appreciate that. And maybe just a second 1 for Neal or Kent. Obviously, super commendable job this year, just getting the free cash neutrality. I know part of the benefit was -- or you did have some help from a customer prepayment, but albeit at the bottom of the pricing cycle here. As we go into '26, I know a lot of people have asked about the free cash outlook, but I guess, in isolation, one tailwind that I am curious on is just the outlook for dividends from Talison, which, I guess, as I think about CGPI completing and coming online. Should that be a credible tailwinds going into '26 in your view?

Yes, David, I can start on that. So we kind of covered that a little bit earlier in the Q&A. Just to go back to that is that is basically in the tail end of the investment part of things, and it will start to ramp as we go through 2026.

But you should think about kind of the majority of 2026 really being the ramp period for that facility. So 2 big things, I think that the Talison dividends will be dependent on is obviously, number one, how well or quickly that unit ramps up, and we're working with the JV right now to understand what that's going to look like as they tip over into start-up.

But then the other part, of course, is pricing. And so it's a little early for me. We never do try to call pricing. It's early for me to call pricing for spodumene across the balance of 2026. We're also working with the JV also through their budgeting to understand the levers that the JV has as well. All the partners are very interested in dividends out of the JV, especially as we get through this investment phase.

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

Thank you, operator. In closing, I want to thank you all for your continued support and trust in Albemarle. Our strong results this quarter enhanced outlook for 2025 and ongoing focus on operational excellence position us well for the future. With our world-class resources, leading process chemistry and commitment to customer success, we're confident in our ability to create lasting value for our shareholders and seize opportunities ahead. We appreciate your partnership and look forward to connecting in our upcoming events. Stay safe, and thank you.

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

Hello, and welcome to Albemarle Corporation's Q2 2025 Earnings Call.

I will now hand it over to Meredith Bandy, Vice President of Investor Relations and Sustainability.

Thank you, and welcome, everyone, to Albemarle's second quarter 2025 earnings conference call. Our earnings were released after market closed yesterday, and you'll find the press release and earnings presentation posted to our website under the Investors section at albemarle.com.

Joining me on the call today are Kent Masters, Chief Executive Officer; and Neal Sheorey, Chief Financial Officer. Netha Johnson, Chief Operations Officer; and Eric Norris, Chief Commercial Officer, 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 strategic initiatives may constitute forward-looking statements. Please note the cautionary language about forward-looking statements contained in our press release and earnings presentation that also applies to this call. Please 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.

For the second quarter, we reported net sales of $1.3 billion, including strong volume growth in energy storage and specialties. Adjusted EBITDA was $336 million, reflecting year-over-year cost and productivity improvements in energy storage product mix.

As a result of this performance and cash actions we pursued in the quarter, we also improved our leverage metrics and strengthened our financial flexibility. We are maintaining our 2025 outlook considerations and now expect to achieve positive free cash flow in 2025. Both assume the current low lithium market pricing persists for the remainder of the year.

This is largely due to our team's successful execution of measures to reduce operating and capital costs and preserve financial flexibility. For example, as of June, we achieved a 100% run rate of our $400 million cost and productivity improvement target, the high end of our initial target range. We are also further reducing our full year 2025 expected capital expenditures to the range of $650 million to $700 million, down about 60% versus last year.

Finally, we enhanced our financial flexibility by redeeming preferred shares we held for an aggregate value of $307 million. On a relative basis, we see macro conditions stabilizing, and our end markets and operations have generally followed the trajectory we expected this year.

Lithium demand continues to grow strongly with estimated global lithium consumption up about 35% year-to-date, including strong volume in stationary storage and EVs.

We continue to expect the direct impacts of tariffs announced since April to be minimal on our enterprise, thanks to the exemptions and our global footprint. And finally, in the Middle East, our operations in Jordan have continued uninterrupted by the recent Iran-Israel conflict. We'll dive into these and other macro conditions later in the call.

Now I'll turn it over to Neal, who will provide more details on our financial performance and outlook considerations. I will conclude our prepared remarks with an update on our macro and end market conditions, including further details on our lithium market forecast before opening the call for Q&A.

Thank you, Kent, and good morning, everyone. I will begin with a review of our second quarter financial performance on Slide 5. We reported second quarter net sales of $1.3 billion, which declined year-over-year, mainly due to lower lithium market pricing. The pricing impact was partially offset by higher volumes in energy storage and specialties.

Second quarter adjusted EBITDA was $336 million, also down year-over-year. Lower input costs and ongoing cost and productivity improvements helped to mitigate the impact of lower lithium pricing and reduced pretax equity earnings. EBITDA improved sequentially, largely due to higher energy storage and specialties volumes and continued cost savings.

Adjusted earnings per share was higher year-over-year, due primarily to a prior year charge related to asset write-offs and associated contract cancellation costs.

Slide 6 highlights the drivers of our year-over-year EBITDA performance. Q2 adjusted EBITDA was down slightly due to lower lithium pricing and pretax equity income. Mostly offset by reduced COGS related to the timing of Talison inventory flow-through as well as the benefits of our cost and efficiency improvements.

The EBITDA impact of volumetric growth is primarily captured in the COGS impact, as our year-over-year volume growth enabled improved fixed cost absorption and reduced reliance on third-party tollers.

Our SG&A costs were down more than 20% year-over-year due to our cost savings initiatives. Adjusted EBITDA increased by 35% in specialties year-over-year due to higher volumes and pricing, as well as reduced costs. Corporate EBITDA increased primarily due to cost reductions and foreign exchange gains.

Moving to Slide 7. As always, we are providing outlook scenarios based on recently observed lithium market pricing. And on this slide, we have presented Albemarle's comprehensive company roll-up for each lithium market price scenario. All 3 scenarios reflect the results of assumed flat market pricing across the year in conjunction with Energy Storage's current book of business with ranges based on expected volume and mix.

Our approximately $9 per kilogram scenario is based on Q2 average market pricing. For reference, the average lithium market price year-to-date was also just over $9 per kilogram LCE. And if we were to assume current pricing held for the balance of the year, the price would similarly be about $9 per kilogram LCE.

As you see here, we are maintaining our outlook consideration ranges. In particular, the approximately $9 per kilogram range is expected to apply assuming recent pricing persists for the remainder of the year. We've been able to maintain our outlook ranges due to a combination of successful execution of our cost and productivity improvements, operational excellence, including energy storage project ramps, and strong first half 2025 demand from energy storage contract customers.

Turning to Slide 8 for additional outlook commentary by segment. First, in Energy Storage, we now expect sales volume growth on an LCE basis to be near the high end of our 0% to 10% range, thanks to year-to-date record production from our integrated conversion network, plus improved mine performance at Wodgina and strong performance at the Salar yield improvement project.

Energy Storage long-term agreements continue to perform in line with our forecast and we have no significant contracts up for renewal this year. We realized a strong first half Energy Storage EBITDA margin of about 30%, thanks to lower input costs and a higher-than-average proportion of lithium salts sold under long-term agreements. As a result, we experienced better-than-expected product mix in the second quarter.

Second half margin is expected to be lower due to a smaller proportion of our lithium salt sales being under long-term agreements. Also, some spodumene sales that were previously expected in June shipped in July. Net-net, we continue to expect the full year EBITDA margin to average in the mid-20% range assuming our $9 per kilogram price scenario. In specialties, we continue to expect modest volume growth for the full year with Q3 net sales and EBITDA projected to be similar to Q2.

Finally, at Ketjen, we expect modest improvements in full year 2025. We see Q4 being the strongest quarter of the year with higher volumes for both FCC and CFT. Please refer to our appendix slides for additional modeling considerations across the enterprise.

Slide 9 highlights our strong focus on cash management actions. As a result of our commitment to effective execution and converting earnings into cash, we continue to expect full year operating cash conversion in excess of 80%. Additionally, we now expect to achieve positive full year 2025 free cash flow as a result of our operating cash flow generation and our reduced capital expenditure forecast, which we lowered to a range of $650 million to $700 million.

Turning to our balance sheet and liquidity metrics on Slide 10. The measures we've implemented to control costs, reduced capital spending, enhance cash conversion and drive other cash actions have strengthened our financial flexibility. We ended the second quarter with available liquidity of $3.4 billion, including $1.8 billion in cash and cash equivalents, and the full $1.5 billion available under our revolver.

At the end of the quarter, we closed on the redemption of our holdings, a preferred equity in a W.R. Grace subsidiary for an aggregate value of $307 million, including $288 million in cash received in June 2025. This transaction further contributed to our strong liquidity position. We continue to improve our leverage ratios, ending the quarter with a net debt to adjusted EBITDA ratio of 2.3x, well below the covenant limit.

As a result of our cash performance and liquidity strength, we intend to utilize our cash for deleveraging. As a first step, we expect to repay our $440 million eurobonds with cash on hand as those bonds mature in November.

With that, I'll turn it over to Kent.

Thanks, Neal. I'd like to start by covering more details on the end market and macro conditions, starting on Slide 11.

First, I will cover our JV operations in Jordan, given the recent activity in the Middle East. That business continued to operate safely and uninterrupted and even achieved record production in the second quarter. This is thanks in part to our NEBO project, which provides both financial and sustainability benefits.

NEBO leverages innovative proprietary technology to recycle a co-product stream into additional sellable product. The result is higher volumes, lower cost and improved energy and water efficiency. The project reached mechanical completion in March and continues to ramp on plan.

Here in the United States, the OBBB was recently passed. It is a complex piece of legislation, and we are actively assessing its implications to Albemarle as rulemaking continues to take shape. For example, there are several corporate tax implications that appear to be neutral to positive for Albemarle.

As expected, the act also amends certain aspects of the Inflation Reduction Act and reinforces the value of our global assets, especially lithium production in the United States and Chile.

The 45x tax credit remains in place for U.S. production of batteries and critical materials with phaseout beginning in 2031 and ending in 2034. Albemarle continues to expect 45x tax credits for critical minerals production at Silver Peak and Kings Mountain. As with 30D, some customers may be willing to pay a premium for domestic or free trade agreement lithium production.

Finally, on the product demand side, global lithium demand remained strong, thanks to strong demand for both stationary storage and EVs. Global stationary storage battery production was up 126% year-to-date through May, with strong growth in all 3 major regional markets.

Turning to Slide 12 for more on global EV demand, 2025 EV demand growth continued its strong start led by China, where EV sales were up 41% year-to-date. Interestingly, Chinese BEV sales have been the strongest segment of the market, up 44% compared to PHEVs, up 38%. This is in part due to recent subsidies in China that made the net purchase price for entry-level BEVs very attractive for consumers.

European EV sales continued to strengthen during the quarter with year-to-date sales up 27% through May. Thanks to a continuation of the step change in regulatory emission targets. The outlook in North America is less certain, particularly in the United States due to the potential impact of tariffs and the removal of the 30D tax credit in September.

North America is the smallest of the major regional markets with approximately 10% of global EV sales, which highlights its relatively low impact on global demand today. Strength in China and Europe more than offset weakness in North America, reinforcing confidence in the industry's long-term growth potential and highlighting regional dynamics.

Turning to Slide 13. We continue to expect lithium demand to be more than double from 2024 to 2030, unchanged from our previous outlook, driven primarily by stationary storage and electric vehicle demand. We are also maintaining our expected 2025 demand growth range of 15% to 40%, including the anticipated impact of tariffs announced to date in the OBBB. Slide 14 gives more detail on expected market balances.

We estimate that the lithium market has been in surplus since late '22 as high pricing in '21 and '22 led to supply expansions. At lithium pricing in excess of $70 per kilogram, effectively, every project was able to secure funding. Now as pricing stays lower for longer, new project development has begun to slow, while demand continues to be robust. Year-to-date, lithium demand growth has outstripped supply growth by nearly 20%, thanks to strong stationary storage and EV trends, and supply curtailments announced over the last year.

If current pricing persists, demand growth is expected to outstrip supply growth by up to 10% per year on average between 2024 and 2030. As a result, we expect that surpluses may peak as early as this year, with the market expected to be more balanced next year and potentially returning to deficits in '27 and beyond. This analysis assumes that recent pricing of $9 per kilogram does not support most new or greenfield projects.

Low-cost projects, in particular, brownfield expansions of existing low-cost resources are assumed to progress. It is also worth noting that this analysis does not include any impacts from recently announced or prospective supply curtailments in China. We remain confident in the long-term outlook of the lithium industry and the energy transition. In the meantime, we will remain patient and disciplined.

Advancing to Slide 15. As we shared before, we continue to progress broad initiatives designed to maintain our long-term competitive advantages along these 4 pillars: optimizing our conversion network; improving cost and efficiency; reducing capital expenditures and enhancing financial flexibility. We are building a culture of continuous improvement. Our results this quarter once again showcased that mindset.

Slide 16 highlights our progress on these actions. In terms of optimizing our lithium conversion network, we started off this year targeting energy storage sales volume growth of 0% to 10%. Today, we expect that to be at the high end of the range, thanks in part to record year-to-date production across our integrated conversion network, allowing for better fixed cost absorption and reduced tolling volumes.

Second, we have continued to progress our cost and productivity programs. We began the year with a target of $300 million to $400 million cost and productivity improvements by year-end. Today, we announced a 100% run rate against the high end of that initial range of $400 million.

Over the past quarter, we've executed projects to capture further reductions to non-headcount spending, supply chain efficiencies and further volume improvement at key manufacturing sites. This isn't a onetime action. We're building the muscle and mindset to identify opportunities to achieve savings and efficiencies.

Third, we began the year targeting 2025 CapEx down approximately 50% year-over-year. The team continues to identify additional opportunities to reduce capital expenditure by prioritizing only on the highest return, quickest payback projects and optimizing value and project scope on existing projects.

As a result, we now expect CapEx in the range of $650 million to $700 million, down approximately 60% year-over-year. As a result of all these actions, plus our focus on enhancing financial flexibility and driving cash conversion, we initially expected to be at breakeven free cash flow for the full year. We now expect to achieve positive free cash flow.

In summary, on Slide 17, Albemarle delivered solid second quarter performance, while continuing to act decisively to preserve long-term growth optionality and maintain our industry-leading position through the cycle. We are maintaining our full year 2025 company outlook considerations, building on the progress we've made to drive enterprise-wide cost improvements and achieved positive full year free cash flow.

We are progressing broad-based, comprehensive actions to manage controllable factors and generate value across the cycle. I am confident we are taking the necessary steps to maintain our competitive position and to capitalize on the long-term secular opportunities in our markets.

With that, I'd like to turn the call back over to the operator to begin the Q&A portion.

[Operator Instructions] Our first question comes from Rock Hoffman with Bank of America.

Could you just go into why the 2H mix may change between contract and spot versus where you were in 2Q, and does this mix potentially extend beyond 2025, implying less than a 50-50 split between the 2 in 2026?

No. And it's probably not that exact. I mean it's essentially about our customer demand, right? And they draw more on contracts at a certain period and -- than others. Maybe it's a little different than we had forecast, but it's essentially our customers drawing more volume than we had anticipated in this quarter. And we don't -- we see it moving around between quarters, which is why we -- the comments that you see in our guidance.

I see. And just as a quick follow-up, given how volatile lithium pricing has been over the last handful of days, what numerically is your underlying assumption of flat pricing? And if pricing does fall off these current levels, how much can it fall before you risk kind of missing your low case guidance for EBITDA and free cash flow?

Yes. So we -- I mean, our guidance says that the kind of current price in that range. And we haven't change -- we didn't change our view of that since it moved in the last month. So it's not something that's based on pricing that moved in the last week or weeks. It's kind of our view of where we are in the market. Does that answer the question?

Yes. I guess any numerical detail on that assumption. Is it $9 per kg for 2H, which is assumed or...?

Yes. Rock, this is Neal. Yes, as we said in the prepared remarks, and you'll see it actually on our modeling consideration slide too. Maybe this is an important point that when -- I think some investors look at just 1 price in 1 region to calculate a market price, and that's not exactly the lithium market.

So we take a basket approach here. So not only are we taking the price in China, we're taking the price in Asia, ex China. We're also taking carbonate and hydroxide. But regardless, when you mix all of that together, basically, no matter how you slice it, it's been about $9 so far this year, and that's, therefore, the price effectively today, and that's what we're drawing forward as well.

Our next question will come from David Begleiter with Deutsche Bank.

Kent, can you talk about what you're seeing from a lithium supply standpoint? How much of global supply is offline? What's happening in China vis-a-vis some of the integrated -- non-integrated producers on the spodumene side, and the lepidolite side, I'm sorry.

Yes. So look, we continue to think that more capacity needs to come out of the market. It doesn't -- and I don't think it's changed dramatically this quarter versus previously. There have been a couple that have come offline in China. It's not clear exactly why they've come offline.

So we're watching that pretty closely. I'm not sure we're drawing any big conclusions from that. So -- and I don't think it's dramatically different than last quarter, really, I guess the only change is a couple of sites coming offline in China and exactly why those came off not clear.

Got it. And just back to the pricing question. Can you talk to what you think underlies the recent pricing volatility in China over the last, call it, months that we're seeing month to 5 weeks here?

Yes. So I'd say it's some of the uncertainty around the supply as well. So -- and government policies. And as you know, the China market is very speculative. So it -- but we're not -- we're watching that very closely, but we've not read a ton into it.

Our next question will come from Laurence Alexander with Jefferies.

If that it takes several years to get back to tighter conditions, can you maintain free cash flow positive if we're at $9 per kilo on average in 2026, 2027, 2028, or can you walk through kind of what incremental adjustments or headwinds you would face in the next few years relative to 2025?

Yes. Laurence, this is Neal. Well, look, certainly, that is the goal of all the actions that we are taking and the things that we continue to work on going forward. Maybe just a couple of examples as we turn the page into 2026. Obviously, today, we're very happy about reporting that we hit our 100% run rate against our -- the high end of our cost and productivity target.

So 100% of $400 million. Not only are we at the high end of our range, but we're hitting that run rate 6 months early. So clearly, you'll get the full benefit of that as you turn into 2026. Then of course, we're also ramping our facilities as quickly as we can so that we can get the full capability out of our own facilities, and we're able then to back off on tolling and move more of our own material through our own facilities. That will be a benefit as we move into 2026.

And then I think one of the key things from a free cash flow -- 2 key things from a free cash flow standpoint, the first is, obviously, we are in an unusual situation here in 2025, where our JV in Australia, in particular, is going through its own growth program. So clearly, as that one gets to the end of that growth program and dials back its capital expenditures. It all depends on where pricing goes, but obviously, that will potentially release some more cash for dividends, and we can get back to a more normal case with dividends coming from our JVs.

And then I just have to say in terms of our things in our own control, our own capital expenditures and the work that we've been doing already to continue to be just much more efficient about our capital spending, much more stringent about which projects are moving forward and which aren't.

You've seen how we've continued to whittle down our CapEx number through the year. And obviously, we're not stopping here. We're going to continue to look at the book of projects and continue to work on that. And that could potentially be something that I think we can hold this kind of CapEx level at least for another year, if not longer, depending on how market conditions develop.

Our next question will come from John Roberts with Mizuho.

At the current capital spending level, do you fall back to flat lithium volumes here at some point in the next few quarters? Or what's your volume growth outlook?

No. So -- John, so I think we -- I mean, the investments that we've made and the programs that are -- that are still going forward around that give us growth for period of time, eventually, right, we run out of that, but it's not the next few quarters, its years, not quarters.

Our next question will come from David Deckelbaum with Cowen.

Can just kind of ask 2 questions on growth. Just one is, and Neal, maybe you can chime in as well. But the -- obviously, the spends that you guys have rationalized this year, you go into next year, you're finishing up some growth projects, obviously, in Australia. Should volume growth, is it solely going to be coming from Greenbushes in '26 as you think of like the broader corporate portfolio?

No, I think we've got -- we'll -- it's not going to be just Greenbushes, it's probably the biggest -- that's the biggest piece of it. But we have capacity at Wodgina and the Salar de Atacama as we ramp the Salar yield project. There's still -- there's a bit more to come there. So -- and look, we try at every asset, both conversion and mine standpoint to gain productivity in both cost, but also in molecules on every asset all the time. So it's not just Greenbushes, that's the biggest piece because that's the one big investment that will come on, but it's broader than that.

Yes. Maybe, David, just to add to that, too, is, obviously, lithium, those are the larger assets and bigger pounds. So you kind of tend to focus on that. But I do want to highlight that we are still pushing out incremental pounds from specialties. And in the prepared remarks, we talked about one example of that in Jordan, where we've started up a project that has great financial and environmental benefits, but it also is pushing out more pounds incrementally. So I think there are a few different avenues across the company where you'll continue to see growth.

I appreciate that, Neal. Maybe you can talk a little bit just about the cash deleveraging opportunities beyond the $440 million that's coming due in the fourth quarter this year. How should we think about how you're approaching the balance sheet in '26 is considering the cash balance that you have, but then also if we're going to stay in this sort of $9,000 a ton reference range. How do you think about the next goals in the balance sheet and pushes and pulls in '26 and '27?

Yes. Thanks for that question. Look, I think we've been very consistent that across the cycle, we're targeting a leverage ratio of 2.5x or less. We're very happy to be there at 2.3x as we exited the second quarter. But we are at the bottom of the quarter -- or sorry, bottom of the cycle. And so clearly, we've made deleveraging really our -- one of our top capital allocation priorities.

And so -- the first thing that I, of course, want to address is the maturity that we have in November, and hopefully, we did that with our remarks today. As we look forward, I think we'll -- we are studying that. It's a little early for me to say exactly what our plans are around that. Other than to say, deleveraging does remain a top priority for us, mainly because I want to make sure, as you said, if pricing is going to stay at this level lower for longer than it behooves us to just make sure we strengthen the balance sheet, and we're prepared for that.

Our next question will come from Josh Spector with UBS.

It's Chris Perrella on for Josh. Could you just walk through the puts and takes of the energy storage margins going into the third quarter and then going into the fourth quarter, the assumptions there? And with the pull forward on volume, have you sold out, maxed out your contract tons in the first half of the year, and that would imply the balance of the year is mostly spot?

Chris, this is Neal. I'm happy to start on that question. So let me answer the back end of your question first. No, we haven't maxed out the contract volumes. Really, what we saw in the first half of the year is, as Kent mentioned, we just saw a heavier demand on our contracts in the first half of the year, and that's where we got a little bit better mix than we expected.

As we look -- additionally, by the way, I should say that -- and we mentioned this in our prepared remarks, we had some spodumene sales that we expected to ship in June, and they just -- quite frankly, they just tipped over into the third quarter. So they have shipped now in July. So that's really another part of the mix.

If you think about the puts and takes for the balance of the year, now this is -- I'm saying this here in July, a lot of things could change. But as we look at the order book today, what we're seeing is probably a softer demand on those contracts in the third quarter. So to your point, you'll probably see a little bit more spot mix from a mix perspective in the third quarter. And then we're seeing a little bit stronger demand from a contract perspective coming into the fourth quarter.

So that's how you should think about things maybe across the back end of the year. But look, it's July, things can move around. They have moved around as you've seen already for the first half of the year, but that's the best visibility we have right now.

Yes. And I'll just let me add to that just because it is mix, not like our contracts are satisfied in the first half. That's definitely not the case. It's mixed. So it's moved around a little bit. We expect to see it really in -- between second and third quarter and then fourth should be more traditional.

And then just a follow-up, the feedstock costs, you were expected to get slammed with that in the second quarter. Is that now going to hit in the third quarter or there was higher cost spodumene that you had to work through. Is that not the case anymore? Or what's -- I guess, what's depressing the margin even more in the third quarter?

Yes. Chris, the way it's worked out. I think we did work through a little bit of it in the second quarter. But yes, you're right. It's primarily more of it's going to get worked off in the third quarter just based on how the inventory is flowing through the system.

Our next question comes from Aleksey Yefremov with KeyBanc CM.

I just wanted to follow-up on the second half guidance. Should we just think about this as the basis sort of, of the run rate for next year? Or is the mix maybe not representative, it's sort of not rich enough because it doesn't have enough LTAs in it. So really a question about second half as the basis to think about next year's EBITDA?

Yes, I think you're reading too much into it. So it's mix between customers moving back and forth. We -- and our -- it's kind of -- we said about 50% of our mix now has got long-term agreements with floors, and that will be the case going into '26. And there, we do have a couple of contracts that run off in '26. But as we've said before, we don't really expect those to run out. We'll negotiate those and extend those. That's our expectation. So I think I wouldn't get carried away between the first half, second half. The mix is going to be the same and it moves around by quarter.

Okay. That's helpful. And I think I remember earlier before you revised your CapEx lower for this year, you were signaling there would be additional opportunities to lower CapEx next year. Did you pull those opportunities forward? Or could you bring CapEx down even more after -- after you just stepped it down?

So look, we're pretty -- we're focused on CapEx and operating costs. I mean we're focused on all of those pieces. I think you see us working kind of across that portfolio to drive cost out of the business includes CapEx. So we're not going to say what the CapEx rate will be next year, but we're very focused on it. Our goal would be to drive it down, but we're going to -- we've got to see exactly what those are as we go into planning for next year.

But we've adjusted our forecast for this year, and we have a pretty good track record of hitting those when that's the case. And then we're very focused on driving that out. But there is a -- we're getting close to the level where it's hard to take big chunks. It's getting to be smaller pieces as we go, but we continue to be focused on that.

Next question comes from Joel Jackson with BMO.

Your JV partner at -- one of your JV partners I agree, which is talked about first ore at CGP3 end of the year, not first concentrate. It's a bit of a nuance there. But is that right? Are we not expecting really any volumes now into maybe early into '26, maybe early to mid-'26? So what's your thoughts there?

Yes, I would say it's probably -- before we start seeing volume there, it's going to be '26 -- or I'd say early in '26 probably not -- maybe not day 1, but early in '26.

Okay. And then also a bit of a different question. We obviously saw what happened with MP Materials over the last month or so. We know the DOE has been out there with programs, DOD has money, Lithium is not rare earth. But looking at Kings Mountain, is that a project that is strategic to the U.S. to the point where Albemarle want to start doing due diligence with different government organizations trying to get the profile of that project up and maybe trying to look at a way to be something like an MP Materials kind of importance for the country.

Yes. So I would say, look, we're encouraged by the focus that the Trump administration has put on critical minerals. As you say, rare earth is kind of at the very top of their list, but lithium is something that they're looking at as well. We've been saying for some time that to build out a U.S. full supply chain, primarily conversion as well, you need public-private partnerships.

And it's interesting to see government moving on something like MP Materials to do exactly that in the rare earth space. So -- and we've been talking with the government for some time about the need for those type of things. So we think it's encouraging. We like the focus that the government is putting on critical minerals, and we're very happy to have conversations about it.

Our next question will come from Vincent Andrews with Morgan Stanley.

Just wanted to ask on the mix. Is there a production geography aspect of it too? In other words, do your contracts skew a little bit more towards Atacama volume? Or are they evenly split geographically in your production facilities?

So yes, I would say that -- I mean, it's split around, right? It's not exactly in 1 location. All of our contracts pretty much are Western -- with Western players. Now that doesn't talk about the facility that it comes from or actually where the ship to location is necessarily. But almost all of our long-term agreements are with Western players.

Okay. And as a follow-up, obviously, a nice job reducing the CapEx. Could you just give us a sense of most recent reduction, what is that coming out of? And also, do you have an updated maintenance CapEx number for us now that the CapEx number has moved lower again?

Yes. So we're not giving guidance on kind of maintenance versus growth capital, but it's coming out of a lot of small places, right? It's just focused on capital, pushing things out, tightening things up. And as we get into planning for next year, then maybe we can give you a little bit more detail on that. But at this point, we've lowered our guidance this year, and we would anticipate continuing to drive capital out of the plan, but it's getting harder, I would say.

Our next question comes from Colin Rusch with Oppenheimer.

I guess I have a 2-part question. One, thinking about the government involvement with market dynamics on critical materials. Have you seen any indication that they might start setting pricing in the market?

And then a secondary question is around refining capacity and technology. You guys had been kind of adjacent or involved in a project around dry processing. I just want to get an update on how you guys are thinking about potential technology evolution around some of that conversion of refining process technology in North America.

Okay. So I guess, I mean, it's 2 quite different questions. So the first around government involvement and pricing. So we're not -- we don't see that. They've not really been involved in that. I guess, the closest thing you'd see is the MP Materials deal is they've done purchases from a DOD standpoint. They did set a price for that, but that's -- I don't see that as getting involved in the market. So we don't really see that or we haven't seen that.

And then on the technology, I'm not exactly sure. We look at process chemistry as a key advantage for us in conversion, but that includes like DLE, which is probably the biggest focus we have on, on new technology, but it's also streamlining the technology that we have in our hard rock conversion assets. I'm not sure what the dry comment was, what technology that is around dry processing because I'm not familiar with that.

Yes, that was a process that Tesla was working on in and around the San Antonio facility where they were doing that with a different closed-loop system. But I can take that offline.

I guess the follow-up question here is around China policy. You guys have gone through a number of policy cycles around EVs. And obviously, that government is focused on short-term sales historically, then following up with incremental policy adjustments to kind of maintain market integrity. Can you just give us an update on your current thoughts on the evolution of the EV policy in China, and how you see that evolving over the next 2 to 3 years?

Yes. So I mean, look, I mean, you're right in that you see them making adjustments in incentives. I think those are around the edges. The broader policy is -- I think it's a key technology for the Chinese. They see it as a way to own a segment and do an export to the world around that. So they've spent a lot of time in development on R&D all the way through the value chain from EVs and batteries, cathode, even the lithium supply chain.

So I think they see it as a strategic segment for them as a way to export materials from China and create more jobs in China. And then a lot of what you see on the increment around incentives for EVs, I think, is just kind of trying to balance activity and what's happening around that. I don't read that much into those, those are short-term incentive programs, but I think long-term, they see it as a strategic segment.

Our next question will come from Ben Kallo with Baird.

Sorry about that. You talked about contract renewals for things that roll off next year. And I'm just wondering like from your customer perspective, how contracts are structured with the current price is like [Technical Difficulty]? And then my second question is on the prepayment that you guys got, I think, last quarter. How is that contract versus what's out there right now? Because prepayment in my mind, I think it's at cheaper prices, if they're good to prepay.

Okay. So Ben, that was a little bit unclear. So you were asking about the contract structures and then the prepayment.

So I think that -- I mean, there's 2 different things, right? I don't think you would -- our traditional customers or people through -- in the value chain. The prepayment is kind of was a unique deal that we did. I don't see that changing our overall contract structure overall. And maybe Eric can comment on how -- I think you were asking how our customers are seeing our contract structure versus spot market.

No. When you renew -- sorry about that. when you renew it next year, like how they're viewing current prices and restructuring the contracts?

We have an active pipeline process where we're for existing customers and potential new looking out 3, 4 years, just as we traditionally have done. Admittedly, in the low-price environment, we had slowed that a bit, but we're seeing renewed interest as OEMs look towards the end of the decade and have their own calculus around how they see supply playing out that they want the security.

We have 2 contracts that towards -- it's about -- yes, 1 or 2 contracts that towards the end of next year come off. Both of those were in discussions at various stages with those 2 customers to get -- to extend them, or to renew or enter into new contracts. The structures are going to be similar to what we've done in the past. They're going to be exposed to the market, but there's also some measures of protection that we're looking at for ourselves and security, obviously, that the customer is looking at for themselves. So more to come, but that's a part of our ongoing process.

And Ben, this is Neal. If I can just circle back to your prepayment. I think what I was hearing is you were asking something about the price that kind of underlies the prepayment. I just want to highlight, and we said this when we struck the deal back in the first quarter, its market indexed. So I don't -- I couldn't quite hear your question. It sounded like you were asking if it was outside of the market. It is the way the mechanics work is it's linked to the market.

Okay. And you guys had the Grace. I think you said early redemption, and that's a good lever for the balance sheet. Is there anything else like dividend or anything else? Like, if we stretch the '27 where like the chart shows pricing still -- you can tell where it is or there's excess supply. Are there other levers like the dividend or anything else that you could pull for cash?

Well, Ben, I mean -- this is Neal again. That's exactly what we're working on every day here is we are constantly pulling on all of these different levers, whether that is CapEx, whether that's cost savings, whether that's productivity measures, pumping more volume out of our plants, so we get better fixed cost absorption.

So the simplest answer to your question is, yes, there are definitely additional levers that we keep working on to make sure that we can generate a strong cash performance. In this case, we had a unique moment where we were able to do the PIK redemption. But this just highlights that we're looking at all kinds of things that we'll work on. Traditional and nontraditional. That's right.

But we're pretty -- I think the message we want to leave is that we're pretty focused on it.

Our next question will come from Arun Viswanathan with RBC.

Yes, I just wanted to ask about the guidance as well. It looks like midpoint of your scenarios still about $900 million, which kind of implies a pretty low EBITDA level for the second half. Could you just walk through some of those dynamics, I guess, on the pricing and volume assumption side? Or is there -- yes, if you'd add anything else as well.

Arun, this is Neal. I can start and if others would like to add on. It really is -- I hate to be repetitive, but it kind of goes back to some of the things that we said on the Q&A. It really is a mix effect as we kind of move through the quarters of the year. I think the important thing to start with is we are still hanging on to those modeling guidance ranges even though pricing has kind of dribbled down in the first half of the year, we still -- if we draw the pricing across for the rest of the year, we're still holding on to that range because of all the things that we're working on.

But yes, just the way things have worked out, we've just seen stronger demand on our Energy Storage contracts in the first half of the year. As we move through the back half of the year, we'll see some of that not quite as strong. But really, it's just been that some of the volume has been more in the first half than it has been in the second half. It's really nothing more than that.

And then outside of that, in terms of things in our control, we have been going much faster on our cost and productivity actions. We've been ramping our plants I'd say, even better than what we expected. So it's really the confluence of all those things that lets us even in this low price environment to hang on to those ranges.

Yes. And just -- and reiterate on that, I mean, the price has moved down from when we were doing this at the beginning of the year, and we've held on to those ranges even at this price range. So it's the second half, half of our book of business is roughly exposed to the spot market. And so as that drifts down, it gets more difficult and the actions are offsetting that. So that's how I would describe it.

Okay. Apologies if I missed this earlier. You mentioned that you do think more capacity could come offline. I guess what do you expect to see there over the next 6 to 9 months? How much of capacity to say, uneconomic? And are there any further comments on inventory levels that you could share as well?

Yes. So look, we're not going to speculate on who might come offline. I mean that would be complete speculation. So -- but we do know people are under a lot of pressure out there and the ones you would look at are people that are -- have 1 asset. That's the only way they're generating cash and they're not generating cash now. So if they are or start-ups that are trying to start up and are not getting the revenue when they anticipated. So those are probably the ones that I would look at, but we're not going to speculate on who might come out.

Our next question will come from Kevin McCarthy with Vertical Research.

This is Matt Hettwer on for Kevin McCarthy. To maybe frame the supply question in a different way. Where would you estimate that global lithium operating rates were in the second quarter? And where do you think they would need to be to restore pricing power in a sustainable way?

So look, we know on a convert hard rock conversion in China, operating rates are about 50%. So there's way excess capacity in conversion. So then it brings it back to the resource. And that's what we talk about people coming off-line. So I'm not sure we -- what the operating rates are, I mean they're pretty high, and people are -- they -- and that's how you kind of operate mines. They need to operate that way. Otherwise, they become big problems from a cash standpoint.

So conversion has a very hard rock conversion and now -- that's all pretty much in China. That's a known figure. It's about a 50% rate. So there's a significant overcapacity there. That means you need to look at the resource and those are probably operating pretty high.

Okay. And then, regarding your lithium demand forecast, you left it unchanged at 15% to 40% for this year. And given that more than half of the year is in the books, why did you decide to leave the estimate so broad? Other than tariffs, what's driving the uncertainty and that you didn't feel comfortable narrowing that range?

There's a lot of -- I mean there's a lot of uncertainty. I mean tariffs are part of it, but you got regulation in multiple jurisdictions around that. So U.S. has been a little weaker. Europe and China has been stronger. So that was our forecast at the beginning of the year. And with all of the uncertainty that we saw, frankly, none of that uncertainty has gone away. It may have broadened a little bit.

But given the environment we're in, that's a forecast that we see. It's been -- and it's been puts and takes, right? U.S. looks a little bit weaker than we had originally anticipated, but Europe and China are significantly stronger. And the energy storage market is significantly stronger than we'd anticipated early on. But there's still a lot of uncertainty. So we just -- we've left the range.

Our last question will come from Patrick Cunningham with Citigroup.

This is Rachael Lee actually on for Patrick. Can you dive deeper into the $400 million cost and productivity savings achieved? And what are expectations for incremental savings in the back half and into '26?

So the cost out -- okay, sorry, I wasn't sure that I heard that. So yes, that's -- we're pretty much the program that we have put out. Neal, do you want to talk about some of the detail?

Yes, sure, sure. So first of all, a decent part of that. If you remember, it's not quite 50-50, but we had put out a target of a certain amount of this was going to be headcount-related, SG&A type of savings. And we went after that very, very quickly. And so that is something that we obviously worked on sort of rapidly as we were exiting last year. And then another chunk of that is a manufacturing cost and productivity set of actions. And that one, we have been progressing that really well.

And obviously, now 1 quarter on and here through the second quarter, we're now getting a lot more traction around that. That's what's really allowed us to sort of push to the high end of this range. So we're just doing block and tackling around this, just working on all of the different things that we have in the pipeline around cost out and productivity and just going after those things.

In terms of going forward, it's a little early for me to say where we go beyond $400 million. I think you heard Kent say earlier on the Q&A, we're not stopping here. We're continuing to look at what we can do from a cost standpoint, from a CapEx standpoint. A little early for me to give any commitments on that. But we're still looking at that obviously, in this environment.

Yes. And I would say our process for taking this on and building a culture around cost out, I think it's quite mature in the manufacturing space, less mature in the other areas. So supply chain, a little less -- the broader supply chain for manufacturing, a little less mature, kind of our back-office processing and getting cost out of that is less mature than that. So we're -- we continue on manufacturing, and then we've got to build the capability to be stronger in the other areas. So a lot of what's come out of this now is overheads and quite a bit from manufacturing. It will probably start skewing toward the other directions.

Got it. That's very helpful. Just another quick one, is you're now guiding to free cash flow positive. What are your expectations for working capital in the second half?

Look, generally speaking, as we get into the second half of the year, that's obviously a little bit of the higher season, particularly in the lithium business. And so I would expect working capital to be actually a tailwind to cash.

You probably have seen so far this year; it's been a little bit of a headwind as we've been building up to the high season. So I think the combination of that plus, obviously, pricing is slightly lower, too. So there could be a little bit of a release of working capital. So net-net, I do expect working capital to be a source of cash as we go into the back end of the year.

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

Thank you, operator. And as we conclude, I want to acknowledge our team's quick response and the ability to execute in this fast-changing market. These are the qualities that drove our strong results this quarter and the ones we'll lean on going forward and will help us sustain our long-term competitive advantages and preserve growth optionality as markets improve.

Thank you for joining us today. We look forward to seeing you face-to-face at the upcoming events. I think those are listed on Slide 18. So thank you for joining us. Stay safe and take care.

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