Good morning. Welcome to Albemarle's 2023 strategic update. Today, we're gonna talk about Albemarle as a market leader transforming essential resources for modern life. My name is Meredith Bandy. I'm the vice president of Investor Relations and Sustainability. I'm joined today by our IR team. Brook Wootton is the senior director of Investor Relations. Eran del Castillo is the manager of Investor Relations. This group would welcome your questions and feedback after today's presentation. As usual, today, we're gonna be discussing some forward-looking statements. The safe harbor language is on this slide, and that same language applies to this call. We're also gonna discuss some non-GAAP financial measures. You'll find reconciliation of these measures to GAAP financial measures in the appendix of these slides.
To the heart of the matter, turning to our agenda for this morning, what can you expect to hear from us today? We recently sat down with some of Albemarle's leaders to recap 2022 and look ahead into 2023 and beyond. Today, you'll hear these prerecorded presentations followed by a live Q&A session. What can you expect to hear from us today? We recently sat down with some of Albemarle's leaders, both to look back on 2022 and look ahead to 2023. Today, you'll hear these prerecorded presentations followed by a live Q&A session. First, Kent Masters, our CEO, will discuss how Albemarle is developing our competitive advantages and executing our strategy and our operating model to continue to accelerate growth and advance sustainability.
This is an extraordinary moment in time for Albemarle. As a leading producer of critical elements for a modern world, we have a tremendous growth opportunity ahead of us. We understand this opportunity requires a leadership mindset and ever higher levels of operational excellence. We are evolving in important ways that transcend our products themselves. We are listening to our customers and our customers' customers to deliver our strategy. We are infusing new technology into everything from production processes to customer experience. As we expand, we continue to prioritize safety and sustainability in extraction, processing, and delivery. We are also starting to think and talk differently about ourselves, and you will see and hear some of that today. Albemarle has a leading position in transforming essential resources like lithium and bromine into critical elements needed for modern ways of living. Of course, we don't do this alone.
Today and tomorrow, we partner with our customers, communities, and industry players to pioneer new ways to move, power, connect, and protect. We do all this within the context of a long-term commitment to building a more resilient world. Our team is focused on creating and delivering on that commitment. As you have heard, beginning January first, we reshaped our core lithium and bromine businesses to allow for a stronger focus and better execution on our multiple growth opportunities. Our two core businesses are now Energy Storage, led by Eric Norris, and Specialties, led by Netha Johnson. This realignment allows Eric and his team to focus on the enormous growth opportunities around the transition to clean energy and clean transportation. It also builds on Netha's success in driving growth and customer experience for our Specialties business. We expect greater focus to help maximize value creation in both core businesses.
We have also rebranded our catalyst business as Ketjen. Raphael Crawford is leading the turnaround of this business, and we're in the process of structuring Ketjen as its own legal entity with its own board, and Netha Johnson will serve as chair of that board. Karen Narwold, who has been our long-serving Chief Administrative Officer and General Counsel, will retire from Albemarle in early April. To prepare for that departure and ensure a smooth transition, Kristin Coleman has already joined the company as General Counsel. Kristin's strong experience with public companies in corporate governance, strategic transactions, legal and regulatory risk will smooth that transition and drive long-term value for Albemarle. We are adding to the team with a focus on advancing our leadership with external stakeholders. Cynthia Lima joined Albemarle as Chief External Affairs Officer in Novem ber.
His extensive background in government and external relations will help us more deeply engage with governments, regulators, and communities. This team is focused on driving transformational advances that enable better mobility, energy, connectivity, and health, powered by our critical ingredients: lithium and bromine. A talented team is one critical element for growth. Another is durable competitive advantages. For Albemarle, these advantages include a diverse global portfolio of world-class assets and resources, industry-leading safety performance, deep process technology and product applications knowledge, and a strong balance sheet with a track record of financial performance. We continue to build on these strengths and develop additional areas of competitive advantage, including expertise in capital projects, enhanced sustainability performance, and a comprehensive operating model to drive operational excellence. To maximize value, we are increasing our focus on customer-centric collaboration and expertise in next-generation materials.
In 2022, we delivered net sales of approximately $7.3 billion, more than double 2021 net sales, and Adjusted EBITDA of approximately $3.5 billion, nearly four times that of 2021. We expect to continue to grow in 2023 and beyond. For 2027, we project net sales of $18 billion-$19 billion and EBITDA doubling to more than $7 billion. Scott will go into these results and forecasts in more detail. We are well ahead of plan on the 5-year targets we shared with you at our 2021 Investor Day. We are updating our long-term outlook to reflect additional investments and accelerated growth. What has contributed to this strong performance and improved outlook? First, our recent capital investments are paying off with increasing capacity and higher production.
We have implemented index reference variable price contracts for our Energy Storage, allowing us to realize higher lithium pricing. We are implementing our operating model to reduce cost and improve productivity. These elements add up to making Albemarle free cash flow positive two years ahead of expectations. Improved operating cash flow allows us to invest more to accelerate growth and meet customer needs for reliable supply, innovative technology, and enhanced sustainability. Our operating model, The Albemarle Way of Excellence, is built around four components: a sustainable approach, a high-performance culture, competitive capability, and operational discipline. Fully executed, this model raises the bar on excellence, delivers outstanding customer experience, and drives greater shareholder value. This is our flywheel for growth. We've recently revisited and refreshed our corporate purpose to enable a more resilient world.
There is immense value in this proposition for shareholders, customers, employees, and communities, well beyond the current EV opportunity we are fully prepared to seize. What hasn't changed is our proven strategy to deliver that value. Our strategy consists of four pillars: to grow profitably, expanding our own operations and partnering to facilitate innovation and growth. To maximize productivity, deploying our operating model to build a strong foundation today and deliver growth well into the future. To invest with discipline, allocating capital to our highest return opportunities while maintaining a strong balance sheet and supporting our dividend. To advance sustainability, building competitive advantage through industry-leading ESG performance. Albemarle leads the world in transforming essential resources into critical ingredients around four transformational impact areas. First, mobility. From the battery in electric vehicles to the initiator for airbags, Albemarle is fundamental in the development of mobility products and solutions. S econd, energy.
From energy grid storage to the materials required for energy-efficient buildings, neither would be possible without Albemarle. Third, connectivity. From fire safety solutions in industrial cabling to the protective glass on your cell phone, Albemarle makes connecting safer and more reliable. Fourth, health. From ingredients for medicines to disinfection, Albemarle helps ensure the food we eat is safe and plentiful, the water we drink is clean, and the environment we live in is here to stay. You'll hear more detail on how we impact these areas from Netha and Eric. During my tenure as CEO, we've also increased our focus on improving the sustainability of our own operations. In 2022, we expanded our role with the UN Global Compact by signing the CEO Water Mandate.
Through this platform, we aim to proactively identify and manage business risk, realize cost savings through water use efficiency, and honor our sustainability commitments. This past year, we also continued our work with IRMA, the Initiative for Responsible Mining Assurance, by completing our first third-party audit at the Salar de Atacama in Chile. We are currently reviewing those audit results together with IRMA and plan to announce results later this year. In 2022, we received our initial scores from CDP for climate and water. We are proud to take these steps toward greater transparency and will continue working to improve our scores and performance over time. In summary, Albemarle is a global market leader in resources that are essential ingredients for a sustainable future. We are accelerating growth with a clear and proven strategy that extends beyond EVs to four transformational impact areas.
We are leveraging our competitive advantages and creating new ones to ensure long-term value creation.
One of the things you heard Kent talk about in that video was the realignment of our core businesses. We now have two core businesses, Energy Storage and Specialties. Next, Netha Johnson, President of Specialties, is gonna talk about how he's taking the playbook that he used from bromine to our newly expanded Specialties business to continue to deliver growth and innovation.
January 2023 marks the official launch of our new global business unit, Albemarle Specialties. This newly formed GBU will optimize our portfolio of bromine and highly specialized lithium solutions and afford us even greater opportunities to capitalize on our organic chemistry expertise, our application knowledge, and our process technology innovations to drive growth. This positioning also promises to enhance the customer experience beyond where it is today, to scale our business relative to demand, and to ensure that we continue to attract and retain the best global workforce. No question, our 2022 numbers were incredibly strong. We delivered preliminary results of $1.8 billion of net sales, up more than 20% from 2021, and more than $500 million of Adjusted EBITDA, which is up 13% from the prior year.
We credit our 2022 performance to our deep understanding of our markets, to our strong relationships with our customers and understanding their growing needs, and to unparalleled operational excellence. I cannot say enough about how we operate. It's a key differentiator in our ability to flex with global markets, to grow where opportunities present themselves, and to pivot when market trends require us to do so. Looking ahead, we can confidently expect our net sales to grow approximately 5% CAGR over the next five years, with margins in the mid-30% range by 2027. Today, we have multiple new products in our development pipeline, which I will get into in just a moment. We expect 10% of our revenue to be generated by these new bromine-related products by 2027.
As we begin to develop the Lithium Specialties pipeline, we expect the combined potential revenues from both business lines will be much higher than that over time. This map represents Albemarle Specialties global footprint. Our business model is straightforward and complementary to the Energy Storage business. As most of you know, we process raw materials, whether that's bromine or lithium, into value-added derivatives and then market those products globally on a value in use basis. Albemarle's world-class resource base for both bromine and lithium remains core to our low cost position. The Specialties business includes facilities in Langelsheim, Germany, New Johnsonville, Tennessee, and Taichung, Taiwan. Of course, we continue to operate our vertically integrated bromine plants with access to two of the world's best bromine resources in Magnolia, Arkansas and Safi, Jordan. As Kent mentioned, Albemarle continues to build on its durable competitive advantages to deliver our strategies.
For Specialties, this means we'll continue to grow profitably, leveraging our low cost position and global portfolio to grow with our more than 400 long-standing customers. We know how critically important it is to remain the tried and true trusted partner, and we never take that for granted. We listen to the voice of our customer to continuously drive greater levels of service and subsequently share wallet, maximize productivity, applying our operating model to improve efficiency and increase productivity and reduce cost. We'll talk more about that in a moment. Invest with discipline. Our strong track record of capital project execution focused primarily on brownfield expansions with low capital intensity, strong returns, and quick payback periods, remains key to the GBU's future growth, as does the value we place on relationships. Advance sustainability.
The Specialties business has some of the deepest bench strength and process technology expertise today, including a substantial team of professionals focused on improving efficiency and sustainability. The Specialties business sells products into diverse end market applications across all four of Albemarle's transformational impact areas. First, in mobilities, specialty products are essential in both internal combustion and electric vehicles, from high-voltage cables and powertrains to airbags and tires. EVs have additional applications for our products, with two times more wiring than a traditional ICE, as well as flame retardants for battery casings. In energy, infrastructure for renewable grid and electrified transport is enabled by our fire safety solutions. Our clear completion fluids make deep sea oil fields possible. In connectivity, the transition to 5G is a huge opportunity for our fire safety solutions business. More towers, more wires, more connection points are all more opportunities to expand our business.
In health, our Lithium Specialties products are precursors for many pharmaceuticals, while Bromine Specialties are used to ensure safer food and water supplies. In 2021, we debuted our operating model, the Albemarle Way of Excellence, including a relentless focus on continuing to improve our manufacturing operations. The Specialties business has multiple projects around 21st century manufacturing with a particular focus on advanced process control with digital twin technology, which is a key component of OEE or overall equipment effectiveness. We calculate for every 1% improvement in OEE equates to between $2 million-$3 million of Adjusted EBITDA. Efficiency and execution here is synonymous with growth for this business. Since our last update in September 2021, we continued to invest in processes we know. In locations where we have been operating for more than 50 years.
We have consistently executed these projects on time and on budget, generating returns that exceeded our expectations. We continued that track record in 2022. In Magnolia, Arkansas, we completed the SAYTEX 8010 and brine field expansion. We debottlenecked and added capacity to the Magnolia plant to expand production rates and improve the quality of our flagship fire safety solutions product, SAYTEX 8010. To feed the expanded production facility, we also invested in technology to produce additional high-quality brines without the need for additional wells. These brownfield expansions have benefits of low capital intensity to add revenue and reduce costs and downtime. In Jordan, we also completed the NEBO project. NEBO allows us to recycle a waste stream into additional finished product, increasing revenues, reducing costs, and improving sustainability. For example, NEBO cuts water use by 11%.
In Jordan, one of the world's highest water risk areas, every drop of water is precious, and the team there does a fantastic job of protecting that resource. I have every confidence that our team can duplicate these results as the specialties business continues to grow in line with our strategic customers and continues to benefit from the macro trends in electrification and digitalization. As many of you know, we pride ourselves on transformative technology. The new specialties GBU sees that level of innovation as its hallmark, and there is no better example of the dividends innovation can yield than with the recent launch of MercLoc, the newest product in our portfolio. MercLoc captures and stabilizes mercury in the environment. Mercury is known as quicksilver. It's dangerously mobile. It works its way through air, soil, and water.
It gets into our food chain and then into our tissues and nervous systems. MercLoc traps mercury. It literally stops the toxin's ability to spread by more than 99% and remediates the soil and water it's contaminated. We see MercLoc as a lifesaver and a game changer. It also represents a new platform business for us, meaning that what this technology can do for mercury, it can also do for other contaminants. In case you're wondering, yes, we already have an active program underway to extend this platform in the coming years. MercLoc, and the competitive advantages it delivers, is only the first of our exciting new rollouts. We are equally excited to introduce you to our SAYTEX ALERO product. ALERO is a next-generation polymeric or large molecule fire safety solution.
The polymeric nature of this product means that it is even more stable than previous generation molecules. It also has an unusual versatility, enabling the highest level of fire safety performance in a wide range of polymers and applications as well as superior environmental profile. In addition, ALERO provides excellent stability, leading to excellent recyclability of flame retardant plastics. We're already receiving high marks on customer qualifications for SAYTEX ALERO, and we expect this product to be fully commercial later this year. As you can imagine, our new products pipeline can lead to a significantly expanded customer base for Albemarle in the future. We want to make sure we fully capitalize on that innovation pipeline to drive organic growth. From a business side, these new products are not only accretive to growth, but also to margins.
More importantly, they demonstrate how Albemarle is innovating to transform essential resources for the benefit of all people and our planet. That's at the core of what drives our commitment to transformative technology. It is the difference it can make in our daily lives for generations to come. In summary, Albemarle Specialties is excited to provide the critical ingredients for growth. We are confident in our standing as a leader because of our low-cost position, our diversified product portfolio, our transformative technology, and our global reach. We demonstrate growth, and we expect that growth to continue at two times GDP with solid margins in the mid-30% range. The success of our specialties business is thanks in large measure to strong underlying macro trends in energy, mobility, connectivity, and health. That said, we are nothing without our people.
It is our talent base, our people's technical skill, and their ability to deliver excellent customer experience as well as innovative solutions that enables the push toward a more resilient world. This is truly exciting time for our company as a whole, and more specifically for the new Albemarle Specialties global business unit. Thank you.
Netha talked a lot about the growth opportunities he sees for Specialties. Now let's talk about our biggest growth driver. Eric Norris, President, Energy Storage, is going to discuss how he's leveraging Albemarle's competitive advantages like our low-cost resources, strategic partnerships, and innovative technologies to power the world's transition to clean energy.
Albemarle's new energy storage segment gives us a sharper focus on the rapid growth of lithium-ion batteries and the transition to clean energy. It's an exciting and important market and an exceptional growth opportunity for Albemarle. With our new segment structure, we can further accelerate growth, leading the way in the market to power clean energy. The opportunity for Albemarle energy storage goes beyond the electric vehicle market to enable transformations in mobility, energy, connectivity, and health. The EV revolution is already driving tremendous demand for lithium. Our 2022 results are expected to outpace the target we previously set for 2026, four years ahead of schedule. As a market leader, we have the resources, expertise, and partnerships to power the transition to sustainable energy in light-duty vehicles.
We expect to nearly triple net sales from $4.7 billion in 2022 to more than $14 billion in 2027, with an Adjusted EBITDA more than doubling from $3 billion - $6 billion over the same period. To meet rapid lithium demand growth, we're once again accelerating our plan to invest and expand our resources and conversion capacity. We intend to reach up to 600,000 tons lithium carbonate equivalent by 2030, and we are already well on our way. We've already increased capacity five-fold from 40,000 tons in 2015 to 200,000 tons today. In addition to reliable, high-quality lithium supply, we're also expanding long-term partnerships and innovating across the value chain. All of that leads me to our ambition and strategy. Albemarle's energy storage ambition is to power the world's transformation to sustainable energy through reliable, high-performance lithium.
To achieve this ambition, first and foremost, we intend to lead the energy storage revolution, not only by expanding our world-class resources and conversion capacity, but by operating with the highest standards in responsibility and sustainability and practicing a world-class capital execution capability. Second, we enable our customer success as a partner of choice by creating deep and strategic relationships with like-minded leaders in the energy storage revolution. Third, to reach the scale our customers need, we continue to grow an inclusive team of diverse, empowered employees and incorporating our values-based culture and attracting the best and brightest within our industry. Fourth, we will broaden and deepen our reputation of being a safe and reliable supplier of a broad range of lithium derivatives with a best-in-class supply chain positioned to meet the needs of our customers, no matter where they are in the world, with high-quality products.
As we expand our network, we remain focused on refining our capital management. We've established a track record of successful capital projects and have built repeatability of capital design and execution. Finally, we will deepen our innovation from mine all the way to market, strengthening our leadership in sustainable extraction and conversion while building know-how in lithium recycling and developing differentiated new lithium products for higher-performing, safer batteries. Albemarle is differentiated by our global access to multiple low-cost, high-grade resources. These include hard rock and brine resources on three continents. We also have a global network of lithium conversion sites with an unmatched track record in capital project execution and operation. These sites are well-positioned to benefit from moves towards localizations with customers and governments looking for secure supplies to reduce economic and geopolitical risks. As I mentioned up front, our resegmented energy storage business serves multiple markets.
In mobility, we are enabling the electric vehicle revolution. This extends from light-duty vehicles to electric bikes, trucks, and buses. In the energy market, we are enabling development of stationary storage to create grid flexibility and energy shifting, and to integrate renewables like wind and solar to the grid, as well as residential storage that makes power more resilient and cost-effective. In terms of connectivity, lithium is increasingly used to power not just smartphones, but all sorts of consumer electronics that simplify our day-to-day living. Technical grades of lithium are used to strengthen glass in a host of consumer applications, including your smartphone screen. In health, lithium goes into anodes that power life-saving medical devices such as glucose monitoring systems and portable automated external defibrillators. All of these end markets are driving growth, with EVs continuing to be, by far, the largest opportunity.
We've increased our demand forecast once again, primarily due to higher expected EV production as well as stronger demand for other lithium-ion battery applications like grid and mobility. We now expect 2030 lithium demand at 3.7 million times, up 15% from our prior forecast. Our updated demand outlook reflects a tremendous growth over the past year and accelerated future growth related to the U.S. Inflation Reduction Act or IRA. Government support like the IRA certainly helps, the reality is that the EV revolution is here to stay. In some regions and markets, EVs have already reached the tipping point of cost parity. We expect to continue to see increased EV adoption with charging speed and range improvements, more access to charging infrastructure, and changing consumer preferences. In response, auto OEMs are setting ambitious electrification goals and making large investments in EV production.
All of this leads to an estimated 50% EV penetration in light-duty vehicles by the end of the decade and 3.7 million metric tons of lithium on an LCE basis. A demand more than 10 times larger than when I started at Albemarle five years ago. EVs are essential on the transition to clean energy transportation and the fight against climate change. That's because an EV can have significantly lower carbon footprint than a combustion vehicle. Researchers at Argonne National Labs estimated emissions both for a gasoline car and an EV with a 300-mile electric range. In their estimates, while greenhouse gas emissions from manufacturing and end of life are higher for the EV, total emissions are about half those of the gasoline car.
As a result, under our market demand projections, electrification of the vehicle fleet will avoid over two gigatons of carbon emissions per year by 2050. Bringing it closer to home, today, we project every one kg of greenhouse gas emitted by an Albemarle lithium production site enables the avoidance of more than 50 kilograms of greenhouse gas emissions per year over the life of an electric vehicle. Meeting expected lithium demand over the next decade requires significant investment in lithium supply, both resources and conversion. By 2030, we see potential for significant deficits. I say potential because, of course, one way or another, supply and demand will balance. Few resources the size of Wodgina or the Salar de Atacama remain untapped, and most announced projects are operations of smaller capacity. That requires a lot of comp anies to deliver, including Albemarle.
Incentivizing the industry to fill this gap requires strong long-term pricing. Improving technologies. The cost curve has continued to move up over the past several years, with a huge variance in production costs from existing resources and new geographies or unconventional resources. Not only are many projects needed to come online, but projects are trending towards higher cost resources. Upwards of $20 per kilogram LCE will be needed to incentivize projects to meet demand. Albemarle has access to some of the world's highest quality resources in the Salar de Atacama and Greenbushes. As new products will need to come online to support growing demand, many of them will be lower grade in quality than those operating today. Generally, lower grade resources tend to be higher cost and are harder to process with larger emissions, water and energy footprints.
We plan to continue to leverage and expand our world-class resources to meet our customers' needs, as well as continuing to add high-quality resources to our portfolio, such as Wodgina and Kings Mountain. New projects, especially greenfield integrated projects, also take a long time to bring to market. A brownfield expansion project may take 5+ years. Greenfield expansions can take 10-15 years to come online. Difficulties include fluctuating commodity prices and funding risk, technical and exploration risks, community support, permitting challenges. Out of the thousands of exploration targets, maybe a few hundred lead to discoveries and a dozen make it into reserves. Just a handful make it to production. Recent projects took on average about 12 years to bring online, a little less for mines only and a bit more for integrated projects.
Once complete, integrated operations can take additional years to ramp new resources like Magnolia in the U.S. and Antofalla in Argentina. We will also need to pursue new resource development and M&A to help fill potential resource gaps, feed our conversion assets, and sustain our leadership position in lithium. In this regard, recycling will also play a key role. Turning from resource to conversion capacity, we expect to nearly triple conversion capacity by 2030 from our current 200,000 tons to an estimated 500,000-600,000 tons of qualified, reliable production. This is about 15% higher than our previous target. As we build our capital projects capabilities and more projects move forward in our pipeline, for example, projects at Magnolia and Antofalla have been added to our latest forecasts. As a global producer, we intend to remain diversified across major markets and product types.
China is the largest and one of the fastest-growing EV markets in the world. We are in the process of building a new lithium conversion plant at Meishan and have opportunities for expansion at Qinzhou and other sites in Asia-Pacific. We also have expansion plans in our free trade agreement countries in Chile. Finally and importantly, we plan to localize conversion capacity for the growing demand in the US and Europe, allowing us, in the case of the former, to be a strong player in meeting IRA-compliant needs. We are now finalizing our site selection process for our Mega-Flex facility in the southeastern US. Our investments in resources and conversion capacity are paying off as we ramp up production and sales. In 2022, our lithium production was up more than 20%. This year, we expect our lithium volumes to be up at least 30%.
We anticipate a 20%-30% CAGR between now and 2027. This means that our accelerated investment should allow us to grow with the market and maintain our leadership position. All told, we expect to nearly triple sales volumes to more than 300,000 times by 2027. By evolving our contracting strategy to include more index reference, variable price contracts, we've been able to realize the benefits of higher pricing while moderating volatility. Over the past year, we have renegotiated our legacy fixed-price contracts, resulting in a portfolio that is split roughly 20%-25% spot and short-term purchase orders and 75%-80% long-term variable contracts. Assuming year-end 2022 pricing, we expect our full year realized pricing to be up over 40% versus prior year.
We estimate that every $10 per kilogram change in full year 2023 market pricing would equate to a $5-$7 per kilogram change in our own full year realized pricing. The tight supply-demand situation means we have had to become more selective in partnering with our customers. These partnerships have become more strategic. We've established a diversified contract mix across cathode, battery, and OEM customers. Are entering into partnerships in advanced energy storage and recycling. We also continue to build our leadership in the energy storage market through innovation, innovating from mine to market. It starts with the resources, maximizing recoveries, and minimizing energy and water use. We estimate that maximizing recovery has the potential to add more than 70,000 tons of annual production over time. Innovation continues with developing differentiated lithium materials.
New forms of lithium are key to future battery technologies, advanced anodes, and electrolytes. For example, pouch cells offer a flexible and lightweight solution. Today at Kings Mountain, we can build and test multilayer pouch cells to understand how our material behaves in real manufacturing conditions. Innovation continues through close collaboration to maximize value for our customers, such as battery material innovation that could potentially increase EV driving range by more than 50% through the broader use of lithium in the battery cell, including the anode. We recently announced a new Albemarle technology park in North Carolina to deepen our research and technology capabilities across the value chain. Here, not only will we develop new materials for and with our customers, but we will also pilot new and innovative process technology in direct lithium extraction and recycling.
In summary, Albemarle is a market leader and well-positioned to power the world's transformation to sustainable energy. We are vertically integrated with a globally diversified portfolio. Projected growth in lithium demand cannot be met without leveraging the largest and most highly concentrated resources in the world, and we have access to multiple such world-class resources. We have a proven track record and a disciplined plan to meet the significant growth opportunity we see over the next decade, and we are building partnerships with our strategic customers to innovate around quality, higher energy density, and sustainability.
Finally, pulling it all together, our CFO, Scott Tozier, is gonna go into all the detail that I know our investors and analysts are looking for in terms of our 2022 performance, our outlook for 2023 and beyond, and our capital allocation priorities to deliver growth, financial flexibility, and ultimately shareholder value.
The extraordinary performance and outlook covered by Kent, Eric, and Netha is a result of our asset positioning, focus on operational discipline, and a balance sheet that gives us tremendous flexibility. We have been working on this since 2015. As we enter 2023, we are realizing the benefits of the deliberate transformational steps and investments we have taken to position Albemarle for substantial earnings growth through volume growth in new products and specialties and volume growth in energy storage and a very tight supply-demand market. We anticipate our 2027 sales to be in the range of $17.6 billion-$19.3 billion. That's a 20% CAGR from 2022 preliminary numbers and a 33% CAGR from 2021, when the latest price cycle started.
Adjusted EBITDA is expected to grow to $7.2 billion-$8.4 billion, a 40% CAGR from 2021, and a margin in the low to mid-forties. We are seizing this growth opportunity from a very solid financial position. Our balance sheet reflects significant liquidity of approximately $3 billion. We expect our net debt to Adjusted EBITDA as the end of 2022 to be around 0.5x, giving us substantial flexibility to act as new growth opportunities are identified. Our weighted average interest rate at year-end was 4%. Nearly 100% of our debt position is at a fixed rate, which safeguards us against the impacts of the rising interest rate environment. We will report our final 2022 results on February 15th. Let me give you a quick preview of what I expect you to see.
Our estimate for full year 2022 diluted EPS is expected to be in the range of $22.50-$23 compared to $1.06 in 2021. This estimate is an increase of over 20 times our last year results. Net sales of about $7.3 billion, up about 120% year-over-year, Adjusted EBITDA of about $3.4 billion, up about 300%. I'm very happy to report we have returned to positive free cash flow, expecting about $700 million in 2022. This performance was driven by strong net sales and margin improvement for the total company due to the accelerating expansion of not just our energy storage business, but also Specialties, as Netha discussed. Now let's talk about our outlook for 2023.
We're expecting our total company net sales to be in the range of $11.3 billion-$12.9 billion, up about 55%-75% versus last year. Eric and Netha shared the market conditions, our expansion plans, and our customer pricing approach for their businesses. This guidance represents our best view. Adjusted EBITDA is expected to be between $4.2 billion and $5.1 billion, reflecting a year-over-year improvement of up to 45%. Our 2023 adjusted EPS is expected to be between $26 and $33, reflecting a year-over-year improvement of up to 50%.
Our net cash from operations is expected to be in the range of $2.1 billion-$2.4 billion. Our capital expenditures are anticipated to be between $1.7 billion and $1.9 billion as we continue to accelerate our investments to meet our customers' demand. We are continuing to stay free cash flow positive even with our increased capital expenditures guidance. The following three slides show the financial information for the newly created segments, Energy Storage and Specialties, and for our renamed Catalyst business, Ketjen. Additional historical financial information revised for these newly created segments will be available on a Form 8-K shortly after we file our 2022 10-K. The first segment that we look at is Energy Storage.
This segment, again, has a focus on lithium sales directed specifically at the battery and electric vehicle markets and other emerging lithium-based energy storage opportunities in mobility, energy, connectivity, and health. We anticipate our full year 2022 net sales to be in the range of $4.7 billion and our Adjusted EBITDA to be approximately $3 billion. As we have discussed, we've had exceptional EBITDA margins in 2022 of approximately 65% and expect them to normalize between 45% and 47% going forward. Looking forward to 2027, we expect a CAGR of 25%-27% to result in net sales of $14.3 billion-$15.7 billion. It is important to note that this is a volume-based projection.
Given the high volatility of lithium market prices, we have assumed our current realized prices stay flat through the next five years. The next segment we will look at is Specialties. This segment includes non-energy related lithium applications such as pharmaceuticals, plus our full bromine business, serving diverse end markets. We expect our 2022 net sales to be in the range of $1.8 billion and our Adjusted EBITDA to be approximately $0.5 billion. We anticipate our 2023 EBITDA margins to dip a bit due to the high cost of lithium chloride, which is a key raw material, but we expect to recover as we bring on new products and pass through these increased costs. Margins reach a range of 32%-36% by the end of 2027.
As we move toward 2027, we expect a CAGR of approximately 5% to result in net sales of $2.2 billion-$2.3 billion. The last segment that we'll look at is Ketjen. Ketjen's Catalyst products primarily support refining and petrochemicals operations, and its results are closely tied to downstream fuel markets and plastics manufacturing. Net sales for 2022 are anticipated to be around $900 million and our Adjusted EBITDA to be around $30 million. This business is clearly in a turnaround situation, and Raphael and his team are fully focused on the commercial, operational, and restructuring actions required. We're expecting to get back to pre-pandemic levels of EBITDA by 2027. Now let's turn back to the full organization and a look at cash flow.
We are starting to see significant free cash flow growth that is projected through 2027. As our lithium conversion facilities come online, not only will this increase our revenue, but it also allows us to continue to accelerate our investment portfolio. As you can see, even with an estimated $4 billion of CapEx in 2027, we still expect to generate more than $2.5 billion in free cash flow in that year. We expect an operating cash flow CAGR of up to 30% as we move from 2022 - 2027 to produce net cash from operations of $6.6 billion-$7.1 billion. This level of cash generation gives us substantial optionality for additional organic growth investments, M&A investments, and shareholder returns. We remain steadfast in our capital allocation priorities.
We continue to focus on using our capital and free cash flow to support our highest growth and highest return opportunities. We're strategically focused on investing in our energy storage and specialties businesses. I wanna reiterate the importance of financial flexibility in our strategy and the competitive advantage that gives us. Our balance sheet flexibility allows us the opportunity to grow both organically and through acquisition, as well as support our dividend. Maintaining an investment-grade credit rating is a key priority for us, as it also provides us additional financial flexibility. I will note that while we have the authorization to do share repurchases, our main focus is organic and inorganic growth opportunities. Share repurchases may be something we consider further down the road as we assess our growth in M&A landscape and future cash flow.
You should not expect us to use that authorization in the near term. Our growth strategy goes beyond our capital project portfolio. It also includes a robust acquisition target portfolio. This is focused on, first, building and maintaining our world-class resource base. Second, funding the development of specialized next-generation technology and materials, for example, process technology or recycling capability. Third, investing in customer partnerships to accelerate growth. Fourth, improving sustainability. Finally, acquiring bolt-on assets where appropriate, such as what we've done with our Chinese conversion assets. We are committed to maintaining this financial strength through disciplined investment that enables us to accelerate high-return growth with a target of more than two times our weighted average cost of capital at mid-cycle pricing and a minimum of more than one times WACC at trough pricing.
This discipline means that if we do pursue an M&A opportunity, it will be with the aim to fulfill at least one of the top objectives shown here and tick most, if not all, of the bottom boxes. With this disciplined approach, we are best equipped to support value for our shareholders over the long term. Let me sum up with the five key points that I think are most significant in our financial picture. First, we've been working hard to keep investors informed as our numbers have evolved, and we hope you appreciate that transparency. The preliminary 2022 results we have been discussing today are in line with the most recent full-year outlook, and they significantly exceed our previous five-year targets.
We expect that strong growth to continue into 2023, with revenue up more than 50% over 2022 and Adjusted EBITDA growing 20%-45%. The growth trajectory over the next five years is transformational, increasing our revenue to potentially 2.5x our 2022 numbers. Free cash flow may increase to 4x our 2022 numbers, supporting accelerated investments to drive growth in our priority markets. Thank you.
Great. That concludes our prepared remarks, and I know we already have a lot of questions on the chat and on the phone lines. Before we dive into that, Kent, I'm wondering if I could ask you, what are just the two or three things that you really want investors to come away with today?
Okay. Thanks, Meredith. Takeaways. Albemarle is a global leader with durable competitive advantages, like our world-class resources, our deep technical and process knowledge, and our safety and sustainability performance. We're executing our operating model in order to scale, to take advantage of transformational growth, and I reference our 2027 revenue targets of more than $17 billion. We have a tremendous growth opportunity in electric vehicles, but it's more than just EVs. We are prepared to grow around our overall market around mobility, energy, connectivity, and health. Let's take some questions, Meredith.
Yeah. First I thought we'd take a few questions from the chat, and then I'll turn it over to the operator. From the chat, we have first, Ben Isaacson from Scotiabank asked, "Could you please discuss the CapEx requirements to generate the incremental EBITDA range in 2027, including the timing of expected outlays?
That. Okay, that's a pretty broad question, starting with overall capital in order to do that. We've laid that out pre in a detailed basis as we go forward. Maybe, Scott, you take us through some of the changes between our previous guidance and what we're talking about now all the way out to 2027.
Right. I'll just start with the guidance first. For next year in 2023, we're expecting to spend around $1.7 billion-$1.9 billion in capital, and that'll grow to $4 billion-$4.4 billion by 2027. Some of the key new areas that we're focused on, North America, both opening the Kings Mountain mine as well as the conversion facility that we'll announce that's someplace in the Southeast. That conversion facility will produce around 100,000 tons worth of material, and we're expecting first product to come out in the 2027 timeframe. Second key new area is on the European flex plant, a similar size plant as North America. That'll be a little bit later in the decade, probably a 2028-2029 timeframe.
We also have investments in resources. Antofalla in Argentina, we're developing that, as well as new investments in Magnolia, Arkansas, to be able to extract lithium from the brines that we get from bromine as well. Lastly, our new products. Our advanced energy storage investments are really all about the advanced materials that are coming out that are required for the more advanced batteries that will have longer range, more power involved. Those are the key new areas. Of course, we've got to complete the plants that we've already investing in, like Meishan. That'll come online in the 2024 timeframe and start to deliver revenue there.
I think one of the great points is that we've really positioned the company so that you have the cash flow and the financial flexibility to accomplish all that.
Absolutely.
All right. Anything else on the CapEx?
I think that's good.
Good. All right. Our next question comes from Vincent Andrews at Morgan Stanley. Maybe this is for Eric. Eric, you made some comments in a conference in early December about lithium inventory builds in certain parts of the supply chain. Are there any updates on those comments, especially having seen some of the automotive OEMs post some deliveries below where pro duction was?
I think the, Vincent, the comments that I made were largely related to China. China had a fantastic year last year for EV sales, and came to a roaring halt with the opening of the country around COVID and the subsequent illnesses that spread and the sapping that meant of demand in the country. What we saw was a period of reduced demand and high inventories that have been drawn down over time. It's our expectation as we look forward into the new year that China, as well as the rest of the world, will see about a 40% growth year-on-year in EVs.
In the case of China, that's probably gonna be sometime later this quarter or early in the first that resumes, because now we're also in a period of time, not only some uncertainty around COVID, which seems to be sort of mending itself, hopefully, but also around the Spring Festival that's going on now. We expect another strong year and a year where demand outstrips supply, as well as we go into 2023, just like we saw in 2022.
Great. Thank you. Vincent had a follow-up question too. Any guidance on how you expect to see the shape of your volume through the quarters of this year? Maybe for you, Scott.
Yeah. like it often is with bringing on plants, and you've come to expect this in prior years, you'll certainly see this in future years, every quarter will tend to, there might be some exceptions, but this will be certainly the case in 2023. Each quarter will tend to be higher than the last just because we're ramping plants.
Absolutely.
As we ramp Kemerton, as we further ramp La Negra, as we ramp tolling, as we'll be doing new tollers through sources such as Wodgina, which is coming online, that volume gets larger as the year goes on. Subsequent quarters on a volume basis are higher. We'll also have to watch margins. We are also, and something we'll talk about is higher spodumene costs will also start to flow through the P&L. There will be some offsetting trends on a P&L basis as we go through quarters to quarters on higher spodumene costs as it flows through our joint ventures.
Okay. I swear I didn't plan this. The next question is actually a perfect segue. Peter Funnell from Boardwalk Investments asks, "Margin compression is projected to be very significant. Can you please shed some light on this decrease?" Maybe, I don't know, Scott, if you wanna dive into...
Yeah, I gave the first part of that.
Yeah.
Scott, give the rest.
Give the rest of that.
Yeah, I'll jump right into that one. It's a obvious challenge that's out there. A couple things that are happening. One is the spodumene cost, as Eric mentioned, continues to increase. Remember, there's about a 6-month lag on our supply chain, in terms of from the mine to the customer, for that spodumene to move through. There's also another about 3-month lag on the transfer pricing that happens. You really have about a 9-month lag in terms of those costs of spodumene, whereas the customer price moves much faster than that, with only about a 3-month lag. That's moving through our, through our P&L.
We're expecting by the second half of the year to be more stabilized, if you will, more normalized, a reason for the upper 40% type margins for lithium next year. The second key thing that's also in energy storage is that as the Wodgina material increases, we're assuming the MARBL JV is a distributor-type model, meaning that Albemarle is selling 100% of the product, including on behalf of our partner, MRL. Of course, that means our 100% of the revenue goes through our P&L, only our share of the earnings go through our P&L, also creating an additional lag. The third one that I mentioned in the presentation is in our Specialties business.
Given the high cost of lithium chloride, we are seeing a one-year dip in the margins in the specialties business. I expect that to moderate as we go through the year and continue to pass those costs on. Those are the three big areas that are driving the effects. As you go out in time, of course, the spodumene and the Wodgina material and the distributor model, that kinda normalizes, and that's why you see our margin rates stay in that for energy storage, at least in the upper 40% type of range.
Okay. We'll take one last question from the chat, we'll go to the operator. If there are more questions in the chat, either the IR team or the corporate comms team can get back to you as well. Our final chat question comes from John Roberts at Credit Suisse: "Scott said the 2027 EBITDA targets were just a volume-based objective, not really a price forecast.
Does 2027 assume Q4 2022 pricing or full year 2023 pricing? Is your 2023 target also just volume-based, or it doesn't matter?
Well, it's volume based, and we're assuming fourth quarter pricing or end of the year pricing, actually. End of the year, not fourth quarter. We're just holding that steady. We established that precedent all last year as we were doing guidance, fourth quarter pricing is what we're using in our guidance for... Sorry, not fourth quarter.
End of year.
End of the year pricing is what we're using in our guidance for 2023 as well as our 2027 forecast. Now I think we'll go to the operator, if we can go to the phones for the questions.
Yes, thank you. If you would like to ask a question over the phone, press star then one on your telephone keypad. If your question has already been asked, you may also remove yourself by pressing star one once again. If you are also watching via the webcast, please mute your computer before asking your question so we do not get feedback into the call. We will pause for just a moment to compile the Q&A roster. We will take our first question from David Begleiter with Deutsche Bank. Your line is open.
Thank you. Good morning. Kent, your 2023 EBITDA guidance range is a bit broad. Can you kind of discuss what could drive the upper and lower end of that guidance range being achieved?
I think, Well, we're forecasting it's early in the year as we forecast that. We normally start a little broad and narrow it as we go through the year. It's probably gonna be the volume that we talked about as we bring that on and then somewhat about the market, right? It's, it's uncertain time, so we'll see how as China comes back from the Chinese New Year, we're expecting that to tell us a lot about the market. I would say the breadth is about economic uncertainty and a little bit just about how volumes come on during the year.
I might add that, David, that one of the aspects that makes this year different, and it might be so going forward every further year, is not only are we ramping a conversion asset, so there's uncertainty as if we can do better, that it will be higher. We've had that in the past. We're ramping a resource asset as well in Gwaja with our JV partner. Again, there could be upside there as well. That there's two variables, whereas in the past it's one, so that also contributes to the possibility some upside if we're able to do better, and perhaps the breadth of the range that you're referring to.
That's a good point.
Understood. Now just on your lithium price, is that a modeling assumption or a price forecast over the next five years? If supply is getting tighter, why wouldn't price be higher than current levels?
Yeah. what we're doing-
Nice answer.
We're intentionally not forecasting lithium price over the next five years. If you wanna call it a modeling assumption, that's kind of we set that precedent last year as we were doing guidance. We don't wanna predict what that price may be, so we're being transparent. We're telling you what we're looking at it as the end of year pricing. We assume that that holds. That's a fair assumption from our standpoint. We're intentionally not predicting lithium prices.
I'd just add to that, David, that you're right. I said it earlier. The market is tighter than it was last year, we believe, with the demand growth and supply growth. There's significant supply coming on, but the demand growth is more significant that we see this year. Yet, even within the past weeks, China spot prices have come down just because of concerns in China, which we think are temporal, as I said earlier. It's very hard to predict pricing. We're not gonna do it. The market is expected to be tight for the year.
Yeah. Actually, that's a true statement throughout the planning period, right? There are ups and downs between supply and demand, but tremendous demand growth that keeps up or is ahead of supply.
For sure.
Thanks very much.
We will take our next question from Jeffrey Zekauskas with J.P. Morgan. Your line is open.
Thanks very much. Can you talk about how your cost per ton of lithium will change over the next five years in your production?
Interesting. Jeff?
Yeah. There are a couple of factors in that. There's a lot of moving factors in that, Jeff. I mean, as you know-
Sure
... we occupy for the resources that we're running today, and expect to run in this plan, we occupy the left-hand side of the cost curve. First quartile sort of costs from a resource standpoint, and that dictates really relative on a competitive basis, our cost versus the rest of the industry. That being said, we will be increasingly, over time, doing more production from spodumene and proportionately, although we are increasing our brine, and doing that from resources like Gwaja, although we'll continue to grow Greenbushes, we'll ultimately bring on Kings Mountain towards the backside of this plan. U.S. costs will be slightly higher on a conversion basis than those produced in China.
You will start to see some movement in that cost, but that relative to the rest of the industry will I mean, the rest of the industry's cost will also go up. We are in an increasing cost curve environment overall. We're still advantaged, but I would expect our cost therefore on average, not because of cost increase in any one resource, but because of the mix to go up gradually.
Yeah. We're subject to inflation like everyone else, but probably the biggest piece of that is our resource. We're basic in the resource, so we're not really subject to the inflation across the whole resource space. I think we're protected vis-à-vis our competitors like that as well.
Jeff, I just remind you that distributor model that we have with MRL and the MARBL joint venture, that's gonna look like our costs are going up as a result if you just take the revenue less earnings. In reality, of course, that's just an artifact of the accounting as opposed to real cost.
Okay. Just as a follow-up, I think on on slide 30, you have EV sales. I'm sorry, EV production going up 4.5 million vehicles in 2023. Roughly is that, you know, 3 million plus from China and, you know, 1.5 from everywhere else?
I can answer that question. We actually see, Jeff, a pretty big uptick in North America and Europe in that. Of that growth, it's maybe slightly more than 50% of it is China, but not a lot more. There'll be a larger contribution from Europe and particularly the U.S., in that growth expectation in 2023 versus prior years.
Okay, great. Thank you so much.
We will take our next question from Colin Rusch with Oppenheimer. Your line is open.
Thanks so much. Yeah, I know you guys don't like talking about other folks' businesses too much. You know, given the history around the difficulty of ramping new lithium resources, can you just give us an update on what you're seeing in the competitive landscape in terms of folks being able to meet their goals and what you're hearing from your customers around reliability of supply?
Well, I think, I mean, I can start. Eric, you can fill in. I think, I mean, we continue to hear the market is very tight. People struggle to get new facilities online, it seems to be the more unique they are or new players in the market struggle more to bring those on than the existing players. I think it's what we've been hearing. It's just more of that. As the volume accelerates, we continue to hear that story.
Yeah. I would say the bias, Colin, is that is to the downside usually on supply. In any one of our forecasts we've seen that in the past, whereas the bias on demand has usually been to the upside, that's created that tension, that gap we've talked about.
You know, our choice about our vision of what we want to accomplish and using the word reliable was very intentional for that reason. It's not only that you can get the same quality from any plant anywhere in the world, but when we say we're gonna bring it on, we bring it on. That, that's a value proposition with our customers as well. The industry desires a lot more supply and will contract for future on speculative resources. They'll look to us to make sure they base load what they need.
Great. Thank you so much. On the recycling side with lithium, obviously, you guys have a fair amount of experience in the brine materials, but can you talk a little bit about the learning cycles that you guys are going through with the innovation center as well as in the Specialties business in terms of, you know, looking at the de-risking of certain approaches and how you see that market evolving from a technology perspective?
Yeah. Eric, you wanna touch base on lithium and then Netha on specialties?
Sure. The great thing about the resegmentation of the company, and Netha will talk about specialties in a minute, is that with the acceleration of our plans, we can be laser-focused on, I think, some of, at least in Energy Storage, the growth opportunities you're referring to, which are really for lithium use in more areas of the battery cell because it is the active ingredient, so to speak, that gives that energy density, that increased range. And that means having it not only in the cathode, but ultimately the anode as well, whether that's a solid-state or some form of a lithium metal anode.
Then there's the aspect of having to recycle that lithium because as we just described, there's a deficit way out there and towards the end of the decade that we're really concerned about, and recycling plays a key role in it. The nature of our relationships with customers collaboratively is how we de-risk and innovate in the future. We're starting to do this. We're getting some good learnings that when we get a rich technical dialogue with the right sets of agreements, be those NDAs, joint development agreements, with people further down in the value chain, more towards battery and ultimately OEMs, we're getting much more learning on both sides to help accelerate that innovation. We wanna extend that now into the supply chain of how we now participate in the recycling angle, which is gonna be very important to address that supply deficit.
It's really the depth of the customer relationship that we're learning is very important to an ingredient to success in energy storage. Netha.
If you look on the specialties side, one of the fantastic things about this resegmentation is the focus that it allows. We've got really deep expertise in organic chemistry and process knowledge. Now we can double down that focus and accelerate our new product development cycle across multiple markets, which really insulates us against the up and downs that we see in the economy, especially the tightness that we're seeing right now with the recessionary environment. Really, you'll see that start to expand in terms of new products that come to market. In the specialties, we've put our foot down and put a stake in the ground.
10% of our revenues will come from new products that did not exist 3 years ago in the year 2026. As we integrate the specialties business and get that focus, I think you'll see that continue to expand and go up and up over the planning period.
Yeah. I think that's actually a good point if we just jump on that. That is the heart of why we restructured the business, to give us more focus on the big growth opportunity around electric vehicles and energy storage. But we think there's a big opportunity in specialties and the skill set that Netha and his team have leveraged on the bromine business, we can apply that into the lithium specialty segment. We're getting additional focus in both areas. That's, it's been a big benefit for us.
Thanks so much, guys.
And we will take our next question from Christopher Parkinson with Mizuho. Your line is open.
Great. Thank you so much. You're in a pretty unique position within the U.S. market. Can you just kind of further evolve on the conversations you've been having with some of the U.S. OEMs, you know, pertaining to the intermediate to long-term outlook, what you're seeing and how that is gonna feed into your some of your investment decisions on your assets? Thank you.
Let me start. Eric, you can talk a little bit more detail. I mean, we are in a unique position because of the resource that we have, we've got multiple resources. We operate in Nevada today. We've got the resource at Kings Mountain that we are leveraging to bring that online. We're talking about a conversion asset in North America that could utilize both of those resources. Potentially at Magnolia as well, there's work to be done, but we believe there's brine in those resources there's lithium in the brine resources at Magnolia. We think we can bring those to market. That's further out. I'll let Eric talk a little bit about customer conversations.
The whether it's OEMs, battery producers investing here in the, in the U.S., the supply chain Kent described is very attractive and fits right within the heart of the Inflation Reduction Act and what it's trying to accomplish. We're very excited about that. Our customers are very excited about it. You know, we use that aspect of the customer relationship in the U.S. to have that innovation discussion that Netha and I were just talking about earlier to complete the relationship as well, and to dive into the topic of recycling, which is still an emerging space as to how it's gonna work.
It's gonna require that kind of collaboration to be successful. Also, though, as important is if you look to these U.S. relationships here, the automotive OEM relationships that we have are our resources in Chile and Australia. They're both in free trade.
...jurisdictions to the U.S. They're equally attractive to Europe as well, to our European customers. Those are become very important pivot points to grow our business here in the U.S. as well, and our share here in the U.S. as well as the market develops.
Yeah, actually, that's a great point. We talk about the benefit of us and the resources we have in the U.S., but really it's that diversification we have around the world. Australian resources, Chilean resources, potentially in Argentina and then North America. We continue to look for additional resources wherever those may be.
Thank you for the detail.
We will take our next question from David Deckelbaum with Cowen. Your line is open.
Thanks for taking my questions, and thanks for the details today. I wanted to just get to a question maybe for you, Scott, around M&A. You've highlighted that new projects, with inferior lithium grades and inferior concentrations between both hard rock and brine relative to your existing resource, how do you think about that in the context of M&A? Does that mean that we should expect Albemarle to be looking at more undeveloped opportunities or near-term production opportunities?
Yeah.
Yeah.
Let me start with that, Scott.
Sure.
I mean, I think you can see us looking across the range. We're looking for opportunities where there may be existing and you're right, the quality of the resource, you know, the premium resources at large scale have been identified and someone's developing that at the moment. The ones that come to market will probably be a little less lower quality, but we're still looking at those. That's the way this market is going to develop. We're also looking at things to develop, like Antofalla. We have the resource in Argentina. It's a brine resource. That's something that we're looking to bring to market as well. I think you'll see us looking across the range from an M&A standpoint.
Historically, we've looked mostly at conversion we've looked primarily at conversion assets, probably less focused on that 'cause there's just less available today, and more about the resource that we see 'cause that's the gap. Our execution capability around conversion is getting better and better. We feel comfortable building that out ourselves. The resource is what you know, as we get out past 2030 is where we really need to focus on developing it ourselves, expanding the resources we have, 'cause we continue to believe that our existing resources and assets that we get, we will be able to develop them further and get more resource from those.
Good. I don't have anything to add. Very good.
Thank you. I wanted to follow up with just, it sounded like on pricing that in your guidance, you're just implying that your current realizations are more or less held static until 2027. I just wanted to dig into one of the points that you made earlier around this concept of developing differentiated lithium with two to three times higher contribution margins. Is that a reference to more higher end applications, or is that more a specific reference to producing a battery-grade material? I guess, is if it's the former, do you see meaningful growth in that segment within this five-year outlook?
Go ahead.
I would say when we talk about the value we're creating from differentiated materials with higher contribution margins, there we're talking about material that will be more than likely, well, it will be value based in terms of how we approach, value add, very much how the Albemarle Specialties business operates. What we're gonna be doing is developing proprietary materials collaboratively with customers that enable a step change in energy storage performance through lithium material science. There's advantage we'll create in that. We'll approach that from a very specialized point of view. When you think about the core business of supplying that's core today, the carbonate and hydroxide business into the cathode area, there, a lot of the pricing is around a minimum threshold around quality.
It can be around regions we expect as well. In the future, we expect potential for indices in certain regions to develop because of the preference, either from a sustainability or a geopolitical point of view, and then quality. I think there'll be classes of products you start to see more often in the lithium salt side by region, whereas again, just to repeat on the advanced energy material, there'll be more value and use.
Eric, I think it's fair to say that the advanced materials really don't start to show up into the P&L until late in 2027, more so even late in the decade.
Yes. We have an internal 10-year plan, and we start to see that revenue in that period of time. In order to get there, we need to start making those investments now.
Exactly.
Develop those relationships collaboratively with customers now.
Got it. That, that becomes much more of an interesting kind of longer-term in the view. I appreciate the color there.
We'll take our next question from P.J. Juvekar with Citi. Your line is open.
Hi, good morning. You know, as you mentioned that your 2023 prices are gonna be much higher than 2022 prices, I think you mentioned 40% on average, then why are your EBITDA margins lower in 2023 with so much pricing leverage? I was wondering if you can shed some light on that.
I'll just come back to the, you know, the points around, there's really three areas, right? one is the cost of spodumene is catching up with our cost, with the pricing in the marketplace. That's one. Second is, as the MARBL JV continues to grow, that's a distributor model, we end up seeing 100% of the revenue, but only our share of the EBITDA flowing through our P&L. That's gonna be a drag. Then the 3rd area in specialties is the high cost of lithium chloride, does create a bit of a drag in 2023 that will catch up in the, later in the periods. That's enough to offset the pricing benefit.
Okay. Thank you. Then, you know, how much contribution will you see from your U.S. Mega-Flex site by 2027? If you bring the carbonate material, let's say, from Chile into U.S. and process it at that Mega-Flex facility, how much IRA benefit do you stand to get from that? Thank you.
You wanna do the timing on the Kings Mountain?
Yeah. Kings Mountain is the expectation that we'll start to deliver product in the late 2026, 2027 timeframe. It'll be in that ramp phase. There's the meaningful amount of two trains, but it's, you know, call it-
Rampe mode. Yeah.
... 20,000 tons maybe at that point in time. It'll continue to grow as you go into 2028 and then 2029.
Right. I can answer the question. P.J., we're not envisioning that Chile would be the feedstock for that. That is an option that we discussed in the past. The current mode is to look at Kings Mountain as a spodumene feedstock for the U.S. Mega-Flex plant. That being said, Chile is viewed favorably also from an IRA perspective as IRA compliant, if you will, as Chile has a free trade agreement with the U.S.
We're not feeding the Mega-Flex plant from Chile, but we could sell product from Chile into the U.S.
Exactly.
In that case, it qualifies for.
Yeah
... IRA.
Precisely.
Eventually, the Mega-Flex will also have recycling.
Yeah.
one train recycling.
Yeah. Ultimately, additional trains would have the ability to recycle feedstock, if you will. Yep.
Thank you.
We will take our next question from John Roberts with Credit Suisse. Your line is open.
Thank you. First a question on specialties and a follow-up on Ketjen. For the new specialty segment, how will lithium transfer pricing be handled since it has no lithium resource assets? Will sales and R&D still have dedicated people for lithium versus bromine, or are those gonna be largely commingled activities?
Let me take the first half of that, and maybe Matthew, you can take the second half. The lithium chloride will actually transfer from Energy Storage at cost. Now it's an all-in cost, so it's gonna include the royalties, taxes, and all that kind of stuff that go into it, but it'll be at cost going into Specialties going forward.
If you think about the resources that the combined specialty business have, we will be functional and basic in both bromine and lithium specialties, absolutely. What this allows us to do now is consolidate and aggregate those resources to the best returns possible, irregardless of which segment it's in. We'll have the capability inside from an R&D standpoint to do both, and we will do both. We'll prioritize on what's the best return for Albemarle and the best use of all that specialty knowledge we have in organic chemistry.
Then for Ketjen, if I look beyond 2023 and compare your 2027 and 2023 midpoint targets for Ketjen, it's something still like a 30% EBITDA growth rate on a 2% sales growth rate after 2023. Is there another big jump in 2024 EBITDA like 2023, or is there a more continuous improvement expected to happen through 2027?
Yeah, I think it's more of a continuous improvement as we go along that train. We're talking about Qinzhou as a turnaround, so we've got a couple of steps in profitability. It kind of just moves along.
Thank you.
We will take our next question from Joel Jackson with BMO Capital Markets. Your line is open.
Hi, good morning. Looking at your December investor presentation, and I may have the numbers off a bit, but let's try. You talk about volume in 2023 of around 180,000 tons, I think about 10,000 from tolling. In your update now you're talking about, I think, about 150,000 tons this year with about 30,000 or so tons of tolling. Can you go through all that? Where did like, you know, the lithium hydroxide volume seems like it dropped a lot? Is that delays in different project and different projects coming on? Or can you please walk through it? Thanks.
I'm not aware. You're referencing what we said in December, Joel, versus what we're saying now. I'm not aware of any delays. We knew exactly in December what we were anticipating for the year, nothing changed in between. Not sure, well, I think we'd have to get with investor relations to better understand what the comparison is you're making. As you just more specific-
There's a very striking difference between slide 22.
Yeah.
-of your December investor presentation and slide, I'm sorry, is it 38? 38 of your current presentation, like quite striking.
Joel, as you can see, I don't, I don't have those slides in front of me. Like I said, maybe we take that offline. More precisely what we expect this year is at least 30% growth. That's what we're guiding. There's potential for more based upon the variability we discussed earlier of how Kemerton ramps and how Wodgina ramps. We have the flywheel we've always had in the absence of our own capacity is to go to tolling. Tolling will grow significantly year on year in order to accommodate that additional resource. Obviously we'll continue to ramp both Meishan later in next year as well as continue to ramp Kemerton one and two this year and into next year to then take that, you know, out of tolling and back into our own internal production.
Okay. Just following up, a couple questions. I don't know that you addressed what the feedstock would be for the European Mega-Flex plant. Then, I know you had talked about the last year, maybe you're doing a bit of research on can you actually access some of your clay resources? Obviously, clay is quite impermeable, and maybe if you liquefy it to open it up or whatever. Do you have any commentary on that?
Yeah, I would say, well, I mean both of those questions. European Mega-Flex, we're looking for that opportunity, we're looking to make sure we have the resource for that. We have our overall portfolio. We're looking for additional resources to accommodate that. Clays, that is a, I mean, we do have access to clays in Nevada, but we don't have a process technology now in order to extract and commercialize that. That's a, that's an R&D project, not something that we're taking to production at this point.
Thank you.
We will take our next question from Christopher Kapsch, pardon me, with Loop Capital Markets. Your line is open.
Yeah, good morning. So sort of a bigger picture question and then one follow-up that's Albemarle specific, likely for Eric. It's going back to the September 2021 investor event. Eric, you kind of spoke, I believe, about a relatively flat industry cost curve. Today, and I'm pointing to slide 32, there's a steepening of the cost curve if you look out to 2030, trying to address that demand of 3.7 million tons of LCE. I'm just wondering if it's, if there's anything specific about your analysis that has contributed to a view that, you know, these projects that we need to feed that demand growth are just simply inferior resources. Just the process by which you are coming up with that steeper cost curve, and then one follow-up.
Sure, sure. I'll actually go back to our 2019 Investor Day. We've always expected if this market broke out and had the growth that we are now seeing, an upward sloping cost curve. We talked about that in 2019. I think in 2021, we were early coming out of the pandemic. We had a lower demand outlook than we did than we do today. What's certainly changed from then till now is a significant growth in demand necessitating any and every resource available to try to come to market to fill this deficit, which we still see by the time you get to the end of the decade. When you do that, you are now going into unconventional or unproven resources or smaller resources that are gonna carry higher costs.
That's what's driving up the cost profile. You also just have, the, if you will, more experience that suggests even some of the projects we may have been optimistic about coming to market have taken longer and are coming at a higher cost, those that I refer to our competitive projects that we've seen out there. I think those are some of the factors, just the step change in growth has really changed the view, of how quickly costs need to come up to support the gap in supply.
Yeah. We've seen that, I mean, in our own experience, they take a little longer to bring to market, and it's not as fast as you know, not as fast, and the costs are higher. We're seeing that across the industry on regular resources and traditional resources, as well as kind of the newer, lower quality resources. It's the demand, as Eric said, but it's our experience, our own experience and what we see in the market that it's just more expensive and taking longer to bring these on.
Got it. Makes sense, and I concur. The follow-up is on that same slide, and I realize the picture is just sort of directionally, but It shows Albemarle positioning on the cost curve in 2030. I'm just curious, it sounds like that would include Kings Mountain because you mentioned that's the potential feed for the Mega-Flex in the Southeastern U.S. Curious if you also include in that a DLE-based Magnolia project and your the Argentine research you're developing. Does that position also include maximum royalties under the current Chilean royalty structure? Thank you.
Yeah. It includes, just to answer your last question first, it assumes, certainly that the maximum royalties where above $10 every 40 cents of every dollar is paid as out as a royalty. It does assume that, which elevates the Chilean cost almost like a variable cost, if you will, based on selling price. If you look at the other resources, it definitely includes Kings Mountain, and it starts to bring in at a small level, Magnolia and those would, which would definitely bias the curve to the right. Those are gonna be higher cost resources. It, you know, as you weight average that, it moves it more to the right versus where it is today.
That's gonna be the case for anybody coming into or growing their resource base in new resources, which is gonna be required to fulfill the gap, which then goes back to the punchline that says pricing needs to be elevated or needs to remain elevated in order to support the incentives required to take on those inve stment risks.
Yes. Great. Thank you very much. That was my punchline as well. Thanks.
We will take our next question from Arun Viswanathan from RBC Capital Markets. Your line is open.
Great. Thanks for taking my question. I had a similar question around the cost curve. We have seen it elevated. I guess you made a reference to, $20 a kg at the upper end of that cost curve to support, you know, lithium pricing. What kind of level of spodumene do you see longer term? I know prices have kind of risen up to like a $6,000 per ton level, but is that sustainable? And maybe you can just describe, you know, the evolution of the cost curve over the next couple of years.
I think that's the, kind of the same question about lithium price. We're not gonna forecast those out. I mean, they are... They'll move with lithium price, and you can almost track them as a formula with lithium price. We're not gonna predict lithium or spodumene prices.
Of course. Bringing it back to us, we are vertically integrated. While there's accounting impacts that affect margin, as Scott described, whatever happens with spodumene price, really from a, you know, from a competitiveness basis, from a cash flow basis, it really doesn't have an impact on us as a vertically integrated producer. It does impact those who aren't integrated, who aren't backward integrated in resources.
Yeah. That becomes almost like two cost curves.
Right
In reality. We've never shown it that way, but they're actually two cost curves for integrated or people that are buying spodumene.
How much of the capacity, I guess, longer term would be non-integrated? Do you see that as greater than 50%? Do you see that as that is where most of the new capacity is being added is non-integrated? I had another follow-up as well.
That's a tougher question because we actually we spend more time modeling what the cost would be from the resource through whatever conversion capacity that is on a cash basis, irrespective of who owns the assets. Today's model is that most, not all, but most Australian spodumene producers, which is the richest source of spodumene in the world, are not integrated, therefore, they're selling to a customer base of converters who aren't backward integrated, and that's largely China. I expect that to become a smaller and smaller proportion of the market. It's a pretty large proportion of the market today, just by virtue of the fact that integrated production tends to be more of the investments you see or more of the trend of late, remains to be seen exactly how that plays out.
Yeah. It'd be an interesting trend to watch.
Great. Thank you.
As that plays out, that'll be interesting to see.
Absolutely. When you think about your own conversion capacity, I know you're investing heavily in North America, how much of your own conversion capacity would you expect ultimately would be outside of China? You know, if you do have a greater portion in China, do you see that as a limitation or any headwinds to bringing that converted capacity over to other regions? I'm just thinking about the IRA and if there's any requirements to have a certain amount of converted capacity in North America, longer term.
Have the strategy to kinda we call it, we said Pivot to the West for some time. It's just now it's really starting to show up with investments that's coming. Our strategy in China is that the capacity we have in China is for the Chinese market. Long term, we'll have the product in China would serve the Chinese market, and product outside of China would serve the rest of the world. A lot of that demand will be in North America and Europe, and we wanna be as close to those markets as possible, but we have to operate with where we have resource and where resource is available. Our strategy in China is that's for the local market long term.
Today, we still export some of that, but ultimately that will be for the local market.
Yeah. If you look at my presentation, you can see we've got the 35,000 tons or so that's already in China, then the increments are being added, Meishan, Qinzhou, one and two. That's the only... At the moment, what we've envisioned for China, everything else is part of the Pivot West strategy in that 500,000-600,000 tons we talk about of total opportunity by the end of the decade.
Thanks.
We will take our next question from Josh Spector with UBS. Your line is open.
Yeah. Hi. Thanks. Just a question on the CapEx in 2027. First, just wondering if you can separate the sustaining versus the growth CapEx at that point in time. Second, just curious about when you would flex CapEx. If lithium prices for whatever reason moves down towards the cost curve, it's not trough, but it's down from where it is today, I think in that scenario, your free cash flow goes negative. Would you flex your spend then? You know, is the mantra growth to capture market share, or capture growth with the market? Does free cash flow start to dominate some of your thinking?
Free cash flow is gonna always have a lot of input into our investment decision. That's gonna depend on, you know, if there is a cycle, what happens during that cycle, and what our view is coming out of that cycle. I don't think there is an answer that we're gonna decide right now and then invest no matter what. That's not how we think. We would look at the situation at the time and decide how we do it. We could invest through a down cycle, but it's hard to predict, not knowing what that looks like. The question about capital sustaining and thus investment. I mean, I don't have all that.
I mean, typically, we look at something like 6% of revenue for sustaining capital as our base, and then the rest of that's gonna be growth. Is that fair, Scott?
That's fair, except it's a little bit distorted by the price impacts that are out there.
Yeah.
You know, you'll see that number come down. If you look at 2027, our sustaining capital is probably in the range of $600 million-$700 million, overall. That includes productivity and other, you know, other types of, actions that we take. Does not include the growth or the mega projects that we've talked about. But it's probably in that $600 million-$700 million range.
Thanks. Just a quick follow-up. With the MARBL JV and the renegotiations there, I mean, you guys are showing the 60% share for Wodgina in line with the non-binding agreement. I guess I apologize if I missed this, but I wasn't aware that that became binding. Is there any update there, or is that actually executed now?
Yeah. It's not executed, so we're operating under the existing agreement, and that's how we're looking at it. We are in discussions and that is subject to change. We're not putting anything into the model or talking about publicly until we get it final.
Okay, thank you.
We'll take our next question from Stephen Richardson with Evercore ISI. Your line is open.
Hi. Thank you. The indication that a $10 move, probably for Eric Norris, the indication that the $10 move per kilogram in index price in 2023 would see your realized prices come down $5-$7 is really helpful. Could you just clarify, is that solely because of the trailing impacts of index prices on your realized, or is there something else going on in the contract structure? I guess said otherwise, if it stayed down $10, would your 2024 prices come down $10, or would we still see, you know, that lower level of impact on your average selling price?
Yeah. It's a function of, as you said, Steve, it's a function of the lag effect for one. The way we phrase this is it's a full year of price down $10 equals a full year for us, a price down average $5-$7 in that range. There's the lag effect. There's also, in a few cases, some caps in place as well that impact that. There are floors as well. It depends on how far you go on either end of the spectrum. In a few cases, a few contracts, we have that impact as well.
Yeah. I think it's important to recognize that that analysis really is only effective at the current market prices. As you move down or up, it's gonna change somewhat. We'll have to keep updating as to what those-
Right.
Kind of sensitivities are because of the caps and floors that are in place.
Yep. Yep.
That's helpful. Scott, maybe a quick follow-up. I, sorry to jump back into the accounting, and I fear this is you're gonna mention distributor model again. Could you just bridge us once again on EBITDA to net cash flow from operations per the guidance? I think you've given indications on that slide for interest in financing expense and D&A and taxes. What's the rest of the gap as we think about our models for cash flow from ops in 2023?
Yeah. Remember, we're growing significantly, and that comes with a cost of working capital. That's gonna be a drag throughout this 5-year period 'cause we're continuing to accelerate that growth curve. You're gonna see a negative on working capital.
Okay. there's upwards of $1 billion of working capital drag this year?
That's about right. Yep.
Okay. Thank you.
Ladies and gentlemen, that is all the time we have for questions today. I will now pass the call back to Kent Masters for final remarks.
Okay, Abby. Thank you. Thanks everyone for joining us today. As you can see, we have a tremendous growth opportunity ahead of us, and we look forward to executing against that. We have a strong strategy, and we use our operating model to align that strategy so we can execute long term and deliver long-term shareholder value for everyone involved, our communities, our customers, and our shareholders. Thank you.