Welcome to Albemarle's 2021 Investor Day, Making the World Safe and Sustainable. My name is Meredith Bandy. I'm the Vice President of Investor Relations and Sustainability. I'm joined today by my team, David Burke, Director of Investor Relations and Katie Pfeiffer, Manager of Investor Relations. Today, we're going to go through a deep dive on Albemarle.
We have a lot of material to get through. As you're working through these slides in the coming days and weeks, don't hesitate The Safe Harbor language you can see here on this slide also applies to this webcast. We'll also discuss some non GAAP financial measures today. You'll find reconciliations of these measures to GAAP financial measures in the appendix of these slides. Finally, the heart of the matter, our agenda for this morning.
We'll begin with Kent Masters, our CEO. Kent will give a High level strategic overview of Albemarle and he'll also discuss how we're implementing our new operating model, the Albemarle Way of Excellence to ensure strategic execution. Next, we'll begin our business unit presentations. Netha Johnson, President, Bromine, We'll discuss how we're growing with our existing core markets, but also some exciting new opportunities we have in the bromine markets. Rafael Crawford, President, Catalyst, We'll discuss how we're pivoting in that business to ensure long term value creation in light of today's changing energy markets.
After Rafael speaks, we'll have the first of 2 Q and A sessions today. I'll ask that you please hold your lithium questions for the 2nd Q and A session. There are 2 options for asking questions today. 1st, we can take questions via the web chat. You'll see a chat functionality in the console of your screen.
We'll also take questions via the phone lines just as we would do during a regular earnings call. Following our first Q and A session, we'll take a brief break, And when we come back, we'll hear from Eric Norris, President, Lithium. Eric will discuss how we're accelerating growth to enable the EV revolution. And then Lenny Pisano, Vice President of Lithium Sustainability, will talk about how we're able to produce lithium sustainably all around the world. Yac Fouri, our Chief Capital Projects Officer, will speak next.
Yac will explain how we've built capabilities required to deliver our growth projects on time and on budget. And finally, Scott Tozier, our CFO, We'll talk about how we have the financial flexibility we need to accelerate growth. We'll finish our Investor Day with a final Q and A session
Thank you, Meredith, and good morning, everyone, and thanks for joining our 2021 Investor Day. We're excited to be here to share the Albemarle has the right elements for a very strong future. We are a global market leader with solid competitive advantages. We have a resilient and reliable track record of performance over time. We have a long runway of And we'll continue to fuel our business and our sustainability ambitions.
And we have a focused Throughout the presentations today. Last Investor Day, I was sitting in the audience with you as Lead Independent Director. Today, what a time it is to be leading Albemarle. Like everyone, over the past 18 We faced a great deal of uncertainty and change with the pandemic. But our resilience saw us through, And now we face great opportunity, and our strengths will lead the way.
Since 20 15, I've been actively engaged with my Board colleagues to establish Albemarle's purpose and values, which are core to our identity. What excites me about Albemarle is the innovation and leadership we bring to our markets and the growth prospects ahead. Lithium, for example, is an industry that is developing quickly. Albemarle is playing a critical role in shaping that development. We have earned an enviable position in our market and with a strong strategy and values, we will build on that legacy for years to come.
We are focusing our efforts in key areas to create a formidable company. By continuing to champion safety And progressing towards 0 harm by advancing sustainability goals and those of our customers. And Ellen will talk about this in more detail. And by using the Albemarle way to establish clear goals and ensure A quick overview. Albemarle has a strong legacy of leading, executing and adapting.
We are a dividend aristocrat, growing our dividend for 27 consecutive years. We have a diverse portfolio High return businesses serving customers around the world with quality products that help drive secular trends. Each business has opportunities for growth, which you'll hear more about from our business leaders this morning. And we generate significant operating cash. As we implement our operating model, we'll build on The sustainable cost savings which we've captured to date.
So that's who we are. Let's shift now to what sets us apart. As I mentioned at the start, we possess a solid competitive edge, anchored by our best in Full and active portfolio management and our strong balance sheet that gives us financial flexibility.
We
And we intend to differentiate further with a focus on sustainable goals And practices, which you'll hear about from all of our presenters. Albemarle's And we are relentlessly focused on managing our resources and assets as efficiently and Our executive leadership team includes long tenured employees and those who have recently joined us. Our new Chief Human Resources Officer, Melissa Anderson, joined us at the start of this year. She previously held long tenured senior HR roles with global leaders like IBM and Duke Power. You can see that this is a seasoned team that brings a diverse set of backgrounds and experiences.
They've also successfully managed through business cycles. I encourage you to read their CVs in the appendix of the materials to see the diversity of business experience This leadership team offers. Our strength extend to our Board of Directors as well. We have a diverse, engaged and accountable Board of 9 members, of which 8, excluding myself, are independent. At our 2019 Investor Day, we were in the process of completing a Board refresh.
At the time, We had several planned retirements. We elected to use that opportunity to increase the diversity of our Board. We're proud of our Board's low average tenure and diversity in terms of not only race and gender, but also Collectively, our Board has the skill set and experiences to oversee the execution of our growth strategy. These global experiences include financial expertise and knowledge emerging markets, geopolitics, manufacturing and operations, supply chain, R and D and innovation, And managing P and Ls for many years. Now let's see how those strengths translate into meeting our long term goals.
At Investor Day in 2019, we laid out our performance targets for 2024. Today, we'll give you an update on where we stand against those targets to date. For our corporate targets, at the top of the table, despite all the challenges of the global COVID-nineteen pandemic, we remain on track to meet or exceed those targets. This success is due in part to the highly successful cost savings program we announced in 2019. It has exceeded our expectations.
We do expect to fall short of our 2024 free cash flow target, but only because made the decision to accelerate investments to capture growth. These investments will In terms of the GBU progress since our last Investor Day, we now expect to achieve total lithium capacity of 175,000 metric tons early next year and have fast tracked our expansion efforts to meet the rapid Increase in demand ahead. Bromine was the least impacted by the pandemic, thanks to diverse existing end markets and growing new markets. Catalyst is the exception due to a material impact from COVID and The accelerating energy transition. The team is charting a path to navigate that transition, which Rafael will detail in his presentation Now if you've been with us for a while, this will look familiar.
We rolled out our long term strategy in 2017. The overall strategy remains intact. However, in 2020, we shifted our focus to clearly drive sustainable value for our customers and shareholders, our strategy has 4 primary pillars. First, we will grow profitably. We have identified and planned a profile, a portfolio of low capital intensity, high Jaak will go over this capability in more detail in his discussion.
We have long term commercial relationships with our key customers. And these projects align with our customer Over the past year, we have optimized earnings and cash flow generation across our business. We have streamlined Business and processes to create an effective and efficient platform for growth. Operational discipline is for generating cash flow and supporting growth, and we will not take our eyes off the ball, even as we move into an accelerated growth phase. 3rd, we will invest with discipline.
We are allocating capital to our highest return We will also continue to maintain our investment grade credit rating and support our dividend. Scott will talk about our disciplined approach to investing in more detail in his presentation. And 4th, we will advance sustainability across our businesses, which is not only strategic, but core to our values. We aim to increase sustainability throughout the value chain, from the resource to the end use of our products. Our lithium products enable the reduction of greenhouse gas emissions through the adoption of battery electric vehicles.
Our bromine products Contribute to consumer safety by predicting fires in electronic equipment. And our catalyst products help refiners produce Now let me spend a minute more on investment discipline and talk about portfolio management. Over the years, we have proven that we are thoughtful in our approach to portfolio management. We have generated more than $4,000,000,000 in gross proceeds from recent divestitures. We have invested more than 2,000,000,000 We actively evaluate our portfolio and review this with our Board of Directors on a regular basis.
You will see in Rafael's presentation that our Our Catalyst business is fundamentally strong, and there are exciting opportunities for Catalyst, but it will require meaningful Resources and focus to realize its potential. We have to ask the question, is this the right priority for morals capital at this time. We are assessing the best way to support the Catalyst business in this pivot. This has prompted us to a strategic review of the business. We will be thoughtful in our approach as we always have.
And I believe our track record of Portfolio Management demonstrates this point. It is too early to see the path for the Catalyst business at this time, But we will consider all options available to us. From a strategic standpoint, we are building We are pursuing significant organic growth opportunities. We may also seek acquisitions if those acquisitions allow or partnerships that help us compete and deliver for our customers. We will pursue Inorganic growth only when the economics are strong.
And as you can see at the bottom of the slide, We have defined a set of financial criteria to maximize returns and ensure value creation. Let's shift now and talk about our approach to strategy execution. For our strategy to be successful, we must To do this, every employee needs to be aligned to our values, our goals And our approach to execution. This approach is the Albemarle way of excellence. This structured operating model will help us see where we need to pursue excellence now so we can run our enterprise better align to our strategy for growth.
So this model includes 3 performance priorities, Our overarching objectives for our performance shown along the outer band, 4 Operating pillars, the key competency areas to optimize our execution excellence. And 12 The channels of execution that strengthen our key competencies. We'll use this model for objective setting, KPI reporting and as a blueprint to continually focus our attention to better execute our strategy And build a stronger company. On the next slide, I'll take you through the Albemarle way in a bit more detail. High performance culture ensures that we keep our help our employees be safe, value centered, focused And an agile and engaged organization with diverse and empowered teams for responsive action.
Competitive capabilities defines how we differentiate and build advantage to remain a leader in our markets. We will do this with best global talent, best in class resources with a low cost position, Technology and partnerships that differentiate our products and services and a robust IT backbone that standardizes global processes, analytics, governance and security. Through business excellence, where we are focused on an effective and efficient back office and advantaged supply design approach to improve capital intensity and enable benefits in product cost, quality and sustainability. You'll hear more from sound product stewardship and responsible sourcing, legal and regulatory compliance, and advocacy for fair and science Staying on the topic of our sustainable approach for a little longer, our sustainability targets were disclosed in June as part of our annual sustainability report. In that report, we committed to reduce intensity of our catalyst and bromine businesses by a combined 35% by 2,030, in line with science Based targets.
To reduce the intensity of our freshwater usage by 25% by 2,030 in areas of high And aim for net zero carbon emissions by 2,050. This morning, each GBU will discuss some of the projects that are currently underway to help us meet these targets. We are about how we'll use our Albemarle way of excellence to accelerate our sustainable approach. We are taking similar deliberate actions
in the operating discipline and high performance
culture pillars as well. Discipline and high performance culture pillars as well. As we were Finalizing our operating model late last year, we knew that operational discipline was a pressing challenge with significant opportunity for improvement. And with the uncertainty of the pandemic, we knew our work culture would change. So in late 2020, We created our Journey to Excellence initiative.
This initiative launched 6 diverse These are challenging problems to solve, and the teams did a great job. Their plans encouraged us to be bold in our approach for great gain. We've assigned implementation leaders for each project, and the work is on an accelerated path. You'll hear more about these projects in the presentations that follow, but let me give you a couple of examples. Customer excellence is about enhancing the customer journey from an initial request to final product delivery.
We are aligning cross functional teams around Attracting and retaining a skilled and diverse workforce. We have established a remotability framework that guides our approach to hybrid work. This framework allows us to manage cost while Video introduction to our bromine business.
There is an replaceable element naturally found on the earth. It is an essential component of fire safety, food safety, oil fill drilling, high-tech cleaning, water treatment,
and more. It's time
to get to know And and more. It's time to get to know bromine. Bromine protects your home, family, and community by decreasing flammability electronics, buildings, and cars, which increases escape time, helping you get to safety in the event of a fire. And That's just the beginning. Bromine chemistry reduces water usage in industrial applications, reduces foodborne illnesses, ensuring safer meat processing, boost fuel efficiency and rubber tires, allows for deep sea drilling, provides It's a key molecule for pharmaceuticals and agricultural chemicals and is crucial for reducing mercury emissions into our environment.
Bromine is By this natural element to better our world, Albemarle is proud to be a global leader in bromine supply. We've spent more than 50 years committed to research, Building our global presence and a full array of products, our superior technology, robust supply chain, and the most impressive team in the industry allow Sustainability initiatives to reduce the environmental footprint of our manufacturing operations as well as developing new high performance products such Next generation flavor targets. We have, we are, and we will continue to innovate new products to Hence, modern life. Without Brony, the world as we know it would not be as safe, comfortable, and efficient
Good morning. My name is Netha Johnson. And over the next 20 minutes, I plan to talk about the strong performance of the bromine business, our pivot of this business to a growth And the numerous opportunities we have to execute against growth over the next 5 years. The bromine business within Albemarle plans to build upon our strong foundation of financial performance. We are a global market leader with value added services and a growing customer base.
The combined CAGR of the markets that we participate in over the next 5 years is 3.5%. What this means for us is that the global volume of equivalent bromine will grow from the 5 50 kilotons that it is today To over 7 40 kilotons over the next 5 years. We will execute against multiple capital projects To participate in this growth. But even with those capital projects, we fully expect the bromine market to be undersupplied for the next 5 years. The bromine business expects to deliver greater than GDP growth rates, while maintaining best in Class margins and cash flow performance.
This is a snapshot of our business today, But I'm only going to focus on 3 points in this whole slide. The first is our diversification. If you look on the right hand side of the chart, you can see how diversified our business is. In fact, our business has never been more diversified Than it is today. What this does for us, it provides us numerous opportunities to grow as well as protect us in case of a market downturn.
This was evidenced in 2020 during the coronavirus. This business was able to grow EBITDA double GDP Even during those difficult market conditions. The next area of the slide I want to focus on is our business characteristics. We have access to world class natural resources with a low cost position. This positions us well as a low cost producer in our industry.
We also have a plant that's able to deliver More than 16 products from the same value stream and same plant cost structure. This allows us to efficiently transition from product to product To capture growth in markets and insulate ourselves against markets that are down. The last piece I want to emphasize is our environment. We could not be more excited about the opportunities we have in this business and our markets. If you look at the macro trends of the future, from digitization, electrification, Internet of Things, Increased health and safety, increased environmental remediation and work from home and hybrid work, the bromine business is Absolutely well positioned to take advantage of these.
We have the right business and the right environment to grow going forward. With the exception of our ability to forecast oil and gas prices, We have far exceeded every financial and performance metric I illustrated to you when I was last year in 2019. In terms of operational excellence, in 2019, 1% of OEE improvement represents $1,600,000 In 2020, we increased that to where 1% of OEE improvement equals $2,000,000 to $3,000,000 of EBITDA, Which translates to us right to the bottom line and margin enhancement. By 2023, This business will have executed over $54,000,000 of annualized productivity and cost avoidance projects, Well ahead of the target we set for ourselves. In terms of financial performance, we beat every metric that we wanted to and listed in 20 One of the fundamental tenets of the bromine business is our access to highly concentrated bromides.
And what that gives us is a low cost position. Our business model is simple and straightforward, We've been executing this model for over 2 decades. In fact, it's very similar to the lithium business model. We extract bromine raw materials from either a well or the sea, and we transform that raw material Into higher value added products via chemical processing. We then sell those high value products And to global key account customers via direct sales model, a very basic operating model that we know how to execute very well.
We get our bromine from 2 places, the Dead Sea in Jordan and Arkansas within the United States. And if you can see from the top right hand slide part of the slide, excuse me, the concentration of bromine in the Dead Sea and Arkansas is the largest In the world. And this also translates, if you look at the bottom left, into the industrial cost curve for elemental bromine. As you can see from that chart in the bottom right, the Dead Sea in Arkansas are the lowest cost Sources of bromine in the world, and we are the only company that has access to both. This is the snapshot of which the markets in which we have an opportunity to play.
The total addressable market And the growth rates only represent the bromine opportunity within these much larger vertical markets. When I see these markets, I see opportunity. If you look at the visuals around telecom, Electronics, energy, and consumer polymers, these are great opportunities for us to grow. And in the next three slides, I'll cover 3 of these markets to give you insights into where we plan to grow. The first will be consumer polymers.
This is where we have an existing product with existing customers and operate from a position of strength. The next will be telecom, where that's where we have opportunity to get new additional opportunities as we transition to 5 gs. And the last one I'll talk about is the EV market, which is a new market for us, but a market in which we could not be more excited to participate in. If we look in the consumer polymer business, our HBR product It's a catalyst that is necessary in the production of PET. We are well established in this market, And we have lots of customers that we're very successful with.
The expansion of PET plants is well documented all around the world, With a particular high number located in China. This is aligned with the new megatrend Increasing consumer disposable income, which translate to an increasing demand For consumer polymer part consumer polymer products. This is a great opportunity for us to build on a position of strength And grow as this market grows. Simply for us, if there's more PET, we grow as a bromine business. The next market I'd like to talk about is actually the telecom market, but more particularly a 5 gs application within that market.
5 gs is a capacity and communications protocol, which allows for the increased connections of multiple of millions of devices. These devices are focused on virtual reality, autonomous vehicles, and IoT devices. If you think about the opportunity that this presents for bromine, this is a tremendous opportunity for our flame retardant business To provide fire protection for all these devices executing within the 5 gs protocol. In fact, if you look at our growth by product, Albemarle is experiencing surging demand in our products that are associated with the 5 gs communication protocol. The final market I want to discuss today is the EV market.
And this is the new market for us that I've Never discussed with you in relevance to bromine. The EV market gives us a lot of opportunities to play. We have applications in the EV market, which are the same as an industrial combustion engine market, such as displays, wiring harnesses, Sensors and tires. But the EV market also gives us additional applications in which we can participate, such as high voltage wiring, Battery encasing and charging stations. Albemarle's bromine products are absolutely On multiple EV platforms that are in the market today, and we look forward to expanding on that going forward.
If you fundamentally believe in the transition to EVs, you have To be excited about the bromine business going forward for Albemarle. Kit talked about the company strategy. Albemarle's strategy is bromine strategy. We will grow profitably and capitalize on growth in existing, New and expanding applications. We plan to maximize our productivity by introducing 21st century manufacturing principles to reduce costs through asset efficiency and productivity.
We invest with discipline. And for us, that means executing high return, short payback opportunities in areas where we've been in business for over 50 years, with products And processes we've known for 50 years and in communities where we have great relationships. A new piece of our strategy is sustainability. Sustainability is the cornerstone for our strategy As well as our value proposition, not only for our customers, but also for our employees and our investors. And we look forward to making improvements in safety, greenhouse gas reduction, air emission reductions, Water and waste reductions.
Now I'd like to pivot to the Albemarle way of excellence. This is a new operating model that will transform this company and transform the bromine business, and it is absolutely embedded Everything we do in the bromine business. When Kent talks about the pillar of competitive capability of research and technology, for And now we have a new product portfolio that's based on true market research, has very strong IP position, It has a platform approach, and this enables us to roll out multiple new product launches every year. We have over 50 ideas that have been through our funnel, vetted and approved for action. And in the next 5 years, in 2026, 12% of our revenue will come from these new products that we launched in the last 5 years.
I'd like to talk about 2 specific examples. The first is SATEC Solero. That's our next generation flame retardant product. It is really Creating a new large and stable molecule that has favorable mechanical properties for our customers and a superior environmental profile. The next product I'd like to highlight is our Merck Lock product.
And this is used to remediate mercury In contaminated soils and sediments and Superfund sites, typically mercury leaches through the pores in the soil And goes back and forth, and it leaches out and creates a greater area where its contamination expands. Our Bromine molecule through a chemical process actually locks onto the mercury and creates a molecule that's too large to come back through these pores as well as trapping Launches that we have in the company. Our portfolio is diverse and healthy, and these new products will be a foundation of our growth. The next pillar of the Albemarle Way of Excellence that I'd like to cover is around operational discipline. As Kent mentioned, this is fundamental To all the things that we do.
And for us, it's all about using 21st century manufacturing principles, Really focused on maintenance and reliability, which in turn drives OEE, which in turn drives EBITDA For delivery to our bottom line results, we have a strong record of delivering on capital projects in bromine. We'd like to do these projects, and I like to think that we do them very well. I'll give you two examples of just those that we delivered this year That are adding to the growth of this business. The first is our new well in Magnolia. Right after the approval of the equity raise earlier this year, Our board in Kent and Scott authorized us to drill a new well in Magnolia.
This well was delivered on budget and started up early in July. Because of our intimate knowledge of our brine resources in Magnolia and knowing where and how to drill, This is the best producing well we've ever had in the history of the company, and it's the highest bromine concentration in our brine field by over 20%. We are absolutely sold out of Tetrabrome from JDC. We've also executed a project there We debottleneck our tetraborm production. And again, this project was completed on budget and started up on time in August of this year.
The result of this project is we have the highest yield and production rates that we've ever had in the history of our Jordan joint venture. We have the capability and we have the commitment to deliver outstanding capital projects, Which is the foundation for our growth over the next 5 years. The last Albemarle Way of Excellence principle I want to highlight It's really around our sustainable approach. As I mentioned before, sustainability is the cornerstone Of our strategy and value proposition. And by executing some of the projects you see on the right hand side, in Jordan Bromine Company, We will reduce our water usage by 41%, our greenhouse gas emissions by 14%, And our waste by 59%.
In Magnolia, we will reduce our water usage by 20% and our greenhouse gases by 30%. These are material reduction targets that we will deliver by 2025. Finally, I'd like to move to our outlook. When we look at our revenue, we expect to grow from our current base of $1,000,000,000 to 1 From the 32% to 33% we have today to 32% to 36% over the next 5 years. We will execute against 3 brownfield projects in Magnolia over this timeframe to deliver this revenue growth.
And we will also be implementing 21st century manufacturing principles to drive the margin expansion. We expect to deliver strong financial for the company moving forward. So in conclusion, I'd like to leave you with a few points. The first, Bromine is a global market leader with access to world class resources. We are a growth business, And we have upside to generate attractive returns.
Our markets are exciting, And we have the ability to grow in new applications in new areas as well as execute low capital intensity projects on time And on budget to feed this growth. We have a deep technical understanding of our products and are able to use this understanding to deliver new that again add fuel to our growth. And finally, we create value added solutions that help our customers be the absolute best they could be In their business. So thank you for your time this morning, and I'd like the translation to Raphael Crawford.
Alba Marl is an industry leader of catalyst solutions. We drive innovation and deliver value to Our customers through FCC Catalysts, Polymer Catalyst Solutions and Clean Fuels Technologies. Our industry knowledge and deep application experience positions us as a valuable partner for customers in the refining and petrochemical industries. Our customers are doing important work, Like shaping the future by finding better ways to supply clean fuel and other usable oil derived products to a growing global economy. At Albemarle, we offer a diverse portfolio of refining catalysts.
We provide flexible, performance based solutions To help customers power the potential of their refinery, we are committed to making the world safe and sustainable to create a better tomorrow. Be a
So I'd like to turn to what underpins our confidence in the Catalyst business. Fundamentally, we are a strong business with many growth opportunities. We have a diverse technology portfolio and Strong customer intimacy. It's that customer intimacy and value creation, which is really core to what we do. Within the Catalyst business, we have a network of global assets, a direct sales force in emerging markets, and we have strategic joint ventures, Which give us global reach to all the refiners around the world.
I'd like to highlight one of those joint ventures right now. That's FCC S. A. That's our Brazilian joint venture with Petrobras. That joint venture for FCC Catalysts and Additives doesn't only give us access to South America and Brazil for sales and production of refining catalysts, It also serves as a global sourcing point that helps Albemarle extend its reach around the world.
And I do want to take this moment. I want to pause for just a moment. And I would like to congratulate the FCCSA team for their safety record. Like the In 54 days without a recordable incident, September 16th will be exactly 4 years. So I think that team is doing a great job, especially And safety.
So to that team, Also within our core competencies is really our product Application expertise, that's something that is core to what we do and creates value for our customers. And I think what's really exciting, so what we're going to talk to you about today Is how we're going to leverage our core competencies into new geographies, new applications and in alignment with renewables markets. So with that, let me tell you about how we see catalysts as a leader in refining chemicals, first, it's a high quality business. I mean, the scale is very meaningful. We have 3 large scale assets, which service And we have seen an acute impact from the pandemic.
But what I'm very proud of is how the Catalyst team has stuck with it, Focused on reliability, safety, operability and never lost sight of what's really important and that's We expect to continue to see sequential recovery in this business. We'll see it in FCC. The FCC business We'll grow as fuel demand increases as well as in the production of light olefins. Light olefins production has held up very well through the pandemic and will continue to grow at The CFT business, which we also call hydroprocessing is expected to continue to recover through 2022 through 2024 Consumer purchases, a growing middle class, electronics and consumption of plastics. So let's look back At 20 19 is in the expectations we set then and how we're progressing.
We're very pleased with our overall progress Given the challenging macroeconomic conditions we faced, we have seen an unprecedented impact from the pandemic And its impact on fuel demand and on low oil prices. But through all of this, we've delivered on low cost manufacturing, Innovation and building on our customer relationships. We've taken the necessary actions as it relates to cost, Asset decisions and innovation to continue to perform during the storm. And as I said before, we're poised for recovery. As the market recovers, we'll recover and we see that as one pillar of our growth.
And additionally, we're focused on new opportunities We continue to grow this business beyond our core markets. We expect margins to recover to the mid-twenty percent EBITDA margins. And while the PCS business was a business we were considering for strategic alternatives at Investor Day in 2019, It continues to perform above expectations. So now let me turn to some descriptions of our 3 businesses. And I'm going to the core function of refineries around the world.
I want to be clear, this is a recurring revenue business and why that's important is we'll talk about CFT on a To tailor their yields and their product slate as time goes on and almost do that on a daily basis if need be. Our particular strengths in this market for FCC are in bottoms cracking. That's really the heavier feed going into an FCC unit as well as in Olefins output. Olefins whether it be propylene or butylene are come from an FCC unit. C3 or propylene is used in durable plastics, and C4s are often used to produce alkylate.
Alkylate is a blending component for Octane enhancing in gasoline. As I said before, the olefin segment through the pandemic and now Continues to perform very well given the macroeconomic trends that drive that. Overall for this business as well as what we'll talk about in CFT, the key drivers are around transportation fuel and petrochemical demand. We see the largest growth in this business in Southeast Asia and India. And that being said, we're a global business.
All of our customers are important around the world and we continue to serve those customers Now and into the future. And I'm very proud of the team we have. When I reflect back, when I go back to like, oh, well, when I joined this business, everybody told me that catalyst is a different business. It's different than bromine. It's different than lithium.
I see it. Look, I really see it. The team of experts, what they know about how to service our customers and generate value, it's a different kind of an expertise. And while I'm very proud of the team we have, they generate value for our customers and I'm proud to be part of this business. So if I Its removal, namely sulfur from fuels.
We often think of this and we've referred to it on earnings calls in the past as being a lumpy business. Actually, if you have a better word, somebody send me a better word, but we use lumpy because of like the cycle in which rebeds happen within this business. Catalysts in hydroprocessing are sold in discrete loads on a 1 to 4 year cycle. So it's difficult to make comparisons on this business in any one quarter, it's easier to look at it more on an 18 month basis because it takes out the variability often of that customer order timing. As I said, it's used to purify hydroprocessing catalysts are used to purify the streams in a refinery, whether it be the intermediate product, So, the feed going into a hydrocracker or an FCC unit or the outputs being gasoline, diesel, Jet fuel, bunker fuel.
Again, primary drivers are around transportation fuel, but also the added effect of increasing Sulfur specifications around the world, the regulations that drive cleaner transportation fuels. Our technical team was experts in this field. We have high performance catalysts and a key point that I want to emphasize, Which we're going to talk about in more detail is the role that hydroprocessing is going to have in new applications in this business. It plays a critical role in the purification of renewable fuels and plastics recycling, and we're going to cover that In more detail. But before we get there, let's turn to the PCS business.
The PCS business is Comprised of 2 operating divisions, that's the Organometallics business and the Curatives business. Organometallics are used in the manufacturing of polyolefins, Linear alpha olefins as well as electronic materials, whereas curatives are used in construction, furniture and automotive markets. Both of these businesses are growing at above GDP rates. We create value for our customers specifically Through the service that we provide, that service relates to safe use and applications use and the reliability of supply. So now I'd like to highlight some of the macroeconomic trends in this business that underpin our strategy.
So on the top left, You'll see the demand outlook over the next few years for transportation fuels. And over the next decade, We will see some leveling out of overall global demand in transportation fuels. But what I think is exciting and exciting for our business Specifically, is that the growth will continue in India and Southeast Asia as those economies grow, as they Start to import less fuel and produce more of their own fuel, it's a tailwind for our business. Most of the new refineries that are being built Our East of Suez and includes significant petrochemical operations. Those new refineries are highly complex and they fit very well with our strategy On enhancing olefin production as well as our go to market strategy in emerging markets.
And to remind you, that go to market strategy Is to have direct sales and technical service individuals in region that are close to the customer. And I do want to highlight that the new refineries being built as well as many of the existing refineries in India Southeast Asia are just bigger. The average refinery size in India, for example, is 1 third larger than the average in the rest of the world. So you can see the opportunity present for us to continue to strengthen our position in those markets. I also want to highlight on the bottom left the growing demand for propylene.
Propylene demand is largely driven By the end market demand for polypropylene, which is a durable plastic, and that is growing at above GDP rates. And as you look at demand for polyurethanes on the bottom right, You can see that because of growth in construction, automotive and furniture applications, that's also growing And that's a large part of the demand for curatives. Now it's our focus to leverage the strengths that I've talked about To drive sustainable growth. So first, we're definitely looking at how do we expand geographic Presence. So we've covered that talking about Southeast Asia and India.
We also want to grow in new applications like crude to chemicals in renewable space. That's really an exciting place for us. And to be very clear, that's very exciting for our customers. We're all in this together. So how the refining market goes and how we adjust to the changes in refining, that's a driver of our success and we are here for our customers To help them succeed as they're pivoting, we pivot with them.
We're going to continue to maximize on productivity and efficiency. A little bit later, we'll talk about an example of operating efficiency with artificial intelligence. The applications that we have Our sustainable applications. As Kent had mentioned, we're focused on using catalytic processes for higher resource efficiencies, so getting more Out of a barrel of crude oil as well as catalytic processes to purify fuel. But it doesn't stop There because the things that we're working on are also new applications that adjust to a new energy economy, more renewables and recycling.
So in summary, our catalyst strategy is twofold. It's expansion in our core markets and it's building on new platforms In emerging sustainable applications. So when we look at growing our core business, as I mentioned before, Southeast Asia and India are critical, but I do want to talk about the crude to chemicals opportunity. So as you can see on the chart, Wanted to give you a sense of like what's the differential value in chemicals versus fuels from a refinery. And if you go back, I know that everybody on this call, Everybody went back and reread the 2019 Investor Day script before they got to this.
So this isn't new news for you, But I want to let you know that I did that too. And when I went back and looked at the same chart in 2019, the difference is $100 Per met ton of value, which is greater now for chemicals versus fuels than back then. So as much of an opportunity as it was 2 years It's a growing opportunity for refiners today. Again, we're going to align our refining customers in this space, Helping them with new builds, retrofits to be able to capitalize on the chemicals opportunity. To put in context, a traditional refinery today is somewhere between 10% to 12% chemicals output, namely in olefins.
Refineries being built are somewhere in the neighborhood of 25% to 45%, and the aspiration is to get to 70 Percent conversion of crude to chemicals. Albemarle is a leader in this space. In high severity FCC units, Which are really designed for max propylene output. We have the highest demonstrated yields with our customers in generating olefins output. Working on all this requires that we have good partners.
Those partners be technology licensors and that we continue to innovate. And the good news is that the technologies for crude to chemicals are FCC like. So the technical support that we provide, The innovation that we know we can do are very transferable to the opportunity. And so Now let me pivot to biofuels and pyrolysis oils. And I want to give you a glimpse of the things that we're working on.
2 major Markets that are exciting for us are really in renewables, hydrogenated vegetable oil, as well as paralysis. Hydrogenated vegetable oil is going to grow at a 33% CAGR over the next 5 years. The pyrolysis oil represents Opportunity to participate in the purification of a feedstock. For those who aren't familiar with pyrolysis, it's the use of thermal or catalytic Decomposition of waste plastics into a usable oil. It enables Albemarle to participate in the space related to the circularity of waste plastic, which is a growing opportunity for the industry and for our customers.
Our strengths in hydroprocessing directly relate to this. Both of these markets are about using hydroprocessing technology To purify the inputs and outputs in those processes and the demand is certain to grow In the renewable fuel space, they're a key partner for us in the past and one in the future, and we've partnered with them on NextBTL And other technology platforms to enable their success and to participate in that success with them. So While growth is the overall key priority, business priority for the Catalyst GBU, we continue to focus on operational Efficiency. And I want to give you a case study from Bayport. So at the Bayport site, we It's enabled us to automate 6 Sigma.
We're able to focus in on the highest impact data to enable our engineers to make good decisions Real time. And I want to share my own personal experience with this. I am not 1st of all, in fair disclosure, I am not an expert on artificial intelligence. I'm very thankful that people in our company are, but every Monday morning we get on a call. It's actually a tradition that's been in Albemarle, predates me probably by a decade Of getting on the call with our manufacturing sites to talk about the performance of the sites.
And it's amazing how Often now on Monday mornings, we hear of examples at our sites of use of data to run the plants better, and we have a staggering amount of data That we now can distill into the highest impact themes to enable the engineers to run the plants. And while that's really exciting for Catalyst, Just giving you one example, it represents an opportunity for all of Albemarle. Really for the lithium and bromine businesses, which are in a sold out position, you can imagine what the higher uptime, higher efficiency means to a sold out business. So it's a great opportunity that we're learning at Bayport, rolling out through our catalysts and learning to implement throughout the Albemarle network. So now pivoting to sustainability, I want to give you some highlights of what we're working on as it relates to contributing To a more sustainable world through our Catalyst business aligned to Albemarle.
As I mentioned, The products we have, they contribute, the existing portfolio contributes to cleaner fuels and higher resource utilization. The innovations we're working on in pyrolysis, hydrogenated vegetable oil, catalyst circularity and biomass co feed, All of them are new opportunities to be part of the new energy economy. And within our own operations, as Kent mentioned, we're very proud of our plans To get to a 35% reduction in greenhouse gases, carbon intensity by 2,030 and net 0 by 2,050, The teams at Amsterdam, Bayport and Pasadena have spent a tremendous amount of effort and have detailed plans on Which projects to execute to be able to run the plants differently and have identified green sources of energy, which enable us to do that. So now let's turn to our financial outlook. As I mentioned upfront, we see recovery coming.
We see it in our markets as transportation fuel Demand increases. We feel like 2021 is a low point and that we'll be coming off that low point into future years. And as we grow, we'll see that drop So in conclusion, I'm very excited about the future of the Catalyst business. I am proud to be part of this business. We see a strong rebound coming in our core markets.
We're leveraging our strengths into adjacent areas and we're aligning what we do operationally and innovation wise with Albemarle's Sustainability priorities. But above all, we're here for our customers in the petrochemical space, in the refining space. We're here to help them be successful in our existing fuels markets and enable them to have a long future. So with that, I want to thank you for tuning in and I'm going to welcome our panel to the stage.
We do have a number of questions both from the chat and from the phone lines. So we'll start with the chat, just a
So I guess the driver for that, I mean, you heard that in Rafael's presentation, we've been from the strategy, there's a requirement for investment and to shift in The market, so that has us asked the question, is that where Albemarle should be putting our capital today? So we're we're we'll review that. I mean, it is a we wanted to do that strategic plan first to understand the opportunity. And the timing, we're On the strategic review, so the strategy of the business is one thing, but now the strategic review from a portfolio standpoint, we're just getting started. So I'm I'm not ready to give you a timeline for that.
So we'll take the time that is necessary, but it's something that we're focused on and Actively working on.
All right, great. So the next question also from the chat, Mike Harrison at Seaport Research Partners asked, Fornetha, of the key markets that you list on Slide 27, where does Albemarle see the largest Just share of total addressable market and what markets do you see as the most profitable for Albemarle?
Yeah. I think if we think about your question, the opportunities for us are really, really biggest in electronics And the consumer polymers. Those are our traditional markets that we've been in a long time. We just know them best. We have customer relationships there that give Most confident in going forward.
All right, great. One more from Kevin McCarthy at Vertical Research Nurse Kevin asked again regarding bromine, how much capacity have you added? Are you able to run at full rates given various supply chain constraints evident in today's global market. And perhaps you can also address inputs, e. G.
Chlorine, as well as any constraints among customers' abilities to operate that may be referring to Hurricane Ida, which people I've asked about a little bit recently.
Yes, Kevin, we typically don't disclose those capacities, but we are definitely adding volume for the market. I think our plants are ready to go. And what I mean by that, we've done the things we need to do on our side to execute. But what you're saying is absolutely true. True.
Ida has really put a challenge in our supply chain. We had challenges before Ida in BPA and chlorine. And to be quite honest, we're living day to day with force majeure notices from our suppliers, especially those in the region hit by Ida. So We're trying to get and understand exactly how this would impact us. But from a production standpoint, we're ready.
We're ready to go. So as these supply chains get fixed, which we know they will, we'll be ready to deliver that additional capacity to our markets and to our customers.
All right. Thank you. So we'll take one more from the chat and then we'll go to the phone lines. Seth Goldstein at Morningstar asked again, two questions on bromine. What is the total addressable market for Cetec Solaro and will this cannibalize existing products?
Walk us through that scenario.
Yes. The service addressable Which means we have opportunity for Cetex Alero is around $300,000,000 And we don't see this as a cannibalization. The market Growth fundamentally supports both products. And now we have that opportunity to offer multiple products depending on the customer's choices and their end application. That's the ideal scenario we want to be.
So there's definitely room for growth for both products over the next 5 years, and we feel just as good about both of them going forward.
All right. Great. Operator, let's go to the phone lines
The first question comes from Joel Jackson with BMO Capital
Good morning, everyone. On the bromine side, tell me if I'm wrong here. Historically, bromine Has grown kind of a GDP like kind of growth rate. Maybe you have a couple of good years, a couple of bad years. As you're looking at over the next 5 years, if you're talking, You see gromine earnings come to higher levels, got to around these levels.
Now you're projecting like another $100,000,000 step up in Ernie, is there something fundamentally changing in the gomi market despite some of you're talking about some of your coffee specific things that you're looking at, but do you think the GDP light history I mentioned is there? Do you think it's changing going forward? Maybe you can comment on that thing.
Yes. So let me start on I'll start on that and then Netha can give A little more detail, but and we've been talking about this a bit for the last almost year, 6 months, I would say, That the market is changing. I mean, and I think it's really driven by digitization and electrification. I mean, it's across a lot of our markets, but you saw the slides that Neta showed, there are more chips in everything. There's more your doorbell As chips, EVs have more chips than ICEs.
Everything has more electronics in it, and a lot of and that's just a fundamental driver. We were surprised at how well bromine held up during the COVID-nineteen pandemic, but it really it held up well. And since then, we've Seeing that transition, and I think that's something that has been building over time. And it's really come into our visibility in The last, I would say here or just at the end, you know, maybe 6 months ago, we started really forming the view that the market had changed and it just wasn't something unique to the pandemic.
Yeah. Ken, you're absolutely right. And to expand a little deeper, our diversification has been stronger than it's ever been. So we have more opportunities to grow maybe traditionally we had in this market. And then the company's management and leadership has put us in a financial position We can invest capital in this business.
For us, capital equals growth. We've been sold out for a number of years. And now with the capital raise And equity investment and the allocation of 10% of that to the bromine business and the way the company has positioned itself with its capital structure, We have an opportunity to expand and grow with the markets we serve.
If I could follow-up on that. You were this is not a trickling question, but your partners in Jordan seem to be wanting to look at now over next couple of years, trying to quantify the lithium resource in the Dead Sea and the pond there and seeing if you can maybe expand to Is that something you'd be involved in?
So I mean, we have access Thanks to the minerals from the Dead Sea on the Jordan side. So and we could look at that. We've not spent a lot of detail. There's a lot of resources From a lithium standpoint, that'd probably be more attractive than the Dead Sea. But we have rights to that with our agreement with the Jordanian government.
Thank you. The next question comes from John Once again, John Roberts with UBS. Your line is open. The next question comes from Matt Baill With Bank of America.
Hi, thank you. Question for Rafael. You talked a bit
About expansion in Southeast Asia and India, and this maybe goes hand in hand with some of the investment With the comments made earlier by Ken, but would you need to expand footprint and capacity in the region? What kind of capital outlay
Matt, thanks for the question. I think over the next 5 years, you won't see a Demand for capital outliers for expansion from our business in Southeast Asia India, but when we get to the point of needing expansion, and I would say likely for anybody doing an expansion, that's the Target market for adding capacity. Right now, we're fortunate that we have the sufficient capacity to serve the market and our key customers. We also have debottlenecking projects for our existing plants to enable greater output, which can help us serve those markets In the near future, but it's certainly a longer term opportunity to put assets on the ground closer to where the
The next question comes from David Begleiter with Deutsche Bank. Thank you.
Good morning. Ken, back The portfolio, what makes bromine core for Albemarle and Catalyst potentially not core? Is it just a matter of how much capital is required For the catalyst business going forward or is it something else behind that potential decision?
Well, I think between bromine Lythkin, there's a lot of similarities. The resource base, you convert that and derivatize it into special products. So there
Those businesses, you know, the digitization and electrification of the economy are square for both of them in that. So I think That's one of the separations as well with Catalyst.
Very good. And now just on the potential margin expansion in your A little more detail on the drivers of that margin expansion in the next few years?
Is that a bromine? You're talking about bromine?
Aprobing, yes. Aprobing, correct.
Aprobing, you want to take that?
Yes, I think it's really a combination of 2 things. The first is we're always Driving operational excellence, as you mentioned, it's part of the Albemarle way of excellence. It's what Kent focused on and it's what we're doing every day. So we think we have a chance to lower our cost as we continue to out into the future, and we think that the market is going to be fundamentally undersupplied, which will allow us to have some pricing opportunities in particular products, in particular
Expansions, that comes at a very nice premium to what we've been doing in the past. And I think that's some of what you're seeing In the margin expansion as well.
Thank you.
Your next question comes from Chris Kapsch with Loop Capital Markets.
Yes. Good morning. Thank you. So question on bromine. First of all, the revised outlook From the 2019 investor event,
on the top one, you
had talked about 2% CAGR. Now you're talking 3.50 basis The anticipated, sounds like more favorable pricing given the constraints of the supply of the industry.
Maybe I can start with that and then Netha can jump in with some details. But as we look at that growth, it is primarily driven by volumetric There's a little bit of price in there, as we see the continued need for bromine in the short But it is primarily a volume story, and one that we'll need to invest in order to get at it. But, Nethin, maybe you can provide some additional Vito?
Yeah. And as we talk about the capacity projects we are going to execute on over the next 5 years, we see opportunity to place that product in multiple markets, Right. So we're really diversified. All of our markets are growing, and we have a great opportunity to place products All of them. And that's also driving the growth that we see coming.
So we're going to have product from the capacity expansion and the markets that get placed, those
Is there another question from the phone line?
Sorry, Rami.
Okay, go ahead.
The next question is From John Roberts with UBS.
Thank you. And sorry for the earlier WR Grace generated primarily financial funds interest when it's in strategic review and very little strategic interest. Is there any Significant differences with your business that you might generate different interest as you go through your strategic review?
Yes. So Randall, I mean, we'll look at that. We think there The strategic as well as interest from financial sponsors, but we've got to go through the process. I can't. I don't want to jump ahead of it and Anticipate what will happen, but I think we'll go through that.
We think there'll be interest from a variety of those, and we think there are a lot of options. We have
Last quarter, I assume Hurricane Ida maybe exacerbated that a little bit, but do you need to do anything longer term to deal with some of the more recent issues you Edward, chlorine?
Yes, I think, and Netha can jump in on this, but I mean, we'll have to look at chlorine. And we've had issues around that. That It is changing, particularly in North America. We've got agreements with kind of the key suppliers and we We've got to think through that. Whether we have to do something from an investment standpoint, I don't know.
We have to look at that. That market has changed quickly and we weren't we didn't see Coming as probably as well as we should have.
The next question comes from Jaspien Tsikalvskiy from JPMorgan.
Hi, good morning. A question for Rafael.
Is the growing demand for electric vehicles something that will impact Diesel fuel demand or gasoline demand for longer periods of time. That said, it doesn't change your lower And you know, at your work for hydrogen and trucks, how does that change the story?
Hey, Jeff, Thanks for the question. I mean, it's certainly the electric vehicle demand, I mean, though it's small today, I mean, it's a growing piece the transportation network, so that will have an impact. Fuel efficiency, probably even more, will have an impact on Overall fuel demand, most of the electrification right now is in light passenger vehicles. So it's probably more on the gasoline side than on the diesel, but I think you'll start to see it in Both places. We would see that there's still while that's happening, there's still Large pieces of the world population that don't have access to an electrical grid that would support that or the disposable income to Have an electric vehicle, so there's certainly going to be growing demand in places in the world for some time for transportation Fuel.
So that's why we see if we do the right things, then we have a good business. So we have to execute well on our strategy in order to do that.
Yes, let me just add. So I think sorry, just I'll add to that. The I mean, the strategy that Rafael laid out Really in response to that transition, right? So we're moving to the east where there's still demand in transportation fuels and then moving toward more renewable So we recognize that electric vehicle will have an impact, but in the long term, in the near term, there's still a growth opportunity. And then new applications for us And opportunities to use kind of the expertise that we have on traditional transportation fuels and apply that to the new ones.
Is there any way to quantify the effects that we can use for?
Well, I Certainly, that's something that can be quantified just based on the estimates on what are the miles driven that will Be in the future, you know, based on those trends and then how much of the fleet will be an electric vehicle and how much of that is, passenger vehicle versus otherwise. It's not a number that I have, like, an exact number for you right now, Jeff, but that's certainly something that we sort of built into our forward looking forecast. When we forecast our business, We look at Eric's forecast for what he's estimating for electric vehicles and what's that balance of electric Coals, other transportation sources, and traditional fuels, and that's what we build into our view. And again, as Kent said,
Great. Thank you very
much. Thanks.
The next question comes from David Begleiter
Thank you. Rafael, on Catalyst, how do you expect the recovery to occur Earnings as well as from a margin recovery, do you expect return to prior margin levels fairly quickly or is it a little bit longer over the 5 year timeframe?
Well, I think we'll get into more of that guidance like when we get closer to next year. I mean, certainly, we see strong sequential recovery, David, in FCC. FCC is very ratable to miles driven and our business is specifically just given our focus on bottoms cracking, We our business recovers like at an accelerated pace. At low levels of recovery, low utilization, we probably feel it more than maybe some of our competitors, But then we really benefited higher utilization. So if utilization continues to increase, which it has been into 2022, you'll see a little bit longer to see it in hydroprocessing, but sequentially, you'll still see improvement.
That concludes the Q and A questions on the phone. Will turn it back to Meredith Sandy.
All right, great. Thank you. We do still have a number of questions on the chat. We'll go back to the chat questions. First Vincent Andrews at Morgan Stanley asked, your bromine growth outlook is much stronger today than it was at the 2019 event.
The growth drivers such as 5 gs or EV are not necessarily new. What are you seeing that's different today versus 2019 that's allowed you to increase your growth
for IG is an element of it, Internet of Things, but it is about electrification everywhere and then the breadth that Netha talked about, the diversification we have in the applications. And it surprised us too. In 'nineteen, we didn't see it that way, and we kind of really picked up on That's too. In 'nineteen, we didn't see it that way, and we kind of really picked up on it out of the pandemic because it didn't drop as much as we'd
anticipated. And it's Just as Kent mentioned, we're learning more. These markets are more mature now than they were in 2019. And our customers are putting more products in there that they're asking for us to have flame retardant solutions around. And then on the last piece, we have capital now to capitalize on that and get an And capture that growth.
So it's a combination really of all those things that make us much more bullish on those markets than we were in 2019.
All right, great. Another question from Laurence Alexander at Jefferies. For bromine, can you sketch the capacity expansion you would need to undertake in terms of size and cost? And I know, Netha, you already said that you're not going to give the exact size, but maybe you can just give us little more color.
Yes. I think, Scott and Kent were very clear when we raised capital that 10% of that will be allocated for bromine. I think that's our plan. We have 3 defined projects, 2 of which have already started, and those are in Magnolia. Again, brownfield projects and places where we've been in business For over 50 years, we're processes we've known for 50 years and the communities that are very supportive of us.
So we feel really good about our execution opportunity around that. And those are that's really where we're putting the capital right away. But we have other capital projects too that will continue to get funded throughout the planning period, And all those will be in the total plan that enables us to grow at the 5% to 6% that we said.
Okay. Let's see. And P. J. Judacar at Citi asked how big is the paralysis opportunity?
What's the market today? What growth do you see? And what's the catalyst used in that process?
Thanks, P. J. We're probably in the last year, Our understanding of paralysis has expanded exponentially, but we're still at the start of building out the portfolio of catalysts that we think we need for that. And so to be clear, PJ, and the there's multiple catalyst applications in pyrolysis. What we're specifically talking about is on hydro processing.
That's like the cleaning up of pyrolysis oil so it can be fed back into making virgin plastics or fed into Refinery is a feedstock, and that's somewhere in the neighborhood of a catalyst opportunity by 2,035. It's somewhere between 200,000,000, dollars 400,000,000 in value of hydroprocessing catalysts. It depends on how It plays out and what technologies are used, but that's what we're looking at. It will build slowly, but as pyrolysis oil use becomes mainstream, and as you know, PJ, That's the key that's the key mode for getting recycling plastic into something usable. Like as that builds steam, as folks need to Purify that to blend it into making new plastic, that demand is going to increase.
So we're excited about the opportunity. And I personally know, like, team is working on it from a technology standpoint, and it fits very well with our expertise in hydroprocessing.
Okay, great. So let's see. The next question, there's one from John Roberts at UBS. Does bromine make it harder to recycle the plastics and textile that they're that bromine is used in.
Hey, John. You know, on the recycling I think we're still learning about the opportunities to do that. I don't think bromine makes it harder. I think there's a lot of things in the plastic in which bromine is just one component. And we all get better at that.
The plastic industry knows that's part of the go forward way, and everyone's looking at opportunities to do that.
Okay. Another one from Laurence Alexander at Jefferies. A question for bromine. What do Albemarle's longer term EV outlook imply for total bromine demand for electrification and charging stations to support that infrastructure? In other words, what could EVs represent as a share of the bromine market, say, in 5 years?
Yeah. I think we're we're learning. Right? For us, this is the new market. Right?
And then we're capitalizing on every learning that Eric's group gets in lithium. We have an opportunity to go back and look at vehicle platforms today and deconstruct them and see which of our products are in there, particularly in high voltage cable. So I think as the planning period goes on, we'll be able to quantify that more. As I mentioned, this is a new market, and it's the first time I ever talked about it to investors. But I think as the time goes on, we'll learn a lot more I provide a lot more clarity about the specific bromine opportunity in EVs.
Okay. Anna Gerken at Davenport and Company asked, with increased recent government regulations in China, What does that change how does that change your forecast for economic growth and or market demand in China over the next few years, I. E, the demand for PET or other products?
Yes. So let me start and we can talk. I'm sure everybody's got a view on the regulation in China as it impacts the
different businesses. But as far as
us doing business there, I mean, we don't But as far as us doing business there, I mean, we don't see it stopping us from doing business there at all. I'm not sure it's changing the demand for the product. So in lithium, as an example, we're probably our biggest opportunity, that As an example, we're probably our biggest opportunity, that is still the largest EV market in the world and big I refer lithium growth in China. So we see opportunities to invest there. And the regulation that we see Have not impacted our view on our ability to invest there or participate in the markets.
So, Nathan, you may want to talk about bromine?
When look and just take China and slice it to a very, very small slice, which is which is bromine. The market opportunity is growing. What's changing with the regulation is where that bromine is going to come from. And maybe it's changing a little bit from a self source market to an import market. We have opportunity to import bromine Into that market to capitalize on that domestic growth.
So that's a little bit of the dynamics of China in our business. But as Ken said, we're continuing to think it's a very positive place to do business, and we'll be right with Albemarle as Albemarle grows in China.
Neff, I think it's fair to say that our customer base continues to be an Asian focused customer base Bromine, particularly with the flame retardants, and the electronics manufacturing that happens in Asia.
Okay. Michael Sison from Wells Fargo asked, bromine is now considered a growth business. Growth was raised or almost doubled. Is there upside to margin in the updated goals? Are there any synergies for selling bromine to EV customers with lithium?
Yes. So again, I'll start, and after you get the real information. But I think we talked about the margin, not to talk about that. So there is margin expansion in there, mainly about kind of scaling and the efficiencies we're driving through manufacturing excellence and productivity improvements. And I don't think we've gotten I mean, there should be synergies as we do this through EVs, but and in the EV market between lithium and bromine, We haven't gotten to that yet.
So we're still pretty early from a bromine standpoint selling into that supply chain, and we sell down Couple of levels below the OEMs traditionally from a bromine standpoint. So we'll but we would look for those synergies and hopefully optimize those Over time, but we really haven't gotten to that yet. Netho?
Yeah. And I think about the bromine industry, just from the history from when I've been here, From a GDP light to a GDP, not GDP plus, and I think we're really good about the guidance that we provided and that there's Best that we can. We were very prideful of our results and proud of our results, and that's just what Albemarle does. We do our best to outperform. We feel very confident as with the guidance that we gave going forward over the next 5 years.
Okay. We'll close with a couple of catalyst questions Christopher Perella from Bloomberg Intelligence asked, what is the sustainable capital spending for the Catalyst business over the next 5 years?
Christopher, thanks for your question. The business does need capital. It certainly needs somewhere in the 3% to 5% per year Just maintenance capital to make sure we maintain the safety and operability of the sites. It's hard to pinpoint some investment in capacity to be able to service, the needs of growing olefins demand. That's a specific type of FCC catalyst.
There's an investment that we're anticipating in additional capacity for those catalysts. There's investments in It certainly doesn't look like as much as what the lithium business needs or even the bromine business needs in order to be able to meet those demands in our business. So it's variable, but all the projects that we look at have high returns and would justify the investment.
All right, great. I think the final question of this session will be from Emily Ketch from Goldman Sachs. Can you talk through the main drivers of how Albemarle plans to return to margins in its catalyst business in the mid-20s.
Yes. Thanks, Emily. I really think it's about drop through, meaning like as volume recovers, we have fixed costs at our assets and that leverage Creates higher EBITDA margins. So as we get incremental business, of course, our contribution margins don't look like Netha and But they're very good. It's still a very profitable business with good margins.
As you get higher volumes, higher utilization at the plant drops through And before.
All right, great. Well, that concludes our first Q and A session of the day. Now we're going to take probably about a 15 minute break and then we'll come back and Eric Norris will tell us more about the lithium business. Thanks so much.
For 1000 of years, The inhabitants and visitors to the Salar de Atacama in Chile have seen the sunrise, witnessing the beauty of this natural landscape in its form. That history continues today and reminds us of the importance of sustainability and social value and provides the promise of a better future. This is where much of the lithium that powers the world is found. We are Albemarle Corporation, a global driven by innovation that is committed to the health of the environment. As one of the largest lithium producers in the world, we have world class lithium resources in Australia, Argentina, the United States, and Chile.
In order to preserve the environment, the world needs to reduce its greenhouse gas emissions. Advancing clean transportation is critical to this goal, and lithium is one of the most important resources to achieve this goal. In the Salar de Atacama, we use one of nature's cleanest sources of energy, the sun, to extract a key element that day offers humanity a better quality of life and a more sustainable future. Lithium is essential for the technological revolution that is now underway, especially for electromobility. Europe, China, and the United States have each stated they are determined to boost fleets of electric vehicles as part of their effort to reduce the impacts of climate change.
One of our key areas of focus at Albemarle is to find more efficient systems that can increase our lithium production in a sustainable way because how we produce lithium is as important as how much we produce. At the Salerda Tacoma, we do not use fresh water in the extraction of lithium from brine, a liquid rich in minerals that has no known alternative use. The brine has a lithium concentration of 0.2%, which we are able to naturally concentrate using solar evaporation to 6%. This is then transported to our La Negra conversion plant in Antofagasta, Chile, where we have developed unique processes to produce battery create lithium carbonate and lithium chloride. In 2022, we are scheduled to start up a new plant at La Negra, Which will use a thermo evaporator that will enable us to significantly reduce the amount of fresh water consumed in the conversion process.
Being sustainable is not an option. It is an obligation. We have the responsibility to protect the environment, and our commitment to this is demonstrated in how we use water in our business ethics, and especially in our relationship with the indigenous peoples of the Salar de Tacama to whom we contribute 3.5% of annual sales in Chile. These funds are used by the community with Self determination in their development projects. But it is not enough just to say what we are able to do.
We must prove it and not just to ourselves. For that, there are international standards. 1 of the most demanding is IRMA, the Initiative For Responsible Mining Assurance, which recognizes Aldemarle on the organization's responsible mining map as the 1st lithium company in the world to complete the organization's self assessment process. In addition, Albemarle adheres to the United Nations Global Compact, the largest corporate sustainability initiative in the world. It encompasses 12,000 companies and other interested parties across a 155 countries.
Our commitment It's demonstrated in our goals of net zero carbon emissions by 2,050, growing our lithium business in a carbon intensity neutral manner through 2,030, And reducing freshwater use by 25% by 2030 in areas of water risk. Today, we can proudly say that at Albemarle, we sustainably produce lithium for the world.
Good morning, and welcome back from the break. I'm Eric Norris, President of Albemarle Lithium. I've been with Albemarle since 2018, And I've been in the specialty chemicals industry for almost 30 years now. The second half of today will focus largely on the lithium business, And I look forward to sharing what is really an exciting time in the industry and even more exciting time at Albemarle As we enable the EV revolution and as I talk about that strategy today, I'm going to hit several key points. 1, the strength of the franchise we have in the lithium space.
2, the acceleration of growth and the increasing and stronger outlook now that we have for our business. And finally, I'm going to get into the details of our strategy of how we're going to sustain a leadership position in this market while increasing share and driving significant Shareholder value. I have never been more confident And the growth prospects for this business. Today, you'll hear us use a word you've already heard it a couple of times, acceleration, Probably a very appropriate word for the end markets we serve. And what we're talking about is an acceleration of our Strategy to meet increasing needs in the EV space.
And we do this from a position of strength. We're diversified across geographies, products and resources, low cost, world class resources. We're playing in a market whose growth is now stronger than we thought just a few years ago. Right now, we see in 2025, for instance, 1,140,000 metric tons on a lithium carbonate equivalent basis, A 30% growth from where we stand today based on increasing EV sales. And we have a proven track record that we have honed In building world class, high quality battery grade lithium plants, and we're taking that forward in this strategy From a base of 175,000 metric tons next year, we plan to more than double our capacity over the planned period that I'm going to be talking about today Through 2026.
And importantly, we're doing that in partnership with our customers, driving quality, Technology and sustainability and helping them set the standard for what's to come and enabling the sustainability ambitions Of these customers and of indeed the world itself. We are well positioned to accelerate growth and nearly triple our sales Over the next 5 years, as a leader in this space, we stand on a foundation of high quality, Differentiation and low cost in a market with attractive characteristics and a favorable business environment. The starting position is depicted on this slide, dollars 1,200,000,000 in sales and 36 percent EBITDA margin. That is comprised of a full range of products that are sold everywhere from lithium salts, high grade and industrial grade quality salts all the way through Ties, organometallic materials served in specialty chemical markets, vertically integrated, as I indicated earlier, for all of our production back to low cost Resources that drives a low cost position and importantly, developing industry leading standards for sustainability, which our customers Are pushing us towards, and we are well positioned to lead in. And Ellen Lenny Casano later will talk in detail about that with you.
We're playing in an environment that is very favorable. I don't think I have to recount what's going on, but let me just say that It's a remarkable environment in which every major region in the world is driving incentives towards EVs From consumer incentives to incentives on the supply side to incentivize building capacity for electric vehicles. And if you look at the pie chart on this page, you can see today our starting position is 60% of sales into energy storage, Things like electric vehicles, grid storage, consumer electronics, that will be over 85% through this strategy that we're executing By 2026, a significant transformation of our franchise. A lot Has changed since 2019, a mere 2 years ago when we were talking with you last, when I spoke about our targets. And despite the challenges of the pandemic, and there were some indeed in the recent past, I am proud to say That the execution of our strategy remains on track.
Let me break it down. Firstly, We are executing on our capacity growth. We will bring, as we said, 175,000 metric tons of capacity online for sale next year, A month or 2 late, several months late, based upon difficulties from the pandemic, particularly in Western Australia. More importantly, our Path forward from there is a more than doubling versus what we told you last in 2019 of that capacity by mid decade. Secondly, market is the outlook is better than it was in 2019.
Technological improvements in the battery, Investments by EV Producers, incentives from governments, consumer preferences broadly are all Stimulating a stronger growth environment for us. And while the pandemic did set us back In the last year or 2, our growth actually our outlook actually looks better than it ever has, and it's stronger Than we thought a mere 2 years ago, as I'll describe through this presentation. While energy storage is at the core of our strategy, we participate in a broader addressable market as depicted here. Certainly, energy storage is the biggest and the fastest growing with expected growth rates of 35% to 40% over this period. We gather this data from a variety of sources and data analytics techniques that I'll describe later when we get into the details of that demand.
Other important markets though for us are the industrial markets, markets where we for decades have served the specialty glass, ceramics, lubricants Participants and importantly, a third market we play in, a specialty market, a niche market where we have highly derivatized products, A very strong competitive advantage to play in with differentiation in attractive GDP plus growth markets In the life sciences space, our aim, sustain leadership across all of these markets. That's going to take a significant investment in driving our capabilities, and it's going to be based upon our strengths historically and going forward of quality, low cost And technical differentiation. At the heart of this is a integrated Conversion network, as you see depicted on this slide. From the lowest cost resources noted on the left, All the way through the production of high quality lithium chemicals on the right. 2 key streams For you to appreciate that we are driving our strategy from 1 largely spodumene supply chain, hard rock supply chain, Largely enabling the significant growth we see in hydroxide.
We are operating at a low cost resources in Australia and driving that into plants and production in China currently and soon in Australia. The second stream is the world's lowest cost resource, the Salar de Atacama, Leveraging that to produce carbonate in Chile and what is the low cost operation, We do the same at a smaller scale, giving us a domestic presence, which we are going to be increasing in Silver Peak, Nevada. And we can take that into the market for carbonate, and that's a very big market for us, has been, or we can take it process it further through hydroxide As we do in at least one plant today at Kings Mountain here in North Carolina, our conversion network provides Low cost leveraging world class resources. And I'm excited. I'm excited by the scale and global diversity that we uniquely are able to bring to our customers who are around the world.
We operate in multiple resource sites as I've described. We're operator of 2 sites in China, making us one of the largest producers in China today. We're the only producer in the EU operating out of Germany now for over 100 years, and we're the only multi site operator In the U. S. Integrated to the resource, and we've done that since the 1950s.
Full vertical integration, 3 resources, Four additional possible resources I'll talk about that for the future that we look to develop, operating in 6 conversion sites and 3 specialty chemical plants positioned Helps our customers sleep well at night gives them peace of mind in what is a rapidly growing market. And that growth, That growth is even stronger than we had anticipated just 2 years ago, driven by EV penetration and driven by light duty vehicles in the light duty vehicle fleet And increasing battery size. As a reminder, we have built a world class data We leverage hundreds of data sources, our own unique insights. We employ modern techniques, sophistication around Monte Carlo simulation, historical training models and statistical modeling to come up with this model. And what it's showing us today, and we've been, I would have to say very consistent in leading the way and showing where this growth is coming from is that demand is even stronger than we thought.
From a base of 300,000 metric tons in 2020, a growth to 1,140,000 by 2025 and we're introducing here today a growth of 2,500,000 metric tons by 2,030. And the driver of all this, the biggest driver on the left hand panel of this chart, the blue bar, EV battery grade lithium. And what's underneath that is the accelerating shift to higher energy density towards larger battery sizes And fully a third as depicted in the middle of all vehicles produced in the world by 2,030 or more being electric vehicles. What's important also to understand is energy density is what unlocks this. So we see growth for both carbonate and hydroxide, But the growth for hydroxide over this period, we expect to be stronger.
And what's exciting about it all in the end when you put it together It's not only is this a 5 year growth story, it is a at least a decade or more story in the making from a growth standpoint. Strong growth Clearly, through the end as far as we can see through 2,030. As a consequence, there's going to be a great demand on the supply side. And we expect more supply needed in this market. We are accelerating our strategy to add our own capacity to this market.
And we in fact inspect that hydroxide could very well be at a deficit, a structural deficit. Let's break these cost curves down between carbonate and hydroxide, some key differences. 1st, on carbonate, It's we expect that capacity to nearly double over this period of time. It is largely from low cost brine resources as depicted here. And as a consequence, the marginal cost that comes in outside of that is at a significantly higher cost, but very steep cost curve in carbonate.
Contrasting that to hydroxide, this is a capacity because the demand I just described, it's going to need to quadruple over this period of time. And even at that, If you look at the demand curves with the sensitivities we have on this chart, we'll be short of what is needed as best we can see it here today with what we know. And Overall hydroxide comes at a higher cost profile. It's processed more often from rock and when it's processed from brine, it requires 2 steps that adds cost to it, Albemarle's position, as Kent earlier said, at the left hand side of the cost curve, and we have operational flexibility to operate from different resources and make different products From either resource sourcing, we can make carbonate or hydroxide. We choose to set up as we do to optimize our cost structure.
And then finally, I referenced the demand curves. You can see the tightness in the market. It's tight for both product lines, but tighter And indeed short for hydroxide. And as a result, we expect the need for more capacity to come into this market than has been announced to date. We are going to accelerate our strategy to sustain our share of that growth.
And we expect that on the hydroxide Side, some carbonate may need to be transitioned over to support the hydroxide side. So We come at this with strong margins, a low cost position and an ability to really accelerate our growth strategy. And so let's talk about that strategy. A similar format to how everybody else before me, Kent, Netha and Rafael, have described their strategy. Our strategy is all about growth With a strong wing around driving productivity, innovation and most importantly, sustainability.
Near term, It's about expanding conversion capacity that we can fully leverage and utilize the resource base we have. We're also working with our customers to innovate And to drive sustainability to meet their ambitions and needs. Ellen will talk more about that in a moment, but one of the important programs we're looking at As a future resource source for us is recycling. We're, as Ken talked about, implementing the Albemarle Way of Excellence. For us, That's about manufacturing excellence.
I'll give you a case study in a bit about how we're driving that. And we're also looking at commercial excellence, how we drive greater partnership With our customers through our contracting and the customer experience we create, and I'll talk about that as well. M and A, M and A is important for the long haul. It's important to either accelerate our strategy and pick up and being able to acquire conversion assets near term To give us future resources as we exhaust the very strong set of resources we have over the coming decade, what comes next from a resource standpoint And technology partnerships, looking for partnerships that can help accelerate our customers' value proposition. Sustainability Is the bottom line.
It's foundational. And as I said, we'll talk more about what we're doing to drive a more sustainable product and supply chain for our customers. This strategy all starts, the whole business starts at the resource level. And while there are a number of large scale resources, small and large depicted on this slide, few are of the size and Gale to support the rapid growth from a low cost position that Albemarle has. Albemarle sits on 3 of the world's best resources.
And for the better part of the last decade, we continue to look at what else we should other resources we should add to our portfolio. We've studied the landscape. We've assessed the key criteria of what makes a resource successful. And this slide, this graph depicts 2 of the three characteristics we think is important. The 1, scale, the x axis.
That's the size of the resources support, A continuous investment stream such as the one we are pursuing in our conversion strategy. The vertical, the y axis is the concentration. The higher up that curve, that line you are, the richer the source of lithium and the less expense and the better sustainability Profile generally because you don't have to deploy as much energy or water or byproduct to get to that product. You can see, as you look at Albemarle's resources noted in gold, we tend to be on the top right corner. That is what I mean by world class resources.
We have access to those. Another characteristic, though, is extremely important in this puzzle of what makes a resource successful, and it's the chemistry, the process know how to take that Resource to a high quality product. And that's know how that Albemarle has built over decades in this period of time. And as we look at that, we look at building that conversion capacity from that 175,000 met tons I talked about early next year, We actually have 2x the available resource in this resource base to keep expanding. And that is what's depicted on the right hand side of this chart is that substantial resource base that we can leverage.
On the left and a key part of the narrative is how we have done that. A proven track record of adding capacity through acquisitions, through Organic activities to debottleneck through capacity additions. What's exciting about this is that if you look here, Fully half of what's coming in this trajectory comes online in the next 6 plus months. The expansion At La Negra 34 for carbonate and the greenfield plant, Kemerton 12 for lithium hydroxide through our marble joint venture. We have a proven track record to build capacity, which I'll talk a bit more about here in a moment, And Jaak will talk a bit more and a lot more detail later about how we're executing that progressively.
I consider our capability we're building One of the best in the world at doing this today. All of this sets the stage for what's to come. And what's to come is exciting and depicted here, We're investing to align our capacity with that strong demand I was telling you about. Few in the industry Our planning to build the capacity at the scope, scale and diversity that Albemarle is. And our aim is to accelerate that investment in order to keep pace with our customers' needs.
There are 2 key waves that are here as we Leverage off of this base of 175,000 metric tons. Both of these waves have 2 important characteristics. They're geographically diverse, helping us to enable localization over time of our supply chain as our customers Start to move increasingly around the world from where they're generally based today, which is in Asia. And a repeat Skill that I talked about and Jackel described of being able to drive down the capital intensity over time. Wave 3, the first step, is a very good example of this.
At the start of wave 3, where we are today is doubling our capacity in Silver Peak. That's giving us a first step towards increased localization in North America. However, most of wave 3 is about a single plant design repeated, perfected and accelerated. What we're talking about doing is building repeat spodumene to hydroxide plants in Asia using Australian resources. Both plants will be in China and in Australia, leveraging the know how in that region to build 150,000 tons of capacity Over a 3 to 5 year period at $1,500,000,000 Wave 4 is the next step and it's different.
Wake 4 is more diverse. In Wake 4, we anticipate needing to look to other sources to get hydroxide. We may need to build plants that are carbonate hydroxide. We have the capability today. We do it in Kings Mountain.
We could increase that in North America. We could bring that to Europe. That's a localization strategy. We're also talking about completing Kemerton 5. That will make 125,000 metric tons on a single site.
That's almost a half of last year's demand. That is a massive site, which will have incredible scale and be world class in all kinds of characteristics, including sustainability, Which Alan will get into in a moment. And then finally, we can continue to localize our production in North America by looking at North American resources, such as Kings Mountain and Magnolia. As we refine the execution capabilities, we're also looking at our operating capabilities. We're honing our playbook so that we can repeatedly, Consistently, effectively, and efficiently bring on plants one after the next.
And I want to talk a little bit about that as a case study. It's part of the operational discipline that Ken talked about in the Albemarle way of excellence. You know, when I came to Albemarle 3 years ago, I felt we had a huge opportunity to build a manufacturing excellence competency. And what that would mean In practice, it is improved safety, lower costs, greater yields, higher quality, greater reliability out of our production. And we today have become very skilled at that.
It's becoming a differentiator for us and it's a journey still. We have a ways to go To be the best in the marketplace and we expect to really have some exciting programs to deploy. So let me describe that here in this case study. First, we're building a manufacturing excellence management system, that's key pillar. 2nd, we're building a predictive maintenance capability.
And third, A continuous improvement mindset. We started a number of years ago by building a team from throughout Albemarle. Albemarle had a lot World class mania has a lot of world class manufacturing excellence in our other GBUs. You've heard, Netha and Rafael talk about that. We pulled that into this GBU to build that skill.
Then we went out and hired some of the best people in the industry in terms of their knowledge Of Lean 6 Sigma Manufacturing. And finally, we have brought in external consultants to accelerate programs on our largest plants from La Negra to Langelsheim to the Salar, we're going to be doing Xinyu next year and building Kemerton from the ground up with this capability. And the results to date Are impressive. We have cut our injury rate by 75% since 2018. We have taken operating rates At legacy units and push them to levels that are 10% to 15% higher and are top of class in the lithium industry in terms of their capabilities And cost profile.
And going forward, we're talking about taking $70,000,000 or greater in cost 25,000 metric tons, that's real value to our customers. What's also important to this case study is what we do from a technology standpoint. Extraction and process technology are essential to drive productivity, reliability and quality. I look to extraction technology to increase the quality of our product, to improve our sustainability And to make less economic resources more competitive. This is our process map of what we're up to, And I appreciate it's complex.
So let me just try to break it down. Again, move left to right. From left, mine source of spodumene, brine or clay Within the industry, Albemarle is denoted in gold, but these are what's in blue here is what's commercial. And as you move from left to right, you move from concentration to conversion to lithium hydroxide in this particular in this particular example. So let me draw your attention away from what's commercial, away from what Albemarle is doing to what's in gray here.
This is where we're investing in know how. One example, in spodumene, we're looking at crystallization technologies. The crystal structure of high quality battery grade product is essential to higher energy density in batteries. We're investing in this to drive higher quality for our customers And improving that continuously for them. A second example, also in the spodumene supply chain across the top, is leaching.
We're looking at alternative leaching chemistries. Why? In order to drive better cost and better sustainability of the byproducts that come from making lithium. A third example on this page is important. Now looking at brine, we are looking at direct lithium extraction technologies to improve the cost competitiveness Of less economic resources, resources where on that y axis, they weren't as high in the lithium concentration.
Magnolia is an example of that. We are looking to develop technology to improve the cost effectiveness and sustainability of processing lithium from Magnolia. Together, All of this helps us drive, as I said a moment ago, quality, sustainability and cost effectiveness. And while technology is important to how we manufacture, it's also important to our customers. We are developing novel materials To enable next generation batteries.
And this slide here depicts that. And everywhere you see an A is where there's an opportunity or a product for Albemarle today. Let me digress for just a moment. From my experience in specialty chemicals, I find it very valuable. And I am pushing Our organization to know our how our product is used in our customers' application as well as or better Than the customer does themselves.
That's a very powerful value creation mechanism in specialty chemicals. It's something that Rafael talked about as a skill his business, what makes our Catalyst business special, for us, it's something about how we're going to develop to be an innovator, To be differentiated and to enable the ambitions of our customers. We are building this capability today At Albemarle, we have been for the past number of years recruiting world class talent in technology. We just earlier this year completed a battery metals Battery Materials, both metal and materials innovation center in Kings Mountain, and we are now adding People now, world class talent around the world to partner with and develop new products with our customers. And this is that field that you see In this chart here, this is the field development.
There's a lot here, but let me break it down. Again, you move from left to right. Left is the legacy technologies. Right is the next frontier. The middle is where is state of the art today, what's being used in technology today.
What you generally see as you move from left to right is Higher energy density and lower cost per kilowatt hour. What you also see is decreasing use of cobalt, Increasing use of nickel in terms of the metal oxides used in the cathode and the shift from more carbonate use to increased Hydroxide use is giving us that higher growth profile. What you finally, what you see is an opportunity for product development. As you look particularly to the far right to the next frontier, You will see multiple lithium opportunities. Opportunities for lithium now in the anode as well as in the cathode as well as in the separator, The amount of lithium in these cells would increase, the amount of energy density would increase and the cost per kilowatt hour therefore would drop.
This is exciting stuff that will really enable the EV revolution and it's very important to our customers. And so speaking about our customers, let's talk about the approach we want to take. We are taking A very in some regards, similar approaches we have. Our long term agreements will continue to partner with our customers in that way. But the specific approach underneath that is changing.
We are changing to be more segmented, to be more differentiated, to enable What Kent described as that customer experience in a journey to excellence. Let me say let's just get into details of what's not going to change. We're going to continue to have a majority of our business under contract, 70% or more. We are going to have 3 to 4 years in average duration Generally, and there'll be a staggered expiration. But the approach is going to be different.
We're evolving that approach. That's because our customers, among other reasons, there are a lot of reasons for doing this, but among others, our customers are changing. And that's depicted at the bottom of this slide. They're becoming more global. They are becoming more varied in the supply chain.
They have different needs. And among them, yes, they will continue to be price buyers. And so some component of this approach is going to be price driven, purely price driven, where we're exposed to what's going on in the market And our mix will move as a result of that. But that'll be a minority of our portfolio. Because of the needs I just described and the trends we see with our Around sustainability, around product needs, around innovation, around quality of product, Security of supply to underwrite the investments they're making.
We are seeing more customers who want to do different kinds of price of contract arrangements. Some may be a high fixed price, others may be a fixed price with a movement around the collar. We are developing that portfolio. One thing I can tell you As we take this approach forward and look into next year, considering particularly the expiration And again, certainly, the strength of the market, the market fundamentals are part of that scenario and what's driving that as well. Our segmented approach, what it's aiming to do is to preserve the opportunity for upside while providing strong minimal returns to keep investing And grow aggressively in this market.
I'm excited about the outlook this all affords for us and as described on this page, The value creation we're going to bring. We've talked about an accelerating market. We've talked about our efforts to move our strategy forward. And what that means It is 24% to 28% growth over this period of time and an EBITDA margin into the mid-40s based upon the scale, cost reduction, Differentiation and customer contracts we have in our business, an exciting growth profile that I hope you share with me. And just to recap, We are enabling an EV revolution, accelerating our strategy to invest in capacity, while driving quality and innovation And helping our customers to see their achieve their sustainability ambitions.
We have a diversified and broad range of products. We're playing in this accelerating market that's an exciting place to be. We've got 3 of the world class resources required to drive this revolution And a proven track record to build capacity to support them. Most importantly, as Rafael said, the customer. In the end, it's about serving the customer with quality, Innovation and helping them achieve sustainability.
This is a business about a sustainability value proposition for the consumer in the end for our customers, and we're here to help enable that. And so I'm very pleased and excited next to introduce Ellen Eni Fasano, who heads up our sustainability efforts with a partner of mine on the leadership team And turn it over to her for a discussion of that topic. Thank you.
Great. Thank you so much, Eric. My name is Ellen Lenny Pisano. I'm the Vice President of Lithium Sustainability, and I've been with Almirall for 3 years. Prior to that, I was a U.
S. Diplomat for 26 years. And during my service, I lived overseas for almost 2 decades, It really is an honor for me to be able to present the lithium GBU strategy, their achievements and our future Plans. And I'm doing this in representation not only of the lithium GBU, but the entire company. We see an overwhelming support and commitment within the company to drive sustainability.
And it really begins, Of course, at the corporate level with Meredith Bandy, who leads the sustainability strategy. And in the lithium GBU, everyone is proudly Aligned with the concept that how we produce lithium is as important as how much lithium we produce. So we are focusing on 3 principal pillars regarding how we produce lithium. 1st, We have committed to growing our lithium business in a carbon intensity neutral manner through 2,030. Now while this may not seem like an ambitious goal, it is.
Without this goal, our carbon Footprint would actually increase during this time frame due to our product mix. So to meet this goal, we will We have also committed to responsible water stewardship by reducing our fresh water intensity by 25% in Chile. Today, we are the only lithium conversion plant that recycles water, and we're doing that in Chile in the desert. This significant Investment will allow us to reduce our fresh water intensity by approximately 30%. So we're at our Well, with this just this innovation, but yet our team wants to do even more.
And so there's a team today in Chile studying Sustainability by contributing to the well-being of the communities in which we operate. And I will talk about that in a few minutes. So you can see that in Albemarle, we believe sustainability is not an option. It is an obligation. So let's do a further deep dive on how we manage our carbon footprint and are reducing our greenhouse gas emissions.
Our brine resource extraction technology utilizes the power of the sun to concentrate the brine. And today, this is the Most cost effective and most sustainable way to produce lithium. We're quickly moving to greening our energy mix as well. Our plants in China use natural gas rather than coal, which truly sets us apart from our competitors there. And we have ambitious plans to convert our plants in Australia and Chile to renewable energy.
Finally, we are integrating electric vehicles into our operations, not only to reduce our carbon footprint, But also to showcase how our lithium products enable the EV revolution. So let's turn to some specific Examples of how we sustainably produce lithium by taking a look at how we produce lithium in the Salar de Atacama. First, let's look at the facts. We have less than 1% of the fresh water rights in the Salar Basin, And we only use a fraction of those rights because our production processes do not require water. Our brine resource is 10 times Saltier than seawater, which means that it cannot be used for human consumption or for agricultural consumption.
So if you turn to the drawing of the Salar on the right hand side of the page, you'll see that our brine is located at the bottom of a closed basin. The fresh water enters from the mountains. Our brine extraction does not affect the upstream Groundwater for two reasons. The first is because the saline interface acts as a barrier between the groundwater So let's think about oil and water in a glass. You've seen it before.
You know that the oil and the water don't mix because water is denser than oil. Well, that is the exact same We developed a model of the Salar that is recognized by Chilean authorities as one of the most hydrogelogical models of the Salar. And yet another thing that makes our natural resource stewardship unique is our Voluntary agreement with the 18 indigenous communities who've lived around the Salar for more than 12,000 3 quarters of this agreement outlines how we will work together to be good stewards of the environmental Every month, we jointly monitor more than 150 points in the Salar to understand the impact of our brine pumping to the ecosystem. And we recalibrate our model with this data To understand the evolution of the resources as well as our potential impact to the surrounding environment. This data, which we share with the authorities and I'd like you to take a look at the graph on the right, and I'd like to explain why this this point is very critical.
It represents points that is closest to the to the community that's closest to our site. We're talking about over 15 miles to give you a sense of scale of the salar. So, what you see in this graph is that the green dots represent the monitoring results, and the dotted orange line indicates And you can see that the orange line is actually moving up. And so that means that the fresh water level is rising in that point. Also, our measurements of a lagoon close to that same site give us the same results.
So the size of the lagoon is actually getting So this data confirms that our brine pumping does not impact environmentally sensitive areas of the salar. So I'd like to turn to how we create social value in the communities where we operate, and I want to continue talking about what we're doing in the Salar, and then I'll talk about what we're doing globally. We have this unique agreement with the Likkan and Thai people, and we share 3.5% of our sales of our Chilean with them. Our agreement is based on the UN Declaration of Rights of Indigenous Peoples. And as such, these communities choose which Projects they would like to fund.
There the community stewardships of these funds has been Remarkable. And it really, makes us feel really proud to witness how the projects that they are funding and implementing Are truly improving the daily lives of residents of the Salar. But rather than hearing from me, if you look in the Investor Day page, you will see a has improved the lives of residents from her community. So my guess is you probably haven't looked at it yet. So I'm going to ask you to raise your hand and say, I commit commitment.
And we are equally as proud of the positive impact that we have on our communities globally, whether it be in the U. S, Germany, China or Australia. So today, it's not enough to say that we operate in a sustainable way. You have to prove it. And in Albemarle, we have taken a leadership role in the lithium industry by being the 1st lithium company To commit to assessing our sites through Irma.
Irma, the initiative for responsible mining assurance is the most holistic and rigorous mining They will require Irma certification for their minerals purchases. Earlier this year, we also hit another first. We became the 1st lithium mine site to finish our Irma self assessment. NGOs, civil society, unions and companies who buy minerals Develop the over 800 Irma standards, which we must meet. And Irma considers all aspects of our operation, Environmental and social responsibility, business integrity, and ensuring the site is managed to deliver positive impacts for our workers, communities, And companies.
And just last week, we became the 1st lithium site to begin our 3rd party audit. We're really proud of that. And it has been so rewarding to see how leaders in Chile, including HR, environmental community management, finance and of course, plant management, Have already driven improvements in our sustainability in our operations, thanks to these rigorous standards. So and we are committed to carrying out Irma audits in our joint ventures as well because we want to drive the same Other important pillar of sustainability. Recycling will allow us to meet the growing demand for lithium with less lithium extraction.
We are well positioned to leverage our existing assets to utilize recycled lithium as a sustainable feedstock, and we are doing this by developing partnerships across Value chain. The EU recycling regulations, combined with the availability of end of life batteries, We'll accelerate the market for recycled lithium in the last half of this decade, and Albemarle is planning to have a significant And strategic role in this new market. So to sum it all up, we are the global leader in sustainability because our as how much lithium we produce. And now I'll turn it over to Jaak, who will talk about how we are developing a World class capability to execute projects. Thank you.
Thank you, Ellen. Good morning. My name is Jacques Fourie. First, let me apologize for the neck brace I'm wearing. I'm still recovering from a small back surgery, and for now, The neck brace is helping accelerate my recovery.
I'm responsible for Albemarle's global projects function. I joined the company at the beginning of 2019, and before then, I worked for 20 years In the mining and minerals industry, I've covered roles in operations, M and A, Marketing and of course, very importantly, major capital projects. As Netha and Eric have spoken about, Albemarle has an Exciting growth program ahead. Today, I'd like to tell you about the journey we are on to improve our capital projects capability to successfully deliver the projects that Our improvement journey started approximately 4 years ago when we saw that organic growth through capital projects Would form a bigger part of our growth strategy going forward. Since then, we have made significant progress Investment Committee to provide strategic oversight of our projects.
We have created a single global capital projects function to build Functional expertise and discipline. We have launched the first version of our Albemarle project process, A standardized way to develop and execute projects. We strengthened support from other business functions For our projects, for example, support from finance and procurement. And we've built expert major project teams in Chile, Australia and China. These improvement efforts are already delivering results.
Over the last two years, our teams in Chile and Australia have overcome tremendous challenges To deal with COVID-nineteen disruptions, disruptions in the global supply chain and labor shortages And nearing mechanical completion and at Kemerton 12, we are also in the commissioning stage and nearing mechanical way of excellence. I will cover each of these three areas, starting with the Albemarle project process, Because it is so fundamental to how we deliver projects and how we improve over time. The Albemarle project process It's a standardized phase gate process for developing and planning projects, and it's based Industry based practice. It drives consistency in how we develop projects The Albemarle project process creates a common language for the company. Whether we are doing Projects in Santiago or in Shanghai, we speak the same projects language.
This allows us to accelerate the cycle time of our projects and to quickly share lessons learned from one project to all Other projects. A strong project process is important, but not Sufficient to be successful. We also need great project teams. And this is the part of our improvement journey I am personally most excited about. In each country where we operate, we build Strong and experienced local teams and we support them with a small network of global experts.
But we have taken this a step further. We have created growth pipelines, which allow us to Transition key team members from one project to the next, thereby retaining knowledge and capturing efficiency improvements. Let me tell a quick story of how this is working in Chile. In 2017 and The La Negra 3 and 4 project, key team members from La Negra 2 transitioned to La Negra 3 and 4. Over the last 3 years, I've had the privilege to walk the improvement journey with the La Negra 3 and 4 project We have become even better at solving difficult problems, capturing improvements and honing our project delivery skills.
With this higher level of capability, key team members from La Negra 34 We're now transitioning to senior project roles on other projects, including the Salar yield improvement project, Which is the next stage in our lithium carbonate expansion program. This gives the Solari improvement project a massive head start and it shows because of all the projects we have started, It is definitely The same growth pipeline approach in Australia, in the United States and in China. Together With the 2 capability building blocks of the Albemarle project process and expert project teams, We are leveraging our deep technical expertise to deliver high return projects. This is Tense of expertise in chemical processing technology. Recently, we have added to that So that we have expertise from the mine to the final product.
On top of this expertise, We are leveraging the capability of world class project delivery companies. We have formed partnerships with 2 leading who are world leaders in lithium processing technology. Over many years of operating and improving our plants, We have developed best in class engineering standards, which we use to make our plants safer And more sustainable. At the same time, we have flexibility to apply local codes when we design projects To capture the benefits of low cost local supply chains. Lastly, and most importantly, We have combined our deep process expertise with the know how of our partners to develop standardized, optimized designs for our lithium plants, which we can repeat rapidly and at lower capital intensity with each iteration.
When we replicate a design, we save time and money in the design phase. We save time with permitting because already have most of the information. We save time and money with procurement because we buy the same equipment From the same suppliers, we save time and money with construction because we already know the best sequence for constructing the plant. And of course, we are able to ramp up the plant faster because we are already familiar With how it operates. All of these benefits reduce risk, reduce capital and accelerate the speed At which we can build new plants and bring new capacity online.
This combination of processes, By replicating proven designs, leveraging the continuity of our teams and building in low cost jurisdictions, We are able to reduce the capital intensity of our lithium projects by 40% when we compare wave 3 to wave 2 And by up to another 20% when we compare wave 4 to wave 3. The The journey we are on to improve our capital projects capability gives us the confidence that we can keep on investing in profitable growth In our lithium and bromine conversion assets and that we can achieve attractive returns at all points in the price cycle. In short, Albemarle's capital projects capability Is a core part of our growth strategy. And on that note, I'd like to hand it over to
Thanks, Jaak, and good morning, everyone. I'm going to close our prepared remarks today by focusing ability to be able to invest in growth in both lithium and bromine. It is having the discipline to say no by assessing the portfolio and acting when the time is right. I will share with you We are reaffirming our 2021 outlook and more importantly, sharing our long term outlook to 2026 That reflects the acceleration of our growth investments in lithium and bromine. I will talk about how the Albemarle through low cost resources and low cost operations.
I will show the significant cash of this business and reaffirm our capital allocation priorities. Ultimately, I believe Our financial position gives Albemarle a competitive advantage in 3 key ways. First, it allows us to accelerate our investments in high growth, high return opportunities. With our strong balance In cash generation, we demonstrated that we could continue to invest even in the depths of the pandemic in 2020. 2nd, our financial position allows us to invest in innovation to support our customers' product roadmaps And create new advanced technologies, as you heard both from Netha as well as Eric.
And finally, our financial flexibility allows us to invest in sustainability that are so important to our customers, the communities As demonstrated time and time again, the great revenue generation and EBITDA margins that we deliver. We have taken Deliberate transformative steps to position us for the substantial growth that you see in our projections. We have invested in world class resources and chemical conversion plants over the past several years. We will start benefiting from those investments as we go into 2022 and can start to sell that volume to our customers. 2nd, we have deliberately divested lower margin and lower growth businesses, and this has In 2020, in the heat of the pandemic and at a low point in lithium pricing, we generated EBITDA margins of 20 5%.
That allowed us to continue to invest through that challenging year, unlike many of our competitors had to shut down their investments. And third, we are leveraging our focus on operational excellence. As you have heard today, the Albemarle Way of Excellence is a key lever for us to keep the organization focused On the priorities that will lead to our success. And you have heard some excellent examples of this in action during today's Gotcha. I am very excited about our long term outlook.
But as you know, it all starts With short term execution. We are reaffirming our 2021 full year guidance with sales growth Services business that we divested in June of this year. Our current order patterns point to a Strong Q3 and a weaker Q4 with lithium and catalysts having their strongest quarters Of the year in Q3, on an EBITDA basis. Increased costs from the start up of the new plants, Inflation in raw material, energy and logistics mean our 4th quarter sales will grow, but our EBITDA will not. 2022 will start to reflect the benefit of our investments over the past several years.
We expect our EBITDA to grow Between 25% 35% on a reported basis. And if you remove fine chemistry services from the results, that growth is expected to be between 30 of 40% to 50% as the La Negra 3.4 and Kemerton plants come online and start to generate sales. At this point, we're expecting lithium volume growth of between 10% 15%. And further, we expect the pricing environment to remain favorable and expect that favorability to Catalyst is expected to grow EBITDA by 50% to 60% as their markets continue to improve. This is off a very low 2021 that was impacted by the winter storm costs as well as a U.
S. Customer changing their buying patterns. Lastly, we expect bromine to grow between 4% 10% On continued strong end markets, however, they do remain constrained on volumes. We expect The chlorine shortage to to resolve itself going into next year, and that will give us a bit of volume tailwind. Ultimately, we'll have to see how the inflationary environment shapes up between now year end And make some decisions around how we how we move that forward.
On CapEx, we're expecting to spend between 1,000,000,000 and 1,000,000,000 3, as we ramp up our wave 3 investments in lithium and initiate those investments in bromine.neta detail. As always, we'll give you a more definitive view on 2022 when we do our Q4 earnings call. We have benefited from our focus on operational excellence in 2021 by about $75,000,000 of gross Activity and a key outcome of the Albemar way of excellence is to make continuous improvement A permanent part of our culture. Our supply chain is a critical part of how we serve our Customers' needs and continues to be an area of opportunity going forward. With this year's Focus on journey to excellence, we have reorganized our supply chain teams into a single global team With best in class professionals to achieve that mission.
They are supported by leading edge systems Such as SAP's Ariba procurement suite and SAP's transportation management logistics module. This team now has a portfolio of actions that they are working on right now that will result in $80,000,000 of run rate savings By the end of 2022 and a vision to continue to find opportunities By negotiating better terms, but perhaps even more importantly, finding opportunities to buy in different, more effective ways. For example, we are in the middle of changing how we buy operational supplies and cost as we leverage their buying power, we're also increasing the quality and reducing the administrative burden on Albemarle. The last area of focus that we'll touch on in our journey to excellence in The Albemarle Way are our efforts in the back office. Our back Office activities include finance, human resources, and other administrative functions.
And our journey to of 2020, and our investment in the Workday Human Resources platform. We are building on these investments with a focus of both efficiency, but also effectiveness. We are newly complete also with our initial pilots with more advanced technologies such as data process mining and robotic process Automation. Maybe more important than the back office process focus is building a continuous improvement engine That can support all of our non manufacturing functions. The business process excellence team will support the company with Lean 6 Sigma, program management and change management capabilities.
They will also run the Excellence Academy. That academy will support and train the organization in these important continuous improvement skills so that it becomes a natural way of doing business. A great example of this in action is where we have implemented lean visual management boards In our shared service centers in China, Hungary, and here in North Carolina. Used by over 300 employees, These boards provide a real time look at performance and allow teams to set priorities each and every day. One result is that we've reduced the time that it takes to issue an invoice to a customer by Over 50%.
We have seen some quick results from the introduction of the Albemar Way of Excellence And the focus on the journey to excellence priorities, but our expectation is that these efforts would deliver value well into the future. Ultimately, we want to be an efficient and effective company that can claim it is the low cost benchmark in Mark in operations, not just resources. This will allow us to weather the economic cycles that our company will go through, Continue to invest in our future growth and generate excellent shareholder value. The most impactful examples in my mind are the focus on customer excellence, getting our company focused on improving the customer experience And reducing the friction that can be created with ineffective business processes. From our existing plants and a world class supply chain organization supported by leading edge systems and processes.
You will see the results not only in our ongoing productivity, but also in our operational metrics such as OEE, E, raw material yield, customer churn and increased value add services to our customers. I look forward to sharing with you our progress as we continue the Albemarle way of excellence. Our high margins and high operating cash flow mean that we have excellent financial flexibility, And it's important to understand our priorities for using that flexibility. Our capital allocation is prioritized to support The growth strategy that we have and ensure we maintain optionality as we work to meet our customer needs through all economic cycles. Our priorities have not changed.
Our first priority is to invest in our highest return growth opportunities. 2nd, we continue to commit to our investment grade credit rating. This offers the best balance sheet flexibility to handle the ups and downs of the 3rd, we continue to support a growing dividend and are proud of our track record here. 4th, we continue to look to M and A and joint ventures to support delivering long term shareholder value. And lastly, while we have the authorizations to do share repurchases, our organic and A key source of our capital comes from our operations, and the next chart is my favorite one In the whole deck, this chart shows the tremendous operating cash flow power that we generate as a company and Impact of the significant growth going forward.
You can see the several years of investments that we have made, And you can expect another 2 years of negative free cash flow as we accelerate our investment plans. We We prepared for these investments at the beginning of the year with the equity raise. Using those proceeds, we delevered the balance sheet. And now My expectation is that we'll re lever by about $1,500,000,000 over the next 2 to 3 years to support the growth investments. And with an expectation of about $1,000,000,000 in CapEx in 2024, we would start generating free cash flow in Finally, I would point out the massive $2,000,000,000 to $2,200,000,000 of Operating cash flow that is projected for 2026, that is 3 times greater than our 2021 outlook.
That is a significant opportunity for us to increase our rate of investment if the right projects are presented to us or generate Is a balance sheet that has significant flexibility. We have a long history of taking the right actions to maintain our financial and expect that flexibility to pay off with growth. Our long term leverage target remains at 2 to 2 and a half times By the end of the year, that we will grow into that, the bottom end of that range. That's really driven by the completion of the Kemerton and the La Negra projects. And as we start to ramp up See on this chart that our projection for 2026 is that that ratio will drop to around one time, Another demonstration of the options that we have to accelerate our growth investments.
We have excellent liquidity, and the next page shows the flexibility of our debt capital structure. We have excellent support from the credit rating agencies, and our bank group and debt investors have Back to maintain a good balance between shorter term and longer term maturities as we increase our leverage in the next couple of years. We remain committed to supporting our dividend, and you can see our payout ratios today Pretty well in line with our specialty chemical peers. However, as we prioritize organic and inorganic investments, The dividend growth will be slower than history, and our expected net income and cash from operations will grow. And as a result of that, I expect 20212026 by 13 17%.
That means 2026 revenue will be double what it was in 2021. Our EBITDA margins have the potential to approach 40% at a total company level, which would put our adjusted EBITDA between $2,200,000,000 $2,600,000,000 a growth of 25% per year, Three times what we were in 2021. And as we talked about, our free cash flow will be around $1,000,000,000 This growth is coming through volumetric growth of between 10% 13% per year across the company in all three businesses, With lithium and bromine growing with capacity expansions and strong end markets. Catalyst is growing off a weaker The pricing environment in lithium and bromine are both considered to be modestly favorable, approaching mid cycle prices from the Last cycle, we are modeling about 2% to 4% of pricing improvement per year across the total company. As you know, this assumption is the most difficult to predict, and we could see periods of overheating or trough as the supply demand fluctuations We have included $100,000,000 of gross productivity through 2024.
So there is potential For upside as we see the long term benefits of our operating model take shape. One big unknown is the tax environment. We have pegged the tax rate at 20%, but with the US and global tax environment influx, we'll have to see as the various proposals make it Through the legislatures and into law. These projections are very exciting for Albemarle. We have Catered, enthusiastic employee base that is fully aligned through the Albemarle Way of Excellence on delivering these results.
Before we turn to the Q and A session and we get a chance to hear from you, and Kent closes our session with some high level I want to reiterate the importance of financial flexibility in our strategy and the competitive advantage that gives us. We are well positioned without that financial flexibility to deliver the growth projections that you've seen over the next 5 years. With the continued growth in electric vehicles and the advancement of electrification and digitization through the global economy, There is every opportunity for us to continue that growth well past 2,030. Meredith, let's go ahead and start with the last Q and A session.
All right. Great. Thanks, Scott. I can clearly see that we do have a lot of questions in the queue, both from chat and the phones. So I'll ask my phone callers to please limit yourself to one question and one follow-up.
And then for The chat participants will get through as many of the chat questions as we can and any that we can't get to, someone from the IR team will follow-up with you next week. So first, I'd like to start with a couple The webcast web chat questions, and these were ones that sort of came in, in the last session, but we held for the lithium session here. The first one is from Tim Off with Canaccord, Tim asked investment in lithium production is rising globally. Given Albemarle's leading position capacity, how do you view your role in protecting your market share and preventing external overinvestment in production, which may adversely impact lithium pricing?
So let me start with that and then Eric, you can add a little bit. But I think we are investing and we're investing to maintain our share, grow with markets and satisfied customer demand with the relationships that we have. So, I'm not sure we have a role Protecting the market and stopping other people from investing. We're investing while we see the market and capturing that share and making sure that we're doing it efficiently and effectively. And we can preempt others with investing to make sure that we're investing in pace.
But to be honest, I mean, the market is moving very And we're scrambling to keep up with our customer demand.
Yes. I would just add, Kent, that this is a new industry that has not gone through a cycle like this before of such rapid build. And as you can see from the demand charts, we need The industry needs that demand to come online, and it's we're accelerating as quickly as we can, and that's just to sustain our position going forward. But that Proven capacity bill that I talked about is a strength of ours, and it's going to have to develop further still in this industry in order to keep up. So I think it's for the foreseeable future, we see it as a big effort just to sustain and build the capacity required to keep up with demand.
All right, great. And another one from the earlier session. Do the bromine operations have any plans to extract Lithium in Wave 4.
So let me I'll take that one and then we'll see. So We are looking at that. So I'm not sure, wouldn't it be bromine operations, it would be lithium operations, but businesses would be integrated. So we will look at that. And then 4, we'll see, that's a bit out and we have time before we get there, definitely not in Wave 3.
It's probably the back end of Wave 4 if we get there and that's probably that's where it would either
And I don't know, maybe the question was asked before I Spoke about that, but that's an area of focus from a development standpoint for us. It's going to take every brine is going to have a different sort of process technology to optimize The factors of sustainability, cost, quality, and that's where we're looking at direct lithium extraction as a possibility. There's innovation ahead there. I We have the capability, and we're looking to address it and make that a viable resource. But as Ken said, we have other areas that will come on
ways, but this particular version is from Kevin McCarthy with Vertical Research Partners. Ari, lithium, what is the level of realized price embedded in your new financial guidance for 2022 as well as the new 5 year lithium sales CAGR of 24% to 28%.
Want me to take that one? I think that's you. So for 2022, as we commented, both Eric and I commented, we're expecting at least a 15% to 20 Expiring, but also the strong increase in prices that we're seeing in both carbonate as well as hydroxide around the world. As you look at our longer term projections for lithium, there's about a 4% to 6% CAGR on pricing Going forward, it gets us almost to the mid cycle prices that we had in the last cycle, but not quite there. But like I said, this is going to be a big question mark of how does the market respond from a supply Demand fluctuation perspective, so difficult to predict.
We decided to be a bit more conservative and just allow us to Get back into that mid cycle range.
All right, great. Let's take one last one from the chat and then we'll go to the phones. So this
So I'll start. Eric, you can add into that. So we laid out those plans in our Wave 3 program for the most part, and it will be a combination. We'll look to acquire if we find the asset and the deal that we want to We'll look to acquire if we find the asset and the deal that we want to do, but we're also looking to build. It'll be either it'll be build And acquire or build depending on if we find the assets that and a deal that we want to do from an acquisition standpoint.
Yep. I don't know there's a lot to add. There is it's part of Wave 3. An acquisition allows us to
get to market faster, provided
the asset, the target in question. Get faster, provided the asset, the target in question fits our criteria from a sustainability, quality and cost point of view. We also to assets that we could expand. So that's where that is could be both a fire and build. And so it fits into wave 3 and that repetition we talked about.
And Jaak Further described of building and successfully building, reducing capital intensity and improving our execution capability to bring these assets
All right. So we're going to go to the phones. Now it's my understanding that the phone questions were difficult to hear on the webcast. So if you'll bear with me, I'll just repeat the question for the webcast audience before the presenters Answer it. So operator, we're ready for the first question from the phones.
The first question comes from
The question is a follow-up, getting some more color on pricing dynamic, and I heard the 15% to 20% guidance next You're just curious how that is comprised by, say, fixed long term contracts versus on a Exposure to spot or what might be characterized as evergreen contracts with escalators? And then also, how does Does that outcome compare to where your prior pricing floors were prior to the construction?
All right. So the question is really around the new outlook for lithium and what that implies for our contracting strategy versus what's open to the market?
Sure. I'll jump in, Chris. Thanks for the question. This builds a bit of what I was discussing towards the end of my presentation. Again, as well.
So we'll have more to sell next year than this year. And this year, I would say, greater than 90% is under some form of contract. So we'll get closer to that 70% mix in the coming year or so. And within that 30%, that will be subject to
market conditions, that will
be at a price or a spot based Conditions that will be at a price or a spot based buyer. Even within the 70%, we'll have a minority business that are a long term commitment, but still We'll have some variability on price, but as I said, the majority of that 70% will be under some more movement relative to the market. That being said, relative to that prior long term price you were talking that we gave concessions against during the pandemic will be at or above that going forward next year.
Okay. The follow-up, Eric, thank you. It would be just in terms of the Sure. The Snyder supply demand fundamental outlook there. Thank you.
Well, it's maybe not as you might think, in that Carbonate is generally more subject to spot or price based contracts. It's more of a China based market where that's more prevalent. So that's where you'll see more of The swing on price versus hydroxide, which is tight, but it's also a product that never moved down as low during the And so it isn't going to have the bounce that carbonate would offer those depths as it moves upward in this strong market. So it's tight and already at High price, a lot more of the variability is going to be on the carbonate side in the upswing that we're talking about.
And Eric, I would add that Tech grade product is primary the technical grade products that go into grease and glass, that's primarily driven by a carbon Price as well. So that will be a part of the market that moves.
The next question comes from Arun Viswanathan with RBC Capital Markets.
Great. Thanks for taking my question. I guess I just wanted to delve into the cost side a little bit. Obviously, a lot of pressures out there On transportation logistics as well as raw materials, maybe you could just describe what you're seeing across your businesses, if there's any Mostly supply demand driven. Thanks.
Yeah. So I would say I'll start and then I think the GBU presence will have a view on it, but I think it's different across the businesses. I mean, the challenges we're seeing, I mean, there are there is raw materials. So chlorine is probably the biggest example, but we have that in other materials where there's just there's challenges and that may Turn into pricing issues in time, but for now, it's just a it's a supply issue. And then and we anticipate having inflation On our raw materials and our supply base, and that's why part of why you see us focus so much on productivity and this operational excellence and driving cost out of the system.
So We're trying to be ahead of that. I mean, we've been working on this for a while. We're trying to be ahead of that, but there are pressures. And whether we can as much as possible by minimizing those costs. Anybody else?
The next question comes from
David Begleiter with Deutsche Bank. Thank you. Eric, on the lithium volume forecast For next year, which I believe was up 10%. Is limiting factor your own supply or the market itself?
It's our own supply, David, pure and simple. This is a tight market. If we could get supply faster, I would we'll be able to sell it as a team. It's a tight market and we'd love to be able to do so. So that's why we're so focused on capital execution and why Honing that skill as we have is going to be important going forward.
And just on Wave 3, what do
we expect the next announcement
Actively engaged and Yoch's team takes the lead on this. So he could comment as well. We're actively engaged in Looking at sites for greenfield expansion, and we've already elaborated and said we have an ongoing M and A evaluation started and so they'll soon become public, the site selection we go through and who we've chosen in China to proceed with. So it would be inside of this year that we start.
Yes. And we're I mean, we're Working on those actively and we're in the early I'd say the early planning phases, but when we get to a final investment decision and get Board approval for when we would go public.
Thank you.
The next question comes from Jobo Jack Smith with BMO Capital Markets.
Hi, good afternoon. Thanks for taking another question. I have a 2 parter. When you talk about your expectation for 15% to 20%, at least higher lithium pricing next year because of not Going back to the minimum price and not getting concession, how much of this is what you expect academically and how much are you actually engaging customers And then my second question is, I think in the past, under these contract discussions, contract setups, you've talked about longer Lithium margin trending above 40%, is that what kind of language you use? Now you're kind of guiding to 45% Going forward, can you talk about the difference of what seems like a margin guide up over the longer term?
Sure. So Let's talk about I'm going to fixate on your margin question. Your first question was on sorry, I lost it. Joel, just give me a key word, please.
Well, you talked about pricing being up next year, 50% Right.
What's the dialogue with our customers?
How much is that? How much is that dialogue This is what you're sort of thinking academically.
Yes. So I would say it's dialogue. We remember what we've just talked about. We have contracts that were given concessions either through the middle of this year versus the long term agreement or through the end of the year. So some have aligned with the approach I described.
And then on the margin side, the way I think about it, Joe, is we've always been in the mid-40s. You go back to the Last cycle, we've been in the mid-40s. I think as we've looked at our plan more closely, And it's even without pricing, you've got much higher utilization on our plants. You're getting Gail, Scott earlier talked about contribution margin. So when you think about La Negra, you're filling out a site.
When you think about as we build out Kemerton going forward and had 34, you're filling out a site. You're getting leverage on that. So that that alone drives margin in addition to the Operational excellence or manufacturing excellence things we talked about. So that gets you into the 40s. Maybe the difference of into the mid to high 40s is price realization, what we can do with contract prices.
Yes, Joel, I would just add to that. If you go back to 2019, our And to Eric's point, each individual plant is bringing significant contribution margin to the total P and L. And so now
The next question comes from Matt Deo with Bank of America.
Thanks.
Perhaps being a dead horse, a little bit, but so Very optimistic about demand growth and the need for new supply. And under certain scenarios, lithium seems like the And so at some point, if things are really bullish, lithium will actually reduce the amount of EV sales And obviously, the market is expecting that's going to drive significant And price increase. And so if we're at a period where, say, lithium is back at $17,000 to $20,000 metric ton For a period of time, I mean, how should we expect your pricing model to respond to that? Would you Into the mid high teens or is that destructive to what you think is the value proposition over time or to Supportive of new product coming into the market.
Okay. So I'll start, Eric. And if I understand the question, I mean, think we're I mean, our model has not really changed. It's still long term contracts. We've kind of moved away from just fixed price to be more where it moves with the Market a bit of variability, so it would move up if those prices go up and then we'll move down if those prices go down.
But we've got probably, In some cases, caps and floors, in other cases, not. And then some exposure to the spot market, and then our industrial business is exposed to the spot market. So I'm not sure we're chasing it, but I think that's kind of where the market is. And I think this is really the 2nd cycle. We had the 1 cycle, Prices went up and then they went way down.
Our anticipation, we may not be right, is that we don't have the highs and the lows that we saw the last time around, Although the spot prices are moving pretty high at the moment, but we're expecting that to dampen and not have such highs and such lows, but Time will tell. We're early in that. And again, this is kind of the 2nd cycle in this industry.
And I would just add it, and I know maybe you didn't intend the question this way, but I would think of it, I don't think of it at least as increasing prices happening because there's just not enough supply. I think if you Look at what happened in the last cycle. So much capacity left the market that was higher cost. So many investors, private investors in some maturity in this industry where pricing is not as volatile, that's one area we would expect that as economics improve to support higher cost resources It's needed in the market that pricing traverses in a range that's more rational, visavis the economics that those investors need to earn in Assets. So our picture that we gave today is where we see things coming out of a bad place from an economic standpoint.
And you See us accelerating our strategy. We have considerable financial resources that Scott described to do that. Here's hoping that other supply come in to meet that demand. We believe that the economic it's a fundamentally attractive market. There is lithium available.
It just needs to be it's just at a higher cost profile to come into the market.
Okay. I appreciate it, Eric. And if I can kind of ask one more for you. Can you give Just a sense like what your runway is at Greenbushes if both you and Tianqi kind of execute
on the projects that you've laid out.
We think about Greenbushes as operating for
the next 30 years, 40 years, 50 years. What's the Seth, what does that actual timeline look like if you get to Camerton 5 and Tianqi kind of ramps accordingly as well? I guess
Yes. Well, I could talk a little bit about the expansion strategy. You had 2 questions there, I think, if I may parse them for you. One was how much can we get out of that asset? How much of a runway of growth can it support?
The other is how long does the asset last? Addressing the At our first, we're going to be putting out our own report per SEC guidelines on it's basically Like the Canadian NI-forty three-1 hundred and one, I mispronounced that schedule, I can never remember the acronym. But we'll be putting out our disclosure for SSC purposes, the details that most studies are done against 20 years because that's practically a required that's the usual requirement for an economic resource. But we would believe There's a long life, at least 20 plus years in this resource. In terms of its capability, it will support that growth rate we talked about, that top line growth And the volume growth rate over this plan period, it'll support us into the latter half of this decade.
That and Wodgina will support us. But we'll gradually start To hit capacity at that resource in about, I would say, 27, 28 in that period of time, if we're able to execute, the the conversion capacity as we've said would, it would be in about that time frame that we would look to other resources.
Yes. And to make sure that's clear, that's just the growth part that would still last the 20 years.
It would still We still need those plants invested in for some 20 years beyond. Good question. Thank you, Ken.
Yep.
Toyota have a big part of the business plan on plug ins. What's the outlook embedded in your assumptions for plug ins versus full EVs?
So John, in that presentation there, there's a hash mark that depicts it. Obviously, it's not very analytical, and we could get with you subsequently and provide the details. But it's less than 20% now and less than 20% of the vehicle population as you go out to 2025 and 2030. And and and that's not a sort of an idle thumb in the air sort of estimate. What that is is based upon what Toyota is doing, what the US Manufacture doing what the European manufacturers are doing, what the Asian production base is based on the whole picture bottoms up assessment.
And really when it comes right down to it, it's just the technology will become so powerful. I don't I mean that more in a figurative in a literal sense in In terms of what it can do from a cost per kilowatt hour and range standpoint on electric vehicle side, we just see that being the predominant vehicle, as does the industry based on
the investments it's making worldwide.
And then It's making worldwide.
And then Scott, you don't show free cash flow positive until 25 in your slides.
If you
were to monetize the Catalyst business before you turn free cash flow Would we expect you to just run with really low debt until you're free cash flow positive? Or would you think about, as you mentioned, no share repurchase. I don't know if there'd be any Deployment of any proceeds from a Catalyst transaction?
Yes, John, good question. Just one clarification, our current projections are we'll tip into free cash flow positive in 2024. And With a potential transaction with Catalyst, we would look to obviously invest in the growth opportunities in lithium and And bromine. So that's our first priority is if there's an opportunity to accelerate, perhaps Accelerate additional M and A transactions, that's where our focus would be.
Thank you.
All right, great. Let's go back to the chat questions for a little bit. Stephen Richardson from Evercore new volumes available? How is your approach to cathode producersOEM shifting? It's a little bit different than what we've talked about so far, I think.
And do you expect more volumes to be sold directly to OEM counterparties?
Sure. So contracting has become very important for Particularly for automotive OEMs, as well as battery producers. As you go closer to the point of Consumer, I think you can assume that the level of investment and the risks are higher to assure security supply. So our customer base sees that. They've increased contracting.
That's why we foresee a long term contracting strategy, multi year majority of our business being under contract is the right thing to do both for the customer and to underwrite and give us confidence in our ability to expand. So in terms of the mix, It is shifting. We do have contracts now with OEM producers. We expect to have more. But part of our strategy will be to have balance across supply chain because not every wants the same thing.
There are some automotive producers who prefer to have an established network of Tier 2 or 3 suppliers that we would supply to, and there's Others that want to have the contract directly. And so we're working with various different types of structures based upon the automotive I think you could see from what I showed that it's a portion of our mix on that one slide, the customer slide, don't remember the number off And we still are selling a healthy amount of direct to cathode and battery producers by 2026.
Okay. Thanks for that. So a couple of questions now from Colin Rusch at Oppenheimer. His first question is, can you speak to the maturity of the lithium cycling technologies and how you're approaching investing in those technologies.
Well, I could get into it and maybe Ellen might Ellen addressed this topic specifically in her presentation. For us, this is about participating In battery recycling, not being a full on battery recycler. So our knowledge is in, and I showed you that road map of Extraction Process Technology is about applying that to a byproduct stream in that supply chain, in that recycling supply chain. That's important to our Customers, and Alan can share a little bit about that in a moment, but it's also important for us as we think about how we want to sustain and grow our business. We have
know how to provide. We are thinking we can build that into our relationships
and into our We are thinking we can build that into our relationships and into our supply network over time as this opportunity develops. Want to add more,
Sure. As I mentioned in my presentation, the EU battery drifters is really going to accelerate All the minerals that are found in EV battery. And so working with our partners, it's really important and our customers to work So that we can meet these goals that the EU is going to set out. It's going to be really important, so that we Can reduce the amount of lithium that we extract, that's something that consumers want, that's something that environmentalists want, it's good for the environment, it's also good for our business
All right. So let's see. We had one more from Colin here. I think Colin's second question was around the evolution of different battery grades that we're seeing as battery chemistry continues to evolve.
Sure. I'll jump on that one as well for Colin. So it is part of the strategy Building understanding, deep understanding on the application side of our materials. And so when we talk about the battery Metals Innovation Center and the scientists we're building, yes, it's about new products, and I talked about that on the New Frontier side. But in the existing products, it's about continuously improving The grades of product to get more out, more energy density, more efficiency in the battery cell.
And specifically, it's things like crystalline Sure. And it's things like ionic impurity levels that you're looking to address. That's what we're building application capability around and we complement that then With our process and extraction technology to drive improvements in the actual process. So it's a sort of an integrated approach to how we drive value there, Colin.
All right. Next question from Kevin McCarthy at Vertical Research Partners, on Slide 60, your base case forecast suggests that hydroxide will be even tighter than carbonate in 2026, seems to be generally the consensus. However, given that circumstance, do you expect customers to shift demand towards carbonate, even if by necessity? And if so, So when and in which applications might that happen?
I can answer that one Again, I would say, actually, what we more likely would expect is the supply base to change its mix to Being more hydroxide oriented. We have that capability. We can do we can we can repurpose our carbonate and process it the way we do a small stream today in Kings Mountain on a bigger way. Assess it the way we do a small stream today in Kings Mountain on a bigger way. And, and and and of course, we can we can we can add Assets that, of course, they do it as well.
Similarly, we have the ability to produce on the carbonate side if that were to happen. So we've got the flexibility. Where Energy density, it gives low $100 per kilowatt hour cost, and and and but the Compromise is a slightly lower range than and so it really is sort of a a vehicle that's very affordable, but a vehicle that doesn't have the range. And so that's there's The market that many automotive producers have demonstrated that exists for that product and we see that taking place. But in order to I've full electrification and get 400 miles, which is on average in the US what most of us like to have our tank and have it as a range, that's higher energy density that can only be accomplished with hydroxide, and that's the growth driver for the center and the high end of the market.
All right. Another question from Anna Gerken at Davenport. You outlined lithium expected capacity additions. How much of that expected capacity addition is contracted at this point? Are you adding committed lithium capacity?
Or are you building capacity
But with the commitments that we have, they're not all contracted. So if you look at the whole wave 3 and into 4, for sure, they're not contracted. But we have relationships with present it.
That's correct. I mean, Yac, on his timeline, talked about 3 years to build a greenfield plant. And as we're Approaching those investment decisions, our aim is to have a majority of that business either in active negotiations where we feel in about being able to close or already closed.
All right. We have this question has come from a couple People, but this particular one is from PJ Juvekar at Citi. What signals are you waiting for the restart of the Wodgina mine?
Again, I'll start with that. So, PJ, it's a signal amount. We need the conversion capacity to utilize it, and that's either us Building capacity or doing an acquisition. So once we have visibility on that, we'll start the process, the lead time. It's tricky because the lead time to restart the mine is shorter than a The mine is shorter than a build, but not necessarily shorter than an acquisition, depending on what that works.
So, but the conversion capacity is the ASP is the trigger for that. When we have kind of line of sight and we know we can convert it, then we'll restart the mine.
All right, great. We probably have time for maybe 1 or 2 more. Michael Sison from Wells Fargo asked, are there opportunities for lithium got some government support, which is likely needed, are US EV players in the US worried about a lack of domestic supply?
Yes. So I would, I'll take the beginning of that and Eric can fill in again. But I would say we're definitely interested in doing that. We've got resource here. So Magnolia, as we've talked about A couple of times a day, a little further out, Kings Mountain, not too far from here, is another resource that we have that's a possibility.
Government support for that would be The both European and US automakers are pushing for localized supply. And I think ultimately that will happen whether it's conversion of Around that?
Yes, I would say the capacity that we have in the U. S. Today is sort of commensurate with the opportunity on Energy storage side, our commitment to our customers is, let's engage in a commitment and we'll have the capacity where you need it in the region. And if it's you want it localized, then Let's make that commitment and we'll go ahead and build that capacity. We have the capability, whether it's taking carbonate from Silver Peak, which is expanding more from the Salar Atacama from Chile and converting it through a unit like we have here in Kings Mountain.
We could Further add to the Kings Mountain footprint through the resource, which would be now shifting to a whole different process, now spodumene Hydroxide, and then, of course, we mentioned longer term magnolia. So we have the opportunities. Right now, most of that cathode demand, which is point of consumption is all in Asia still. We do expect it to migrate, it's being and we'll be ready in here when it does when that
And Eric, you've talked about in the past how recycling is a way to localize Supply as well, so you're actually importing the materials through the original battery, but then you keep it in region through that recycling stream.
Thank you so much. For those of you that we didn't get a chance to get to your questions at the chat, we will get back to you through the IR team later this week. At this time, that concludes our Q and A session, and I'll turn it over to Kent Masters for final remarks. Kent?
Okay. Thanks, Meredith. So you heard a lot from us today. But to close, I'd like to go back to the strategy. So we will grow Profitably by building capacity in line with customer demand.
We just talked about that. We will maximize productivity through discipline that optimizes earnings and cash flow, but more importantly, it builds that base for us to grow from. We will invest with discipline to maintain that us to enable the sustainability ambitions of our customers. So we're very excited about the opportunities that we have, and we hope after today that you Understand those opportunities a little better, and we hope you share our enthusiasm. So thank you for your time, and thank you for your