Great News for Albemarle Investors

2026-02-26 02:13:12

Albemarle’s (ALB +4.71%) management recently updated the market on its end-market outlook for 2026 and cost-cutting and restructuring plans. It’s an interesting setup that could lead to increased revenue and profit margins at Albemarle. In addition, growing geopolitical and trade tensions are creating an environment in which the Western price of lithium could trade at a significant premium to the Chinese price, which would be good news for Albemarle.

Restructuring and cost cuts

The first of the two major near-term events is the impending sale of a controlling stake (51%) in its Ketjen refining catalyst solutions business. Management is expecting $660 million in pre-tax proceeds from the sale, and the sale will increase Albemarle’s exposure to lithium and specialty chemicals.

The second is the recent announcement of the idling of its last train (specialized transportation systems) operating at its Kemerton lithium hydroxide processing plant in Western Australia. According to the press release, “The decision is expected to be accretive” to its adjusted earnings before interest, taxation, depreciation, and amortization (EBITDA) “beginning in the second quarter of 2026, with no impact to projected 2026 volumes.”

Image source: Getty Images.

It may seem strange to laud a company idling processing at a time when lithium prices are rising. But as CEO Kent Masters noted on the recent earnings call, “recent lithium price improvements alone are not enough to offset the challenges facing Western hard-rock lithium conversion operations.”

It’s a response to the realities of its end markets and will strengthen Albemarle’s financial position. The company has production capacity in China to serve the Chinese market.

Albemarle’s guidance for 2026

Turning to the end-market outlook, improving demand for lithium from the electric vehicle (EV) market and fast-growing battery energy storage systems (BESS) have contributed to the near doubling of lithium prices over the last six months.

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NYSE: ALB

Albemarle

Today’s Change

(4.71%) $8.80

Current Price

$195.63

Key Data Points

Market Cap

$22B

Day’s Range

$195.31 - $206.00

52wk Range

$49.43 - $206.00

Volume

272K

Avg Vol

3.1M

Gross Margin

13.06%

Dividend Yield

0.87%

Combined with $459 million in cost cuts in 2025, the Ketjen stake sale, and the idling of Kemerton, management outlined earnings scenarios for 2026 that highlighted the significant EBITDA margin expansion opportunity coming from potentially higher lithium prices.

For reference, a market price of lithium (as defined in the table below) of $10 per kilogram resulted in $1.1 billion in EBITDA in 2025, with free cash flow of almost $700 million for Albemarle.

Albemarle 2026 Guidance with Average Lithium Market Price ($/kg)]	$10 per kg	$20 per kg	$30 per kg
Net Sales	$4.1 billion to $4.3 billion	$5.7 billion to $6 billion	$7.5 billion to $7.8 billion
Adjusted EBITDA	$0.9 billion to $1 billion	$2.4 billion to $2.6 billion	$4.2 billion to $4.4 billion
Adjusted EBITDA margin	Low 20%	Low 40%	Mid-50%

Data source: Albemarle presentations.

A bifurcation in lithium prices

Furthermore, management hopes that the Foreign Entities of Concern (FEOC) provisions in the Inflation Reduction Act (expanded in the One Big Beautiful Bill) will result in Western lithium prices commanding a premium over Chinese prices. That would strengthen Albemarle’s competitive position, given its operations in the U.S. and Chile.

Ultimately, while the price of lithium is likely to remain volatile, Albemarle’s cost cuts, restructuring, and possibility of an improved competitive position and profitability at current prices make it an attractive stock for lithium bulls.

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