Lithium Producer Livent and Allkem Approve Merger

Livent, a leading lithium producer, is set to end the year on a positive note with the approval of a merger with Australian lithium maker Allkem. Shareholders of Allkem voted in favor of the merger, with over 70% supporting the decision.

Livent shareholders are also expected to vote in favor of the merger. As of midday trading, Livent’s stock has already seen a 1.4% increase, outperforming the S&P 500 and Dow Jones Industrial Average.

The merger between Livent and Allkem will result in the creation of a top-four global lithium producer. Currently, Albemarle and SQM hold the largest market shares, with China’s Ganfeng Lithium also being a major player. This merger not only increases scale but also provides geographic and raw material balance. Allkem has significant hard rock assets in Australia, while Livent specializes in salt brine-based assets in Argentina.

When it comes to lithium mining, about 35% is sourced from Chile and Argentina combined, while approximately 45% is extracted from Australia. The raw material is then refined elsewhere, with China currently holding the title as the largest lithium refiner.

With a combined market value just shy of $8 billion, including debt, Livent and Allkem are poised to make a mark in the industry. However, they still have some ground to cover as Albemarle’s worth stands at approximately $20 billion.

In summary, Livent and Allkem’s merger has been overwhelmingly supported by shareholders. This partnership will not only boost Livent’s position in the lithium market but will also result in a more diversified and balanced portfolio of assets.

Lithium Prices Impact Livent, Allkem, and Albemarle Stocks

All three companies – Livent, Allkem, and Albemarle – have experienced a decrease in value compared to the previous year. This decline in value is directly attributed to the plummeting prices of lithium, which have seen an 80% drop over the past year. During this period, Livent stock fell approximately 16%, while Allkem experienced a decline of around 10%. However, Albemarle shares took a substantial hit with a 36% drop.

There are several factors contributing to the decrease in lithium prices. Although the global sales of electric vehicles continue to rise, the rate of growth has slowed down, resulting in an imbalance between supply and demand. In the commodity industry, it is challenging to meet new demand as it arises. Usually, new supplies are introduced in large quantities, whereas demand experiences incremental changes. Furthermore, high prices experienced a year ago led lithium buyers to deplete their inventories rather than purchase more, further weakening demand.

Presently, lithium prices stand at approximately $14,000 per ton. To put this into perspective, a Tesla vehicle contains roughly $500 worth of lithium. As a result of the decline in lithium prices, the cost of an all-battery electric vehicle has decreased by about $2,500.

This development presents a silver lining for not only Livent, Allkem, and Albemarle but also the entire electric vehicle industry. Lower-priced cars will inevitably lead to increased sales of electric vehicles, consequently generating greater demand for lithium. Ultimately, this cycle will reverse as it has done historically.