Kent Masters
Chairman and Chief Executive Officer at Albemarle
Thanks, Neal. Turning to slide ten for more details about the actions we announced yesterday to streamline our operations, build on the cost out and productivity actions we already have underway and maintain Albemarle's competitive position across the cycle. Now on slide eleven, I'll first cover the fundamentals in our market. On the demand side, EV registrations are up more than 20% year-to-date through June, led by strong growth in China. However, the pace of growth in Europe and the US has moderated substantially versus the industry's expectations.
Across the value chain, we are seeing meaningful mix shifts. First, stronger growth in plug-in-hybrid sales which is translated to smaller batteries with less lithium per vehicle. And second, we see a continuation in the trend towards more carbonate based batteries. Both of these developments are still positive for overall long-term lithium demand. However, they highlight the shifting nature of this value chain as it develops and matures.
These demand changes are occurring at the same time as we see dynamic conditions on the supply side. We have yet to see significant changes at the mine level, as existing and new supplies continue to come to market. And on the conversion side, there is still oversupply, predominantly in China. At current Chinese spot pricing, we believe and are hearing from the market that many non-integrated producers are unprofitable, with some operating at reduced rates or idling production and we are hearing that even producers who are integrated into cathode or batteries are under pressure. Moreover, current pricing is well below the incentive pricing required for western greenfield lithium projects.
At the same time, geopolitical developments are also adding uncertainties to our business. This includes escalating trade tensions and ongoing armed conflicts. Challenging western supply chain dynamics are also at play, notably, the IRAs, 30D consumer tax credit has yet to benefit upstream producers like Albemarle. And specific to our position, as written, the final US Department of Energy Foreign Entity of Concern or FEOC rule will impact the eligibility of our Australian product and we suspect that others could be impacted as well.
While current dynamics add challenging uncertainties, there is no question that the energy transition remains well underway and the long-term growth potential of our end markets is strong, as you can see on slide twelve. The global EV supply chain is on track to achieve the critical $100 per kilowatt hour tipping point, where EV's are at cost parity with internal combustion engine vehicles.
The Chinese industry has likely surpassed that target, with the rest of the world not far behind. Taking all these changes into consideration, we continue to anticipate 2.5 times lithium demand growth from 2024 to 2030. Additionally, we see battery size growing over time, driven by technology developments and EV adoption. These factors all translate to significantly higher long-term global lithium needs.
Turning to Slide 13, in January, we announced a series of proactive actions to preserve growth, reduce cost and optimize cash flow. Our teams have successfully executed on many of those actions, including ramping in flight projects at Qinzhou, Meishan and Salar on or ahead of schedule, delivering cost out and productivity actions and we are now tracking to deliver 50% ahead of our initial targets, reducing 2024 estimated capex by between $300 million and $400 million year-over-year and enhancing our financial flexibility, including improving cash generation and conversion.
While these steps have served us well, the industry dynamics I just described require us to do more to ensure our competitiveness across the cycle. Building on the actions we announced in January, we announced yesterday that we are embarking on a comprehensive review of our cost and operating structure, pushing deeper into our playbook to further pivot and pace to maintain our leading position. We are focused on the four key areas you see on the slide, optimizing Albemarle's global conversion network to preserve our world class resource advantages, improving our cost competitiveness and efficiency, continuing to reduce capital expenditures and future capital intensity and enhancing Albemarle's financial flexibility.
The middle section of this slide highlights that we've already taken the next set of actions across these four focus areas and the bottom of the slide details additional opportunities that we'll closely evaluate as part of the process. The comprehensive review of our cost and operating structure has just begun and we plan to provide additional details with our third quarter earnings. That said, we took the difficult, but necessary decision to bring forward the first step in the review, which is to further optimize our Australian network, as we show on slide 14.
As one of the first steps in this comprehensive review, we announced yesterday immediate adjustments to our Australian lithium hydroxide footprint. These changes follow our previously announced decision not to proceed with the construction of Kemerton Train 4. Specifically, we will idle production at Kemerton Train 2 and place the unit in care and maintenance.
Additionally, we will stop construction activity on Train 3. Notably, we estimate that stopping construction on Train 3 will save at least $200 million to $300 million of capital spending over the next 18 months. These changes allow us to focus on optimizing and ramping Kemerton Train 1 to preserve optionality and diversity across both product type and geography.
In the coming weeks, we'll be identifying other ways to optimize our global conversion network, with a focus on the highest priority and highest return options. Our global portfolio of conversion assets and our extensive tolling network provide the flexibility to maximize the value of our high quality resources and to provide either carbonate or hydroxide to meet the needs of our customers as their demands and technologies evolve.
Turning to slide 15. As we deliver these initial savings and begin the next phase of our review, our operating model, the Albemarle way of excellence, remains the standard by which we operate. By executing our operating model, we are building a culture of continuous improvement to identify best practices at every point in the cycle. We are on track to exceed our initial goals for restructuring and productivity savings through manufacturing, procurement and back office initiatives. Much of the better than expected performance to date is in manufacturing improvements.
For example, optimized pond management at the Salar and overall equipment effectiveness improvements at La Negra have maximized production at one of our lowest cost assets. These manufacturing benefits in Chile are in addition to the increased efficiency and volume we expect as the Salar yield improvement project continues to ramp.
Moving to slide 16 and our capital spending profile. As I mentioned earlier, we expect 2024 capex to be $300 million to $400 million below 2023 levels. Moving forward, we are evaluating opportunities to further reduce our capital intensity and total capital spending. This will provide enhanced optionality, improve free cash flow and put Albemarle in a stronger competitive position long term. Our capital spending profile is another element of our comprehensive review and will have more to say about our near-term spending plan on future calls.
Moving to slide 17, with all these near-term factors shifting and requiring us to take action, I think it's important to remember that Albemarle continues to have significant competitive strengths. And so I will end with review of our framework and the core advantages we continue to prioritize as drivers of our long-term value creation.
Slide 18 provides our strategic framework which informs our planning and gives us confidence that we will achieve our growth ambition, to lead the world in transforming essential resources into critical ingredients for modern living. This framework defines where we play, how we win and how we deliver. Albemarle remains uniquely positioned to enable operational excellence during this dynamic period, thanks to our competitive strengths, including our globally diverse portfolio of world class resources, leading process chemistry, deep innovation and technical know how, customer centric approach to the market and responsible stewardship.
Each of our competitive strengths will help us right now and well into the future in ways that we summarize on slide 19. First, our world class resources are arguably the best in the industry with large scale, high grade and therefore low cost assets. In energy storage, we have access to some of the high grade resources in both hard rock and brine. In Australia with Greenbushes and Wodgina and one of the largest known hard rock assets in the US, Kings Mountain. And in Chile with our long standing position in the Salar de Atacama.
Similarly, in specialties, we are the only producer with access to both of the two best bromine resources globally. In Jordan, on the southeast side of the Dead Sea, the source is the largest concentration of bromine in the world and in the smackover formation in Arkansas, the only source of commercial bromine in the United States. In both of our core businesses, we maximize the value of our world class resources by converting and flexibly derivatizing into higher value and use products in our conversion assets or in the case of energy storage, through our extensive tolling network.
Second, our leading process chemistry know how is key to achieving further productivity and cost improvements, safely and sustainably. For example, the Salar yield improvement project utilizes a proprietary technology to enable up to 20% higher yield. At Magnolia, we've leveraged advanced process controls to increase production, while lowering cost and improving sustainability.
And at both the Salar and Magnolia, we have evaluated a wide range of direct lithium extraction options and are piloting proprietary and third party solutions in order to be prepared for technology shift that could be imported and more sustainable sale options for this industry. Third, we have a pipeline of high impact innovative solutions in both bromine and lithium. Our research, testing and piloting facilities in North Carolina, Louisiana and Langelsheim, Germany allow us to participate in differentiated high margin segments and support our customers specific requirements.
Fourth, Albemarle's leading industry position as a partner of choice is demonstrated through our growing number of partnerships with iconic, pioneering companies. Both our businesses have high net promoter scores, with significantly positive gaps relative to competitors, reflecting longstanding successful relationships with major customers. And last but not least, our responsible stewardship, strong values and high performance culture are increasingly recognized by leading organizations.
For example, we recently earned an EcoVadis gold medal, placing us in the top 5% of global companies and demonstrating our commitment to creating a more resilient world and advancing the sustainability objectives of our customers. In summary, on slide 25, Albemarle delivered another strong quarterly performance in the second quarter, including sequential improvement in adjusted EBITDA and cash from operations.
Despite lower market pricing, we've been able to maintain our full-year 2024 outlook considerations, thanks in part to enterprise wide cost improvement, strong energy storage project ramps and contract performance. However, we understand these positive actions may not be sufficient given ongoing industry headwinds. Our entire organization is focused on delivering operational excellence, while positioning the company to capitalize on the incredible long-term opportunities in our markets. That's why we are taking the proactive steps to control what we can control and ensure we are competitive across the cycle.
Albemarle is a global leader with a world class portfolio and vertical integration strength. We are uniquely positioned to win. I am confident we are taking the right actions to maintain our competitive position and ensure we execute with agility today and in the future. I look forward to seeing some of you face-to-face at upcoming events listed here on slide 26.
And with that, I'd like to turn the call back over to the operator to begin the Q&A portion.
