October 11, 2018 / 4:20 PM / 2 months ago

UPDATE 2-Livent drops in IPO on lithium concerns, CEO sees spiking demand

(Adds details from interview)

By Ernest Scheyder

HOUSTON, Oct 11 (Reuters) - Lithium producer Livent Corp shares fell in their market debut on Thursday, the second poor showing for a lithium IPO in as many days, even as the company’s chief executive dismissed oversupply concerns and forecast surging demand for the white metal.

Livent, spun off from chemicals producer FMC Corp, enters a lithium market struggling to predict how fast electric vehicles will be adopted. Lithium is use to make electric vehicle batteries.

That tension has unnerved investors, who now view the sector with trepidation and worry the appetite for lithium may not be as high as previously hoped.

Livent shares lost more than 5 percent as they debuted Thursday before recovering, trading down 2.4 percent in the afternoon. The drop came after Chinese rival Ganfeng Lithium sank 29 percent on its own market debut in Hong Kong.

Even as some investors fear a tsunami of lithium hitting the market over the next decade, a step that would harm producers, Livent expects the opposite, said CEO Paul Graves. He cited plans by Tesla Inc, Volkswagen AG and other automakers for dozens of new electric models in the coming decade.

“The demand pattern for electric vehicles goes on and on, and continues to accelerate,” said Graves, who was previously FMC’s chief financial officer. “I see a real challenge for our industry to meet that demand.”

Philadelphia-based Livent expects about 2 million electric vehicles to be sold globally this year, with sales spiking to 12 million by 2025, Grave said.

Livent’s IPO is being watched by rival Albemarle Corp , the world’s largest lithium producer, which has privately told investors it could buy Livent if the IPO stumbles, Reuters reported last month.

“We understand there has been a bit of a tug-of-war sentiment around demand and supply in the lithium space,” said Graves. But the stock drop “doesn’t really change our long-term plan and thesis.”

Livent, named for the chemical symbol for lithium, “Li,” produces 18,500 tonnes of lithium hydroxide annually and plans to increase that by 4,500 tonnes next year, Graves said.

‘MIXED MESSAGE’

Livent and peers typically sell lithium to battery makers, who then sell batteries to automakers. Tesla, Toyota and other automakers, though, have talked publicly about working directly with lithium producers.

By doing so, automakers “are sending a mixed message,” Graves said. “This model that they’ve used in the past around commodity metals doesn’t really work for lithium.”

That is because battery makers require a highly purified form of lithium for batteries. Less-purified lithium could make it difficult for a battery manufacturer to honor a warranty. Graves said he believes this is a market advantage for Livent’s purified lithium.

“There are performance demands being made of the battery that can only be met if the battery producer has control over the lithium supply,” said Graves.

Livent plans to spend $200 million to $250 million next year to expand Argentina brine operations, though other regions are being eyed, Graves said. Lithium can be produced from saltwater-rich brine.

“Diversification of supply is a very real objective of ours,” said Graves. (Reporting by Ernest Scheyder; editing by Jonathan Oatis and Chizu Nomiyama)

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