We should not be surprised by the blow-out earnings this week from Livent and Albemarle, as our “critical metals” analysis has been highlighting the runaway prices for lithium all year. This price rise has a much more profound impact on the current suppliers than the start-ups that either have minimal volumes to sell today or none at all. Both Livent and Albemarle were established players in lithium long before the current hype. The higher valuation for Albemarle is both a blessing and a curse in our view as the company is now a little hamstrung with respect to further portfolio changes, given that no one will pay as much for the catalyst and bromine businesses as is reflected in current valuation. You would need to be very convinced that the more focused lithium portfolio would see a further step up in valuation multiple to account for what would inevitably be earnings dilutive divestments.
Akzo Nobel is somewhat unusual among the more specialty chemical (in this case paint) producers, as the company has managed to raise prices fast enough to offset costs and produced strong positive results for 4Q 2021. Not having auto OEM exposure will have helped Akzo and the company is well-positioned to manage pricing through its stores in many cases. It is a relatively safe environment to push up paint prices as all of the competitors have the same cost pressure and need to do the same, and demand remains strong – consumers are buying paint.