Chemical maker Albemarle is to pay $6.2 billion in stock and shares for lithium producer Rockwood to tap into the increasing demand for lithium.
Rockwood is one of the four big lithium producers that control about 90% of the lithium production market. The purchase of Rockwood will give Albemarle access to the company’s assets in the Atacama desert in Chile, providing a low-cost base for lithium production. Rockwood also has a site in Nevada, US.
The consumption of lithium has doubled in 2012 and Louisiana-based Albemarle expects an increase three times than the overall economy in the next years.
“Growth in lithium will come from the continued proliferation of electronic devices as well as energy storage, with the prospects for battery growth within the automotive industry especially attractive,” said Albemarle chief executive officer Luke Kissam.
Other lithium producers are optimistic too. The world market may double in a decade with demand growing at 7% to 10% annually, chemical supplier Sociedad Quimica Y Minera de Chile said in April.
Tesla’s planned “gigafactory” alone is likely to consume 17% of the current lithium output and double the global production of lithium-ion batteries, according to investment management firm Goldman Sachs. Tesla announced that it will only use raw material produced in North America.
Albemarle is the latest and largest takeover of the consolidation in the lithium industry since Solvay bought Rhodia in 2011.
According to a report by Bloomberg, Albemarle could use the new resources to pave the way for a second source of lithium in the US. Albemarle expects about $100m in annual savings by 2016 from the acquisition. The deal is set to close in Q1 2015.