Matthew K. Juneau - Albemarle Corp.

Luke C. Kissam - Albemarle Corp.

Scott A. Tozier - Albemarle Corp.

John Mitchell - Albemarle Corp. Silvio Ghyoot - Albemarle Corp.

Raphael Crawford - Albemarle Corp.

Robert Andrew Koort - Goldman Sachs & Co. Vincent Stephen Andrews - Morgan Stanley & Co.

LLC David I. Begleiter - Deutsche Bank Securities, Inc.

P.J. Juvekar - Citigroup Global Markets, Inc.

(Broker) John Roberts - UBS Securities LLC Michael Joseph Harrison - Seaport Global Securities LLC James M. Sheehan - SunTrust Robinson Humphrey, Inc.

Michael J. Sison - KeyBanc Capital Markets, Inc.

Laurence Alexander - Jefferies LLC Tyler Charles Frank - Robert W. Baird & Co., Inc.

(Private Wealth Management) Christopher J. Kapsch - Aegis Capital Corp.

Dmitry Silversteyn - Longbow Research LLC Rosemarie Jeanne Morbelli - Gabelli & Company

Thank you, Mark. Thank you, and welcome to Albemarle's third quarter 2016 earnings conference call.

Our earnings were released after the close of the market yesterday. And you'll find our press release, earnings presentation and non-GAAP reconciliations posted on our website under the Investors section at albemarle.com.

Joining me on the call today are Luke Kissam, Chairman and Chief Executive Officer; Scott Tozier, Chief Financial Officer; Raphael Crawford, President, Bromine Specialties; Silvio Ghyoot, President, Refining Solutions; and John Mitchell, President, Lithium & Advanced Materials. As a reminder, some of the statements made during this conference call about the future performance of the company may constitute forward-looking statements within the meaning of federal securities laws.

Please note the cautionary language about forward-looking statements contained in our press release. That same language applies to this call.

Please also note that our comments today regarding our financial results exclude all non-operating, non-recurring and other unusual items. Reconciliations related to any non-GAAP financial measures discussed may be found in our press release or earnings presentation, both of which are posted on our website.

Page 8 and the appendix of the earnings deck provide details of our reported earnings along with non-GAAP reconciliations related to discontinued operations and other special items in the quarter. With that, I'll turn the call over to Luke.

Thanks, Matt. And good morning, everybody.

I'm very pleased with our third quarter results as we continued to deliver strong growth in both Lithium and Refining Solutions and our Bromine Specialties and PCS businesses performed in line with our expectations. Adjusted EBITDA grew by 32% in Lithium, and by 19% in Refining Solutions compared to the third quarter of 2015.

For all of our continuing operations, excluding the year-over-year net impact of the divestitures of Minerals and Metal Sulfides businesses, adjusted EBITDA grew by $16 million, an increase of 10% compared to the third quarter of 2015 and adjusted earnings per share increased by $0.19 or 26%. Overall, company adjusted EBITDA margins were almost 29%, up 270 basis points from the third quarter of 2015, and our three reported segments again delivered combined adjusted EBITDA margins greater than 33%.

The third quarter was also highlighted by additional moves to strengthen our industry-leading Lithium business. In August, we signed a definitive agreement to acquire the lithium hydroxide and lithium carbonate conversion assets of Jiangxi Jiangli New Materials Science and Technology Company, with the closing expected by the end of the first quarter 2017.

Once closed, these assets will give us spodumene conversion capacity of 15,000 metric tons per year of lithium hydroxide and lithium carbonate with infrastructure already in place to support a 20,000 to 25,000 metric ton expansion. Spodumene for the current operations and the planned expansion will be supplied from our Talison joint venture in Australia.

The acquisition increases our control of the supply chain from spodumene mining through production and sales of battery-grade lithium hydroxide and lithium carbonate. In addition to the planned capacity expansion at Jiangxi Jiangli, we will continue to pursue development of a greenfield spodumene conversion plant of approximately another 40,000 metric tons a year so that we can fully utilize the Talison resources over time.

Full utilization of the Talison resources combined with the additional capacity we expect to add in Chile once a new quota is finalized will allow us to achieve roughly 160,000 metric tons per year of lithium carbonate equivalent production capacity by the beginning of the next decade. Based on current demand projections, we believe we will fully utilize that capacity by the early to mid-2020s.

At that point, our assets in Chile and Australia will have many years of useful life remaining, but as of now, we do not believe further expansions are likely. Therefore, to meet the expected market growth past the early 2020s, we will need new resources.

The agreement with Bolland Minera S.A. that we announced in the third quarter is a positive step in that direction.

This agreement gives us exclusive exploration and acquisition rights to a lithium reserve in Antofalla in the Catamarca Province of Argentina. Based on existing data, we believe this resource will be certified as the largest lithium resource in Argentina.

Given the development cycle to commercialize a new resource, we must begin investing now to bring new resources online by the early to mid-2020s. Our very preliminary evaluation on the Antofalla resource is encouraging, but you can expect it to take one to two years for us to make a decision on commercial viability.

With that, I'll turn the call over to Scott.

Thanks, Luke, and good morning. In the third quarter, we reported adjusted net income from continuing operations of $0.91 per diluted share, an increase of 26% compared to third quarter 2015, excluding the year-over-year net impact of the divested Minerals and Metal Sulfides businesses.

The increase was driven primarily by core business growth and a lower effective tax rate compared to 2015. Our corporate costs in the quarter increased, driven by increased compensation cost and some one-time costs related to relocations and legal settlements.

As a result, our corporate costs for the full year will likely range between $85 million and $90 million. There was no change in our estimated 2016 effective tax rate in the third quarter from the second quarter.

Excluding special items, non-operating pension and OPEB items, we continue to expect the 2016 ETR to be about 19%. We continue to expect D&A in 2016 of $185 million to $200 million, with 2016 capital expenditures now expected to be $175 million to $185 million, down from an estimate of $185 million to $200 million at the end of the second quarter.

We're not slowing any of our projects. The decline is simply a result of changes in the timing of spending and improved capital efficiency versus our prior estimate.

Operating working capital remained at 29% of sales at the end of the third quarter. Strong sales in our Refining Solutions business at the end of the quarter especially in Clean Fuels Technologies drove an increase in accounts receivables.

We also saw an increase in our Refining Solutions inventories in the quarter. Forecasted demand in Clean Fuels in the first half of 2017 will necessitate further inventory growth in the fourth quarter to manage production for those expected sales.

As such, our working capital is likely to remain in the 28% to 29% range at the end of 2016. Through the end of the third quarter, our adjusted free cash flow including contribution from discontinued operations was $415 million.

This number represents cash flow from operations, adding back pension and post-retirement contributions and subtracting capital expenditures, but excludes one-time synergy, acquisition and tax-related costs. Free cash flow included in those one-time costs of $325 million through September nearly doubled the cash flow generated last year in the same period.

Before I turn to our core business unit performance, let me briefly update you on our Fine Chemistry Services business. Sales and adjusted EBITDA improved in the third quarter, both year-over-year and sequentially.

However, as we look ahead to the fourth quarter, this business faces top comparisons. Fine Chemistry Services made all of its total 2015 adjusted EBITDA over $17 million in the fourth quarter of 2015.

In the fourth quarter of 2016, we only expect breakeven performance due to contract timing. Moving on to our core businesses.

Let's start with Lithium and Advanced Materials. Third quarter net sales were $240 million with adjusted EBITDA of $92 million, resulting in adjusted EBITDA margins of 38%.

Compared to the third quarter of 2015, net sales were up 15% and adjusted EBITDA was up 18%. The Lithium portfolio again delivered outstanding results.

The third quarter net sales were up 30% and adjusted EBITDA up 32% compared to the third quarter 2015. Adjusted EBITDA margins of 41% were consistent with our guidance.

And this is the seventh consecutive quarter with margins above 40%. Overall, volume grew in the quarter by 13% and pricing improved by 16%.

We saw continued strong pricing momentum in our battery-grade products and price increases in technical-grade lithium carbonate and lithium hydroxide as well. As in the second quarter, volume growth was driven by increased tolling of spodumene into battery-grade lithium carbonate and hydroxide.

As a reminder, these results include a negative impact from year-over-year potash pricing, which we continue to forecast at $7 million for all of 2016. PCS performance was in line with our expectations with net sales down just over $6 million and adjusted EBITDA down $2 million compared to the third quarter of 2015.

Impact from the Sun Edison bankruptcy and pricing pressure in our Organometallics product lines drove the lower results. Our full-year expectations are unchanged with PCS adjusted EBITDA likely to be down by about $15 million in 2016 compared to 2015.

Bromine Specialties also performed as expected with third quarter net sales of $194 million and adjusted EBITDA of $52 million, resulting in adjusted EBITDA margins of 27%. Compared to the third quarter of 2015, sales were up 2% with adjusted EBITDA down 12%.

Adjusted EBITDA and margins were impacted by negative pricing and mix, lower completion fluids, volumes in the Gulf of Mexico and Europe, lower volumes in certain flame retardants and reduced demand for agricultural intermediates. Consistent with prior guidance, we continue to expect the business to deliver full-year adjusted EBITDA that is only a few percentage points below 2015 performance despite a $15 million year-over-year headwind due to the loss of a methyl bromine contract at the end of 2015.

Refining Solutions reported third quarter net sales of $190 million and adjusted EBITDA of $65 million, resulting in adjusted EBITDA margins of 34%. Compared to the third quarter of 2015, sales were up 3% and adjusted EBITDA was up 19%.

As expected, Heavy Oil Upgrading, or FCC catalyst, was down year-on-year as refiners made small operating adjustments for higher-than-normal gasoline inventory in the United States. Also, while our full-year expectations for Heavy Oil Upgrading are unchanged, that is we continue to expect 2016 adjusted EBITDA to be very similar to 2015, this business faces difficult comparisons in the second half of 2016 due to the very strong sales in the second half of 2015.

Volume in 2016 has been more evenly spread across quarters while volume in 2015 was back-end loaded due to both turnarounds and competitive trials at our customer base in the first half of 2015. Clean Fuels Technologies, or HPC catalyst, results were strong as expected with improved sales and adjusted EBITDA driven by increased volume and a more favorable product mix.

Overall, Refining Solutions continues to exceed our expectations at the start of 2016 with full-year adjusted EBITDA now likely to be up close to 20% versus 2015. Now I'll turn the call back over to Luke to update our view on the year.

Thanks, Scott. In the third quarter, we continued to deliver impressive year-over-year growth in our businesses.

Growth in Lithium and Refining Solutions again led the way with the remaining businesses meeting our expectations coming into the quarter. In the fourth quarter, we expect the Lithium business to continue its trend of strong year-over-year EBITDA growth.

However, we're forecasting relatively flat year-over-year performance for Refining Solutions, Bromine Specialties and PCS. As Scott already noted, our Fine Chemistry Services business had a strong fourth quarter in 2015 with over $17 million of adjusted EBITDA while we expect a breakeven fourth quarter for that business in 2016, which will impact our year-over-year comps.

Still, in total, our view of 2016 continues to improve. We're adjusting our full-year 2016 forecast upward with net sales expected to range between $2.6 billion to $2.7 billion, adjusted EBITDA between $725 million and $745 million, and adjusted EPS between $3.45 per share and $3.55 per share.

We remain on track to complete the sale of the Chemetall Surface Treatment business to BASF before the end of 2016. All regulatory filings are complete and several more jurisdictions, including the European Union, have cleared the transaction.

Once closed, we will begin implementation of a deleveraging plan that will allow us to achieve our targeted debt-to-EBITDA ratio of 2.5 times in early 2017. We're very pleased with our performance to-date in 2016.

Our businesses have delivered impressive core EBITDA growth, and we have made much progress on our strategic objectives as well. While as expected, the fourth quarter of 2016 will be softer than our first three quarters, this does not mean a weakening in our outlook for 2017.

We believe we have positioned the company for outstanding performance in 2017. Our budgeting process is well underway and we're very confident that our high-growth lithium business will drive another strong year of earnings growth for Albemarle.

Before we get to Q&A, I want to call at your attention to our press release of November 4, announcing that we'll host an Investor Day in New York City on March 17, 2017. Additional details will be forthcoming, but we look forward to the opportunity to provide a detailed update on Albemarle and the strategy and priorities, both for the company and each of our global business units.

Operator, we're now ready to open the lines for Q&A; but before doing so, I would like to remind everyone to please limit questions to two per person to ensure that all participants have a chance to ask questions, then feel free to get back in the queue for follow-ups, if time allows. Please proceed.

Thank you. Good morning.

Hey.

Luke, I wonder if you can give us an update on CORFO or the environmental regulators down in Chile. How soon before you get all that buttoned up and what's the hold up at the present?

Yeah. Well, let me divide it up and at a high level and then I'll let John give some more color if necessary.

First of all, there're two separate issues down there. One, you remember was, and I don't want to miss it, one was the environmental permit that gave us the right to pump a certain amount of brine.

We received that in the first quarter this year. There's no contest to that, so the environmental permits are not at issue at all down there.

And we have sufficient brine to produce over 80,000 metric tons of lithium carbonate equivalent per year down there. The CORFO agreement, there was CCHEN is going through that process, the nuclear agency, is in discussions down there.

And I expect, at a high level, we're going to get that agreement done by the end of the year. I think they're just going through the administrative and regulatory process, which some time is somewhat bureaucratic to make sure that all the I's are dotted and T's are crossed, but I don't have any concern about that agreement getting finalized.

And then for my follow-up, you mentioned expanding capacity in your Chinese venture and then also maybe building another plant, a spodumene conversion plant. How much would all these efforts cost?

And is there any chance you would combine forces with Jiangxi since they're also building a big spodumene conversion plant?

Yeah. I think that all the numbers that we would have for capital are well within our plan, very consistent with what we've talked about during the course of the year on our capital.

So, if you look at the Chinese capital, would probably be a good bit lower because a lot of that infrastructure is in place. So, we're just really adding it back in.

If you look at a brand new site for spodumene converting 40,000 metric tons, you're probably north of $350 million. We hadn't done the engineering work for that yet.

But as we stated, we're going to invest over the course of the next three to five years to ensure that we try to capture at least 50% of this growth and all of this is within financial modeling and we have more than sufficient cash flow throwing off these businesses that we can self-fund these, pay our dividends and service our debt with no problem at all.

Thank you, Luke.

Thanks, and good morning everyone. You saw a nice sequential price movement in lithium versus the first half.

It seemed like from the comments that it was a mix of price and mix, but if I could just ask also on the technical grade product. Why is that price moving up?

Is it moving up as much as the battery grade or what are the dynamics there?

Yeah. John.

Hi. This is John.

The technical grade did not move as much as the battery-grade products, although we are seeing some pricing movement in technical grade. I do want to draw your attention to the fact that we started our tolling efforts in Q3 in 2015, and so we are seeing now good volume comps on the tolling volume out of Asia.

And so, we're seeing kind of a shift of some of that value in the pricing area. So that's one reason you see a big uplift in price in Q3.

I also just want to draw your attention to the fact that we have been getting pricing all along the way. And as we said on the last earnings call, I mean battery-grade pricing is in the range of up 20% year-on-year.

So, just as a follow-up, how many more quarters do you think before you're sort of fully at the current run rate of battery-grade pricing? How much longer it will take to fully flow through?

What we've told everyone is that from a modeling perspective, you should look at our business given the product mix that will see pricing continue to escalate year-on-year in a kind of mid single-digit range.

Okay. Thanks very much.

Thank you. Good morning.

Luke, do you have an early read on 2017 EBITDA for both the Lithium business as well as your overall company?

Yeah. I think we're in the middle of it.

So, it's too early to talk about right now exactly. We're in the middle of our budgeting process.

I think we're going to see growth. I think you'll continue to see good strong growth in Lithium from an EBITDA standpoint going forward.

And I think we'll talk to you in January then. I wouldn't expect Refining Solutions to kind of have the same kind of EBITDA growth going into 2017 that you saw from 2015 to 2016.

I think it'll moderate some. And then, as always, I've talked about Bromine is going to be flat to up a little bit or down a little bit.

And overall that's been the consistent message that we've been giving all year as we look forward to the longer term growth of these businesses. And I would expect that to hold in 2017, but not ready at this time to quantify what that type of growth might be.

And thank you. And just on the spodumene conversion plant, to be clear, you expect that plant to be online by year-end 2019 or 2020.

Is that correct?

All right, so on the spodumene conversion plant, you're talking about a couple plants. The first one we talked about is the expansion of the facilities that we would be acquiring, and we would think we could bring that one online, John, by 2019, correct?

And then, the following would be the greenfield site, which would be another 40,000 metric tons and what we've said is, probably by the beginning of the next decade. So, if you look at 2020 kind of time, that's about right.

It might be a little bit early, it might be a year or two later. We're going to bring it online to meet the demand and not to just to have it there.

We need to be sure that we can meet this demand, but we also don't want to be caught with a plant that's not operating. So, we'll be monitoring the markets and we'll continue to invest to meet our customers' needs as they make commitments to us.

Very good. Thank you.

Yes. Good morning.

Your Lithium margins were 41%. That was up year-over-year.

As you do more tolling in China, especially with your new acquisition there, where do you see lithium margins going, and can you talk about lithium extraction margins versus lithium conversion margins?

Hi, P.J. This is John.

As we've said before, we see our EBITDA margins for the Lithium business holding in the range that it's in right now for the foreseeable future. And there is a lot of puts and takes with regard to pricing impact but also as we're doing more exploration and we're bringing new capacity online and the cost of bringing that new capacity online.

But what we've said on past earnings call and we reiterate on this one, we see the EBITDA margins continuing in the same range, going forward.

And P.J., I didn't understand your second question about there was too many extraction in conversion technologies. Can you repeat that?

Yeah. So, what are the margins in lithium extraction?

For example, in Chile versus lithium conversion assets, what are their margins, let's say, in China?

Yeah. I mean, P.J., we had broken that out and that's fairly competitive since there's competitive intelligence and we're not prepared to give that out in a public setting, right, while our competitors sitting here and listening to it.

But I think this business will maintain excellent margins with the steps that we're taking from our resources to expanding those resources and to the relationships we're building with the winning customers out there. So, I expect we can maintain this type of margin for the foreseeable future.

Okay. That's fair enough.

And then you decided to go into Argentina to look at the new asset or the new resource. Can you talk a little bit about your Kings Mountain, North Carolina asset and what are you doing there?

John?

Yeah. Hi, P.J.

First off, we have probably the most sophisticated resource team in the world. And they're looking at resources everywhere on every continent.

And Kings Mountain is ranked with the rest of the resources that we continue to evaluate. And so, we do know that there's a hard rock ore body in Kings Mountain that contains lithium.

We know that the quality of that lithium is very high. We like to say it's the second best resource, hard rock resource, in the world.

And it is part of the mix that we look at in terms of developing resources going forward. But we're not in a position to say when and if it will be developed.

As Luke mentioned on his opening statements, the brine resource in Argentina is really exciting for us. We believe that it has the potential to be the largest resource in Argentina.

And it gives us the ability to build a world scale plant and provide us a low-cost source of lithium that we could supply our customers in the world.

Yeah. If I might add, P.J., if you look at what we're trying to do in lithium, we've got resources identified that we've said it'll take us to about 160,000 met tons of production by the beginning of the next decade, so 2020, 2021.

That will be the annual operating rate if we see those resources being able to provide. We need to be able to provide growth for this industry past 2020 and 2021.

So, we are taking steps today to look at resources around the world to ensure that we still have the resources to be able to bring to the market to meet this growing demand that we're going to see for lithium over the next 10 years, 15 years, 20 years. So, we are, I would say, the one company in the lithium space with a proven technical resources the current set of lithium-based resources, we have the financial strength to invest in the conversion capacity needed through 2021 as well as the technical skill and financial resources to bring on the next world scale resources that allow us to continue to meet that demand.

So at the end of the day, I love our position in this market and I love the strategy that John and his team have put together to meet the demand today and have a sustainable winning business well into the future.

Very clear. Thank you.

Thank you. How is the FCC catalyst price increase going?

It's a little hard to tell from the numbers.

Silvio?

Hi, John. This is Silvio.

As we explained earlier, we are in the early days of that price increase. We have a couple of successes at different places in the world.

So, we do believe and are committed to that price increase, but it will take two to three years before you see the full effect of that announced 10% increase.

Do you think a year from now we'll be seeing 2% to 3% average selling price year-over-year in your reported results?

I think that's a fair assumption.

Okay. And then in Fine Chemical Services, is a normal quarter near the average of breakeven for this quarter and $17 million for a year-ago EBITDA or how do we think about what normal is for that segment given its volatility?

Yeah. It's a very volatile business given the contracts.

Since it's a custom-manufacturing business, it's got contracts that are coming in and out of the portfolio. I think it's fair to say that if I could put a normalized on it, it's probably in the single digits of millions of dollars is probably what's normal for that business.

Okay. Thank you.

Hi. Good morning.

Hi.

Luke, can you hear me?

Yeah.

Luke, can you talk a little bit about your expectations on the lithium royalties in Chile? I was just hoping that you could maybe give a sense of, should we just expect higher royalties to be about offset by lower cost at the new La Negra plant that's coming on-stream?

I know you mentioned that you'd expect to keep margins about where they are, but it seems like there are a lot of puts and takes around the margins as we go forward.

Yeah. There are tremendous amount of puts and takes in the royalty and additional volume are two of the big ones that you'd mentioned.

I think your assumption right now is a good one. Let me say that once the agreement is finalized and signed, and the agreement is finalized.

But once we go through all that process and it's sign, we'll make it clear what the role of this structure is. I don't want to do that until such time as the agreement is signed by CORFO and signed by Albemarle, it's more than MOU.

We'll make it clear for all you guys because I know you want to see that. I can tell you that it's commercially reasonable.

We're excited about it, and we're looking forward to get that signed and get the information to you and continue to grow this business.

All right. And then, was hoping also that you could comment on the Refining side.

It seems like the FCC demand is suffering a little bit from higher refined product inventory levels. Can you talk a little bit about how you expect that to play out over the next quarter or two?

And what is going on right now with your FCC utilization rates? Thank you.

Mike, this is Silvio. Global picture structure, there is no difference.

At current crude oil prices, we do see a strong demand for gasoline, but you know that we are sitting on larger inventories in the U.S. And to that extent, we have seen some lesser throughputs at the end of the third quarter, which is affecting a little bit our result.

For the fourth quarter, we'd expect that refiners will continue to take some measures to address the high inventory and take the opportunity to do some maintenance. Structurally, going forward, I do not expect any major changes, and next year should be a comparable year to this year.

Good morning. Could you guys comment on your share buyback authorization and what the pace of buyback activity you might be considering for 2017?

Yeah. So, we announced yesterday afternoon that the board had approved an increase in the authorization really on the same program that we've been operating under since 2000, and that authorization takes us back up to 15 million shares.

And frankly, that's just an anticipation that as we move forward that there will be opportunities for us to do some share repurchases. At this point in time, we're still evaluating for 2017 the amount of investments required in the Lithium business in particular and the amount of cash required for that going forward before we make a formal commitment on the number of shares that we'll purchase.

So, we'll continue to look at that and keep you updated as we proceed.

This is Luke. You should not expect us to buy one huge slug of stock.

Don't expect us to buy back $750 million worth of stock in one slug coming up in 2017. What we would do is, assess what we need for Lithium.

In the end, we will enter into a programmatic thoughtful and methodical share buyback probe consistent with what we've done in the past.

That's great. And also regarding your ambitions in Argentina, there've been some issues with other producers there in past years around currency and political risk.

Can you just tell us how you assess the political and currency risk situation in that country going forward?

Yeah. It's ever moving.

So, a piece of – somebody asked me about Kings Mountain and John talked about the resources that we look out around the world. There're also reserves in Bolivia.

There're reserves in other places around the world, and we've got a methodology and a matrix that we're looking at. Country risk as well as currency fluctuations as well as costs as well as how long it's going to take us to develop, all that goes into play.

And what we have to do is make some decisions and balance that risk against the opportunity and take a step that we believe is in the best interest of creating value for the company and for the shareholders. So, it's no easy answer.

We're a long way from putting steel in the ground or even making the decision about putting steel in the ground in anywhere. But that is obviously one of the major considerations that we look to whenever we're going to make a capital decision such as this.

Thank you.

Hey, guys. Nice quarter there.

Hey, Luke, when you think about Lithium, we had two years of really good, really strong double-digit EBITDA growth. Any impediments you see either on the demand side or the supply side that that type of growth want to be sustainable through the end of the decade?

Not really. I mean, it's hard to sit here now and say what's going to happen.

You could have a significant recession that could have an impact. You have a 2008, 2009 kind of, they can have a blip of an impact.

But when I think about long-term and I look at the drivers for that market demand, when I look at the supply that we expect is going to come online when we look at the demand curve, there's going to be years and times where we're out of balance and a little bit oversupplied or a little bit undersupplied. But for the long-term, I expect to see good trend lines on the growth of that business.

Great. And then the Refinery Solutions, you've mentioned that you should have some growth next year.

Would you expect it in both areas in HPC, FCC, this year was a little bit different for FCC and HPC. So, just maybe walk us through the dynamics for that business heading into 2017?

Yeah. I think it's all going to be driven by transportation fuels and the demand for the gasoline and where that ends up.

So, we've got great technology that whenever they got high margins or low margins in the FCC area, we help improve yields. So, we help the refiners to make more money.

So, if we can do that and continue to do that, where they need that technology will be successful. And the ones the new refineries that you see coming online over the period of time, they're taking a more complex crude slate and they're looking to upgrade to make as much profit as we can.

So, I feel good about FCC for the long term. HPC, it all comes down to regulations, what those salt prospects are.

You've got some good moves on bunker fuels and some other regulations that'll cause the use of more hydrotreating catalysts. So, longer term that business will have good, steady business.

And it'll all come down to what the mix is of that business and what the mix that catalyst uses, and that will be more impacted by what their margins are. But overall, it's hard to break it down by what's going to happen next year in both of those businesses.

But as we look at our plan and roll it up, we'll see what the turnarounds are going to be, et cetera. But long term, Mike, this is a good business.

This business is one that's got great technology. As long as those specs in gasoline and transportation fuels demand continue, we'll be in good shape with the technology we have in both of these sectors.

Great. Thank you.

Good morning. Just one question on Lithium; as you've been having pricing discussions with your customers, has there been any change in the quality of the discussions or the agreements in terms of are they interested in either jointly funding capacity expansions or giving you firmer agreements on volumes or any other improvements showing up in the contract terms?

Yeah. Hi.

This is John. The relationships that we have with the customers, many of these customers go back decades.

We are really focused on ensuring that we grow together and that we have a reliable supply for them. And so certainly, the quality of the conversations has gotten to a much more strategic level where customers are willing to enter into multiyear agreements.

Currently, we have more than 60% of our lithium salts business under long-term agreement. And we think by the end of the year, we'll be in the 75%, 80% range, which is kind of our target range going forward.

And we want to make sure that we continue to invest with customers that are committed to us and we're committed to them. And so that's part of our whole investment strategy as well as our commercial approach with the customers.

And so, given the strong relationships that we have with them, the quality of the conversations have been excellent and I think it feeds into a long-term growth story for Albemarle.

And to follow, I guess it's clearly early days, but do you think there's a line of sight to that location being as low cost or even lower than your current low cost capacity?

Certainly, costs being low cost is critical for us. We're focused on maintaining that leadership position in terms of low cost supply.

And there's always a combination, not just geography but the quality of the resource, the way that we apply extraction and conversion technology, and the way we deliver the product in the right form to the customers. So there is a lot of complexity that goes into being low cost provider for our customer and the high value adder for a customer.

But we're focused on low cost and we're focused on making sure that we're translating as much value to the customer as possible.

Thank you.

Hi, guys. Thanks for taking the question.

A quick follow-up to the last question. How does going into the longer term contracts for Lithium impact your ability to dictate price?

And then as a follow-up, for the overall lithium market, how have things changed since your Lithium Day almost two years ago in terms of overall demand expectations? I think at that point, you were expecting the market to grow about 20,000 metric tons per year with the goal of capturing half that demand.

Has that increased at all? And more players are bringing on additional capacity, so any commentary you can provide will be greatly appreciated.

Thank you.

Sure. This is John.

Let me answer your question regarding the demand capacity first. Our demand model, it still remains the same as what we communicated at the last Lithium Day.

So, just simply put, we think that the overall market is growing at about 20,000 metric tons per year through the 2020 time period. The total market is about 185,000, 190,000 metric tons.

So, we've seen that demand forecast play out. We are updating that demand forecast, and we'll communicate that at the Investor Day in the first quarter.

With regard to long-term agreements and how did that impact our ability to price product, of course, we are having those critical conversations with customers where we do need the flexibility to adjust price, but we want to treat customers fairly. So, there are provisions in our agreements that allow us to adjust price as appropriate and also gives the customer an opportunity to look at the market if they so choose to do that.

But I think the important thing is that we're committing these long-term agreements, allow the customers to invest in the energy storage market because they know that they have a partnership with a company like Albemarle that has the ability to invest to supply them. And I think as Luke outlined in the opening comments, when we said during the Lithium Day that the overall market's growing at 20,000 metric tons per year and we're going to invest to supply half of that, I think you've seen through the tolling, through the acquisition of the China conversion technology, the expansion of our mine in Australia, what we're doing in Chile, how we're expanding the capacity in Chile, that we have invested and will continue to invest to be able to supply at least 10,000 metric tons per year.

We've done it this year. We'll do it next year.

And I think we've given you guys the path to see that we can deliver on our promises. And that is going a long way with the customers.

I mean, as I said, we have very long and deep relationships with these customers. They appreciate it.

They appreciate being with a market leader like Albemarle, and we're going to treat each other fairly going forward.

Okay. Thank you.

Yeah. So, some of the commentary about your contracts with Lithium customers got up my question, but it really has to do with strategy.

And, Luke, you emphasized the strategy of being establishing a sustainable winning business really into the foreseeable future. And I think if you look back couple of years even some skeptical investors, then would acknowledge that this has been working.

And then, the most recent portfolio changes where you've become even a more concentrated play on lithium. The question is, as you've done that, there are some seasoned investors who are taking a step back looking a little bit more skeptically saying, hey, this has the looking for setting up to be one of this classic boom-bust cycle in lithium.

And I don't really hear a lot of that. I mean, a lot of the discussion is about trying to keep up with demand into the foreseeable future.

So, I'm just wondering if you could just share with us how you think about that risk, that cyclical risk over time, and if there's anything that can be done in your strategic approach with your customers to mitigate that risk looking forward? Thank you.

Yeah. So, obviously, that's a lot of discussion that we have with the investors.

We go out and meet with them as well as the board of directors, and what our concentration is and how do we maintain that growth and profitability going forward. If you look at what we're trying to do, it's a couple pronged approach.

One, we want to be – have access to the best resources in the world. That allows us to drive our costs down.

So if you get to a boom-bust, we're still going to be the winners in this industry because little cost always wins, right? Secondly what we're doing is, we're working very hard to have the capability to expand to meet that market demand but do it in a phased approach, so that we can continuously monitor the supply-demand situation to understand when we bring on what portions of a capacity expansion that we bring on.

And third and importantly, we're entering into long-term agreements with our major customers that give us line of sight into their demand forecast going forward, and so that we want to make sure we have their views on what their demand is so we can meet that demand in a timely fashion. And they are very interested ensuring they have accurate and quality production to meet that demand.

So, there's a lot of great conversations. So, if you got the resource side, you got the technology side, you got the financial wherewithal to bring that online in a way in increments that makes sense for that market demand and you're in strategic relationships with the customers who are going to be winners in this industry going forward, that's the way you protect yourself and really drive shareholder value in a market such as this.

Go ahead, John.

So, just one comment to add with regard to the boom-bust comment. Our view on supply-demand is that it will remain in balance through 2020.

Beyond 2020, none of us have a crystal ball in terms of exactly what the inflection points will look like, in terms of the EV adoption and who will actually figure out how to build capacity the right way. But one thing, I think we have a high degree of confidence on anyone that has built any kind of large scale chemical plant understands this, it's one thing to announce a project.

It's another thing to actually build it, commercialize it, qualify it, et cetera. And if you just look at what it takes to bring on capacity, we have hundreds of engineers and scientists working as fast as they can on our projects.

But if you look at the marketplace and what it takes to bring on this capacity, I think you'll find some comfort in our prediction that the market will stay in balance through 2020.

And that's helpful color. Thank you much.

And then, if I had one follow-up, it was actually more focused on the Bromine business. I think you guys are still in Bromine.

Last quarter, you talked about some signs of the electronics end market was improving for brominated flame retardants. Could you just provide color on how that played out in the third quarter?

And then any nuances to the specific connectors versus enclosures versus printed wiring boards will be helpful. Thank you.

Chris, this is Raphael. And yes, we are still here.

So, I'm happy to answer your question on electronics. So, the outlook still on a year-over-year basis still looks weak, but it's improving versus the weakness that was projected previously.

So, year-on-year, in the third quarter, PCs were down, TVs were down slightly, but they're not down quite as much as what we thought they would be. The bright spots that we do continue to see is servers, that's up about 2% year-over-year.

And I think the growth opportunity is likely to be in automotive. So, wire, cable applications or circuit boards within automotive.

On a full-year basis, year-over-year, it's been relatively flat for us at Albemarle, but we certainly see that there are some bright spots that could counteract some of the downsides in PCs and in TVs.

Okay. Thank you.

Good morning. Thanks for taking my call.

I actually would like to continue the Bromine question. So, you talked about in your prepared remarks that there was some weakness in the market and your drilling fluids in the Gulf of Mexico were down.

Electronics doesn't sound like it was particularly strong, and yet you put up a positive growth number even excluding FX of 1%. So, are these all share gains of the drilling fluids in the Middle East?

Are there businesses that may perhaps small or you didn't mention upfront that that are driving the growth here? What's offsetting the sort of the weakish environment that we've seen in Bromine overall?

Dmitry, as Luke had mentioned, I think, third quarter was about what we expected it to be. We do see weakness in completion fluids in the second half of the year.

First half of the year was stronger than what we thought, and second half is about what we thought it would be. So, it's weaker in Gulf of Mexico and in the EU.

We're essentially holding our own in the Middle East. Our position there as well as in the other core markets is to maintain the earnings quality of this business and as well as to hold on to our position in markets like completion fluids where we know it's going to be down because of oil prices and lower exploration investment, but we've held on to our position as best as we can because we know when that market recovers, you want to be in strong with those customers and participate in the growth going forward.

Yeah. Hi, Dmitry.

This is Luke. I think, overall, there had been a whole lot of market share gains.

I think that's relatively been where it has been for the last two years at a high level. I think one of the areas where we focused on whenever Raphael was looking at his business and we were really refining on strategy on how we're going to have businesses.

We had to look at costs. So, if you look at costs across our portfolio and Bromine has done a good job in getting yield enhancement, yield improvement, just good old chemical engineering technology to get a better result for the same amount of dollars or lesser dollars.

So, they've done a good job at cost. And looking at opportunities, remember, we have the fluctuation to move production in some respects between Jordan and Magnolia, and that cab have an influence on our bottom line.

So, they've done a good job managing that, if I look at overall for the full year. So, I don't want you to leave here with some view that there's been a big shift in markets and that's what's happened, because I don't think that's the case.

But, I didn't have the view, I was just trying to understand pricing down and a lot of the businesses that you mentioned being weaker. Where did you get the volume growth, but we can follow up offline.

I guess, as a my follow-up question, I'd like to ask about the catalyst business and the guidance you provided for the second half of the year. You talked about second half being weaker relative to first half and perhaps versus a year ago, but then you delivered a pretty strong third quarter.

So, does that mean we're going to have a really bad fourth quarter comp in Refining Solutions?

If you look at the comp in the fourth quarter for Refining, it's probably going to be the weakest quarter we have. It's probably going to be a little closer to the first quarter than it is to the second and third.

Had strong second and had strong third quarters, we'll have a weaker fourth quarter. And I would say it's probably in the range of the first that's how you all look at it.

Okay. Okay.

I just want to make sure I was hearing the right things. Okay.

That's all the questions I have. Thank you.

Thanks, Dmitry.

Thank you. Good morning, everyone.

Just speaking with Bromine for a second, could you talk about your progress regarding the new flame retardant for construction installation?

Yeah. Sure, Rosemarie.

This is Raphael. So that product for us is called GreenCrest.

That's a polymeric flame retardant, and we have seen year-over-year growth both in volume as well as in pricing as the market moves away from HBCD. So, for us, the fundamentals are there both in terms of regulations as well as our own supply position to continue to participate in that market as demand grows.

So, when you talk about lower pricing and volume in Bromine overall, what came down substantially if the GreenCrest saw some price increases?

Well, to put it in context, Rosemarie, GreenCrest is still a relatively small piece of our overall portfolio in Bromine. So, while that has been a bright spot, there's been a few things that have pushed pricing down in the third quarter, which are largely not tied to direct Bromine sales that being potassium hydroxide, which is a byproduct of our Bromine production in Jordan as well as the amines business, which is also a non-Bromine piece of our Bromine portfolio.

That is very helpful. Thank you.

And I was wondering, I didn't see any price for your acquisition of Jiangxi's assets. So, if you could give us a feel for that, I don't know if it is public or out.

And then the $3.2 billion of gross profit from the sale of Chemetall, what kind of a net profit are you expecting, fees and tax bleeds?

Yeah. So, if you look at the transaction in China, what I would say is, we will provide that data once the deal closes.

But for a number of competitive reasons, I don't want to give that number out right yet. Let us get it closed and then you'll see what that number is and understand what a great value we believe we receive.

With regard to the Chemetall transaction, we expect that to close by yearend. And the leakage on that because of the way that we structured the deal, Scott, is kind in that 10-ish percent range, is that fair?

Yeah. That's correct.

Yeah.

Okay. Thank you very much.