Al Root
The bottom in lithium prices might finally have arrived, which is big news for several stocks -- including lithium mining giant Albemarle.
BofA Securities analyst Steve Byrne upgraded shares of Albemarle to Buy from Hold on Wednesday. His price target went to $156 from $137 a share. He sees a turn in lithium prices coming.
The bullish call had shares moving in early trading, up 2.4% to $132.20. Hotter-than-expected inflation, however, is weighing on most stocks. Albemarle stock was down 1.1% in midday trading, at $127.71, while the S&P 500 and Nasdaq Composite were both down about 1.1%.
Lithium is a key component of electric vehicle batteries. Rapid capacity expansion combined with slowing EV demand growth has hammered benchmark prices. Lithium carbonate prices peaked at roughly $80,000 a metric ton in November 2022 and bottomed at about $13,000 in February 2024, down more than 80%.
Prices have ticked up lately, reaching about $16,000 a ton.
"2023 marked a huge drop in lithium prices, as the market flipped from the 2022 deficit into surplus," wrote Byrne. "Inventory levels in China for lithium carbonate were elevated in February, but started to trend down in March [and pricing] started to show some strength. While EV sales growth has slowed, it is still 20% for the next few years, and thus we expect the global lithium market to tighten near-term."
He sees benchmark lithium prices averaging about $14,000 a metric ton in 2024, up from a prior call of $10,000 a ton. For 2025, he projects prices of about $16,300 a ton, up from his prior estimate of $15,500.
Sometimes higher commodity prices are all it takes to get commodity mining stocks working again. Albemarle shares have not been working lately. Coming into Wednesday trading, Albemarle stock is off about 35% over the past 12 months. Shares are down more than 50% since lithium prices peaked in late 2022.
Citi analyst Patrick Cunningham also increased his Albemarle price target on Wednesday, to $135 from $125 a share. He maintained his Hold rating on the stock, however, writing that while lithium prices are finding a bottom, slowing demand growth for EVs is still a concern.
Overall, 59% of analysts covering Albemarle stock rate shares Buy, according to FactSet. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target for Albemarle shares is about $143.
With lithium prices rising, investors can look for moves in other lithium mining stocks, including Lithium Americas, Sigma Lithium, and Arcadium Lithium.
Write to Al Root at allen.root@dowjones.com
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April 10, 2024 11:48 ET (15:48 GMT)
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