Why Albemarle, SQM and Arcadium lithium stocks soared this week

Lithium stocks have been hammered this year along with lithium prices, but a major industry development this week has raised investor hopes for a recovery and sent shares of lithium producers higher.

Here are some of the best-performing lithium stocks and the percentage they were up at their highest points in trading this week through 12:30 a.m. ET Friday, according to data from S&P Global Market Intelligence:

• Albemarle (WHITE -1.78%): Increase by 16.8%.
• Sociedad Quimica y Minera de Chile SA (sq -0.09%): Increase by 12.8%.
• Arcadiu Litiu (ALT -2.11%): Increase by 10.2%.

Could this be the start of the next bull run in lithium stocks? A lithium stock, in particular, looks like a solid buy right now.

The news that sent lithium stocks soaring

After hitting an all-time high of 575,000 yuan per tonne, or $80,000 per tonne, in December 2022, lithium carbonate prices have fallen off a cliff and now stand at just 75,000 yuan per tonne on fears of a supply excessive. China, in particular, has continued to expand its lithium capacity, even as demand for lithium from key industries such as electric vehicles (EVs) and solar power has fallen amid a global slowdown.

ALB data by YCharts

This week, some analysts reported plans by China’s CATL to cut production at its giant lithium mine in Jiangxi province due to rising costs. Reuters later confirmed the news. CATL is among China’s leading lithium producers and ironically also the world’s largest producer of EV batteries.

Analysts at UBSwho first reported CATL’s plans, expect the move to cut China’s lithium carbonate production by nearly 8% and believe it could help rebalance supply and demand. UBS expects lithium prices to rise 11% to 23% in the remaining months of 2024.

Any recovery in lithium prices will be a lifeline for lithium stocks. This is how commodity stocks behave: their prices fluctuate with commodity prices, although a company’s fundamentals have far-reaching effects on its stock price over the long term.

sqm; Arcadium Lithium, which listed earlier this year; and Albemarle are all profitable lithium companies, but there’s a reason why Albemarle stock was one of the top performers during the lithium price boom and why it posted the biggest gains among lithium stocks this week.

A lithium stock to buy now

Albemarle is one of the world’s largest lithium producers and the world’s largest lithium company by market capitalization. Despite lower lithium prices, Albemarle’s net sales rose 31% to a record $9.6 billion in 2023. It posted the second-highest net profit at $1.6 billion this year year.

Falling lithium prices have hit Albemarle’s top line since then, forcing it to cut production and suspend growth projects to preserve cash. As of the end of the second quarter, the company has forecast revenues of just $5.5 billion to $6.2 billion for 2024. Albemarle has the financial flexibility to navigate down cycles and should be one of the most big beneficiaries as lithium markets recover. That’s why if I were to bet on a lithium stock right now, it would be Albemarle.