The recent rise in lithium prices has spurred optimism among investors — particularly for Australian lithium miners amid reports of tightening supplies. Unconfirmed news of Chinese battery giant CATL closing down its Jianxiawo lithium mine before the Lunar New Year holiday has fueled speculation of potentially tighter market conditions. These developments are likely to help beaten-down lithium stocks to stabilize after a brutal 2023 year.
With CATL being one of the world’s largest lithium producers, the reported shutdown could remove about 3% of global lithium supply, exerting upward pressure on prices. Over the past year, lithium prices experienced a significant decline of around 80%, mainly attributed to weakening demand for electric vehicles (EVs). Just in January, lithium prices dropped to their lowest point since August 2021, exacerbating the challenges faced by lithium producers.
However, recent developments, including upbeat quarterly earnings from Albemarle Corporation (NYSE:ALB), the world’s largest lithium producer, have brought a glimmer of hope to the lithium market. Albemarle’s positive outlook which anticipates a surge in lithium demand, has boosted investor sentiment and prompted a rebound in Australian lithium stocks.
Albemarle CEO Kent Masters emphasized the necessity of higher lithium prices to support the anticipated tripling in demand by 2030, labeling current price levels as unsustainable. While challenges persist, particularly in the face of subdued EV demand and sluggish economic conditions, the potential for a turnaround in lithium prices in 2024 remains plausible, especially if key markets like China witness economic recovery and renewed EV demand.
Albemarle (ALB)
The aforementioned Albemarle Corporation is a leading global producer of lithium, specialty chemicals and bromine. With a rich history spanning over 130 years, Albemarle has established itself as a key player in the chemical industry, delivering innovative solutions to various sectors worldwide.
The company’s stock fell recently following the release of pricing guidance for the full year 2024, which fell short of Wall Street’s expectations. Some analysts noted that the company might need to implement additional measures, such as further reducing capital spending, to address investor concerns.
Albemarle also disclosed its first-quarter adjusted earnings per share, coming in at $10.32, crushing Wall Street’s expectations of $7. The company also reported sales of $2.6 billion, slightly below analysts’ estimates of $2.7 billion.
“We see strong sales volume growth for the rest of the year but have modified our guidance to reflect softening lithium market pricing,” said CEO Kent Masters in a news release. “We remain confident in the underlying market strength of our world-class asset base and our long-term growth strategy.”
With shares down about 50% over the last 52 weeks amid falling lithium prices, Albemarle stock is one of the better-positioned lithium stocks to play the rebound in this sector.
Ganfeng Lithium (GNENF)
Ganfeng Lithium (OTCMKTS:GNENF) is a leading global producer of lithium and lithium-ion battery materials. Headquartered in Xinyu, China, the company specializes in the exploration, mining, processing and production of lithium products essential for electric vehicles, energy storage systems and other high-tech applications.
Most recently, Citigroup research analysts have identified a promising investing opportunity in Ganfeng Lithium stocks, which has been hit hard by the recent downturn in lithium prices, a key component in electric vehicle batteries. Despite an 80% decline in lithium’s value since its 2022 peak, Ganfeng Lithium’s share price has halved over the past year.
Responding to this, Citi double upgraded Ganfeng Lithium’s investment rating from ‘sell’ to ‘buy’. Citi’s optimism stems from Ganfeng Lithium’s adept handling of the lithium price slump. The company has reportedly dealt with most of its high-cost inventory, including raw materials, work in progress, and final products, between the second and fourth quarters of 2023, suggesting a potential upturn in its financial performance.
Moreover, Citi anticipates a surge in battery demand and production starting in March, hinting at a restocking phase in the battery supply chain. To seize this growth potential, Citi has initiated a 30-day upside Catalyst Watch for both the A-share and H-share of Ganfeng Lithium, indicating short-term stock growth prospects.
Standard Lithium (SLI)
Standard Lithium (NYSE:SLI) is a leading lithium exploration and development company focused on unlocking the potential of lithium brine resources in North America. Standard Lithium aims to produce high-purity lithium products for use in various industries, including electric vehicles and energy storage systems.
BMO Capital (NYSE:BMO) initiated coverage on Standard Lithium with an Outperform rating and a Cdn$3.75 price target, praising the company’s strategic approach to developing lithium projects in the Southern United States.
Standard Lithium focuses on high-grade lithium brine projects in the Smackover Formation, aiming to implement direct lithium extraction (DLE) technology for battery-grade lithium production.
BMO analysts commend the phased development approach, multi-year demonstration plant testing, and strategic partnerships, which mitigate technology and project execution risks, potentially expediting the path to production.
Standard Lithium fell over 70% over the last 52 weeks. Given the magnitude of the selloff, the depressed valuation makes it a solid candidate for a relief rally as the lithium market stabilizes.
On the date of publication, Shane Neagle did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
