While lithium prices continue to remain depressed in 2024, demand for lithium is expected to rebound strongly as the electric vehicle market matures and infrastructure improves. Industry analysts predict that demand for lithium will significantly outstrip supply over the next decade and prices could soar again as governments set aggressive carbon reduction targets.
In fact, buying stocks during a lithium market downturn can be more cost-effective than in a rising lithium price environment, although it’s difficult to take immediate profits in the short term. Here are three lithium stocks with both stability and growth potential to consider buying now.
Albemarle (NYSE:ALB) is one of the world’s top lithium producers, and management forecasts that the company’s lithium production will continue to grow, buoyed by demand from the electric vehicle industry. Due to its excellent lithium extraction capabilities in Arkansas, Albemarle has filed an application with the state’s Oil and Gas Commission to establish a pilot plant designed to take advantage of the state’s abundant lithium reserves.
In the first quarter of 2024, the company reported revenues of $1.36 billion, down from the same period a year earlier. This was mainly due to the decline in global lithium prices, which affected overall sales. However, the company’s excellent management of production costs and strategic capital deployment offset the more severe financial impact. In addition, Albemarle’s decision to issue $2.3 billion of mandatory convertible preferred stock is evidence of the company’s aggressive stance in strengthening its financial base and supporting expansionary growth.
Sociedad Quimica y Minera de Chile (NYSE:SQM) is a leader in the lithium sector, and the company’s financial performance has experienced a roller-coaster ride over the past year due to falling lithium prices. However, despite broader market challenges, SQM demonstrated its operational resilience and ability to strategically expand by delivering strong lithium sales growth of around 30 percent in the first quarter of the year.
Looking forward, SQM plans to further expand its lithium production capacity to 240,000 metric tonnes by the end of this year through process improvements and efficiencies rather than less capital-intensive construction of new production lines.
SQM’s recent strategic decisions underscore its commitment to maintaining its leadership position in the lithium market. The company’s expansion projects, particularly in the Atacama Salt Lake, are critical to increasing capacity. Given the expected surge in global lithium demand, SQM’s long-term prospects are excellent. The electrification of transport and the expansion of renewable energy storage solutions will significantly increase lithium consumption, and SQM, with its abundant reserves and expanding production capacity, is well positioned to capitalise on these trends.
Lithium Americas (NYSE:LAC) is a special lithium stock, primarily because the company is not currently generating revenue, as there is no active lithium production and the financials are largely dependent on future prospects rather than current earnings. Despite broader market challenges, Lithium Americas’ ace in the hole, the Thacker Pass project in Nevada, may be the largest known lithium deposit in North America.
Despite the current lack of revenues, the Thacker Pass project has significant potential. Once operational, the project’s lithium production costs will be well below the industry average, according to Lithium Americas projections. Confidence in the viability of the project is underscored by General Motors’ $320 million investment. In addition, the U.S. Department of Energy has provided a $2.26 billion loan, which will cover the most of the $3 billion needed to bring the Thacker Pass project into production, which are strong validations of Lithium Americas’ future growth.
