Shares of Albemarle (ALB), the world’s largest lithium producer, tumbled 7.6% to $91.64 in midday trading on Tuesday (9 July), hitting its lowest level since November 2020 and making it the biggest decliner in the S&P 500 index.
Analysts at market research firm Baird Equity Research lowered their price outlook for the stock to $127 from $170, maintaining an “outperform” rating.
Baird analyst Ben Kallo said the price of lithium has remained at or below the “lower end of guidance” of $15 per kilogram so far this year, which will lead to weak second-quarter results for Albemarle. The company is due to report its second-quarter results on 31 July.
Research firm TrendForce noted in a report this week that lithium prices fell sharply last month to their lowest level this year as the downstream battery industry focused on reducing inventories. Lithium demand is expected to remain subdued in July, with prices falling to a “sensitive range” of US$11,000 to US$12,375 per tonne. Even if the supply side contracts, overall supply will still outstrip demand as the weak price trend continues, the analyst added.
Kallo also noted that this year’s US election could have an impact on the electric vehicle (EV) market, which directly affects demand for lithium batteries. He expects lithium prices to be volatile in the run-up to the election vote, as automakers await clarity on any potential changes to the government’s EV tax credits, and may suspend production or commit to stricter transition targets after the vote.
Undoubtedly, the main reason for the current situation in the lithium market is a serious imbalance between supply and demand. On the one hand, the rapid expansion of lithium production capacity in recent years has led to oversupply. On the other hand, the slowdown in demand growth for electric vehicles has further exacerbated the conflict between supply and demand.
However, because lithium prices are battered, some large energy companies begin to actively enter lithium industry. For example, the Norwegian national oil company Equinor announced in May this year, the acquisition of Standard Lithium in Arkansas and Texas two lithium project company 45% of the shares.
In early June, Warren Buffett’s heavy weighted Occidental Petroleum and a unit of Berkshire Hathaway Energy formed a joint venture aimed at commercialising Occidental’s technology for extracting and producing lithium compounds from California brines.
Looking ahead, the development of new technologies such as direct lithium extraction (DLE) could be key to driving industry breakthroughs. These technologies are expected to improve the economics of the lithium industry by increasing productivity and lowering costs.
According to Quentin Lamarche, co-managing director of Techmet-Mercuria, who believes that some “smart, long term patient capital” has not been deterred by the price collapse, and is betting on more rapid direct lithium extraction. They are betting that faster direct lithium extraction technology will be developed.
