Albemarle (ALB) Stock Alert: Why Are Lithium Prices Falling?

The shares of the lithium producer Albemarle (NYSE:ALB) fell about 9% to a multi-year low yesterday. ALB shares fell after two banks cut their price targets on the stock, citing the sharp decline in lithium prices. Although more and more lithium is being used to power electric vehicle batteries as global EV sales increase significantly, surpluses of the metal have pushed prices down tremendously since late 2022.

However, there are signs that lithium prices will recover significantly in the long term.

The price target cuts

Investment bank Baird lowered its price target for ALB shares from $170 to $127. The lithium producer is likely to report “weak” results for the second quarter as lithium prices “remained at the lower end of (Albemarle’s) forecast or below,” the bank said.

The metal currently costs about $12,500 per tonne, down from about $85,000 per tonne at the end of 2022. On a positive note, however, Baird was encouraged by “stronger than expected EV deliveries” and the investment bank maintained its buy rating on the shares.

UBS lowered its price target for ALB shares from $124 to $109. The bank, which also attributed its move to lower lithium prices, maintained its rating for Albemarle shares at “neutral.”

Lithium prices could rise in the long term

Last October, Deutsche Bank predicted that there would be a “moderate” lithium shortage by the end of 2025. And by 2030, the deficit would rise to 768,000 tonnes, the bank predicted.

Recently, no one has been particularly optimistic about the prospects for lithium other than ExxonMobil (NYSE:XOM). A senior executive at the giant oil producer, which aims to become a major producer of the metal, said Bloomberg Last month he said: “We know that the world urgently needs significantly more lithium than it produces today.” And the fact that the company wants to enter the lithium business suggests that it expects lithium prices to rise significantly in the long term.

At the time of publication, Larry Ramer 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 author and are subject to InvestorPlace.com’s disclosure policies

At the time of publication, the editor in charge did not hold any positions (either directly or indirectly) in the securities mentioned in this article.