Investors should focus on the long-term story in the lithium investing landscape, not the volatile price swings seen in recent months. Prices for the chemical used in electric vehicle batteries have rallied to about $28,000 per ton in China, after plunging 70% to low of $22,000 per ton over the past five months, according to Citi analyst Shreyas Madabushi. “Lithium carbonate (Li2CO3) prices in China are no longer in freefall and appear to have bottomed out,” he said in a note to clients Tuesday. What’s driving that relief rally? On top of improving sentiment and lower inventories in China, Citigroup said there’s shrinking supply of the industrial carbonates. Export arbitrage, by which the same asset is bought and sold in different markets at different prices, has also played a part. Prices should go higher in the second half of the year given improved buying interest and restocking within the supply chain. Madabushi set a price target of $32,000 per ton — about $10,000, or 45%, off the low seen in recent months — over the next three months. Moves in China are driving changes in the global market for lithium as demand for electric vehicles increases, said Keybanc analyst Aleksey Yefremov. Despite the volatile price swings, some still point to what they see as a broader story around stocks tied to lithium. Here’s what to know: Lithium suppliers Albemarle is the biggest name in the sector with a market cap of more than $24 billion. That’s still relatively small, with the market cap representing about one half of Lululemon ‘s and a tenth of Abbvie ‘s. Still, Bank of America analyst Matthew DeYoe noted Albemarle is a diversified way to play lithium trends. He also said the company is one that can actually grow with the market, which is a challenge for other mining and resource stocks. “It’s kind of like an ETF” for the entire sector, he said, adding that Albemarle’s balance sheet is strong and it’s large enough to trade into and out of easily. Keybanc’s Yefremov upgraded Albemarle to overweight last week, noting the company “owns world-class resources at the bottom of the cost curve, and is well positioned to nearly triple 2023 lithium production over the next decade.” His price target of $270 implies the stock could rally 31% from where it finished Tuesday. The upgrade puts him in the majority on Wall Street, with nearly three out of every five analysts rating the stock as buy or an equivalent, according to Refinitiv. The average analyst expects the…
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