Lithium prices are continuing to slide. One of its biggest market players, Albemarle Corporation, is halting plans to expand operations in Australia. Nonetheless, Wall Street maintains its conviction in lithium given the potential of electric vehicle (EV) expansion.
As CNBC noted in a report, Albemarle is facing the pressure of weaker lithium prices in the current market environment. The company is a major supplier for lithium use in EVs. So it’s decision to halt expansion could be telling for lower-for-longer prices.
“We realized that the market is not moving in our direction, that prices are down,” said Albemarle CEO Kent Masters. “We think they’re going to be down for a little bit longer, and we have to position ourselves to compete at this price level.”
As he mentioned, it’s a move to simply weather the storm while lithium prices can hopefully break out of its slump. Masters did strike down any notion that the company is in dire financial straits and won’t need to access equity capital.
“One of the reasons we’re taking these actions is we don’t plan to go to the market for additional equity,” he explained. “And we definitely don’t plan to have any covenant issues around our current debt.”
Wall Street analysts aren’t souring on the stock given this latest news. The CNBC report added that 54% of analysts say to hold the stock, 39% rate Albemarle as a buying opportunity, and only 7% say to sell. One of those reasons could be growing EV demand.
EV Sales Ticking Higher
As a Forbes article mentioned, the pulse on EVs is mixed. But some manufacturers are seeing sales tick higher. Nonetheless, a mixed sentiment is much better than a largely negative one for future EV demand.
“EV adoption is growing but at a slower pace. While premium segment retail sales are down 13%—driven by Tesla’s 22% decline—the mass market segment is up 63%,” wrote Elizabeth Krear, vice president, electric vehicle practice at J.D. Power, in a report released on July 26. “This is primarily due to increasing product availability as the percentage of mainstream shoppers who have viable EV alternatives has jumped to 56% from 38% in January.”
The opportunity to access lithium at weaker prices can present a value opportunity. That said, consider getting miner exposure via the Sprott Lithium Miners ETF (LITP).
LITP tracks the total return performance of the Nasdaq Sprott Lithium Miners Index. That index aims to track the performance of a selection of global securities in the industry. That industry includes producers, developers, and explorers.
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