The Lithium Challenge: Meeting What Looks Like Years of Rising Demand for Electric Vehicles.
Lithium’s hot. Electric-vehicle sales are growing fast—a trend unlikely to reverse. And that puts pressure on the small number of lithium miners.
Lithium is a silver-white alkali metal that’s key to electric batteries. Mizuho’s Christopher Parkinson, who launched coverage of lithium miners this past week, sees mining’s traditional boom/bust cycle giving way for lithium. “As EV momentum builds substantially…the relative stability of [lithium] price realizations should improve,” he writes. Lithium carbonate prices have ranged from roughly $6,000 to $25,000 a metric ton over the past five years.
Where prices will settle is anyone’s guess. Kent Masters, CEO of lithium miner Albemarle , declined to tell Barron’s what he thought a fair price for lithium should be. Prices will be determined, in large part, by the cost of mining the metal. In mining, the cost curve tends to rise as new capacity comes online to meet increasing demand.
Parkinson expects the industry to be producing “all-out to match EV demand [in 2022] and onward.” In short, the challenge won’t be to find new demand—it’ll be to meet demand created by EVs. So, he’s cautious about the two lithium stocks he’s covering, Albemarle and Livent , both of which he rates at Hold. His price target for Albemarle is $247, up some 14% from recent levels of $217; for Livent it’s $26, up slightly from about $25.
Overall, some 50% of analysts covering Livent rate its shares a Buy, versus about 45% for Albemarle. The average Buy-rating ratio for S&P 500 stocks is about 55%. Still, lukewarm buy-rating ratios haven’t held the stocks back. Both have risen 130% over the past year.
Next Week
Monday 10/18
The Federal Reserve releases industrial production data for September. Economists are looking for a 0.20% rise after a 0.4% increase in August. Capacity utilization is expected at 76.5% for September, roughly in line with August’s 76.4%.
Albertsons , Philips, Steel Dynamics , and State Street are among companies releasing quarterly financial results.
Tuesday 10/19
The Census Bureau reports new residential construction data for September. Economists forecast a seasonally adjusted annual rate of 1.623 million housing starts, compared with 1.615 million in August.
Halliburton , Procter & Gamble , Johnson & Johnson , Synchrony, Travelers, Philip Morris International , Kansas City Southern , WD-40 , Interactive Brokers Group , Netflix , ManpowerGroup , Dover, and Canadian National Railway are among companies hosting earnings conference calls.
Wednesday 10/20
The Federal Reserve releases its beige book about current economic conditions across the central bank’s 12 districts.
Abbott Laboratories , Biogen , NextEra Energy , ASML Holding , Nasdaq, Canadian Pacific Railway , Verizon Communications , CSX , Lam Research , Tesla, IBM , and Anthem discuss quarterly financial results.
Thursday 10/21
The National Association of Realtors reports existing-home sales for September. Economists forecast a seasonally adjusted annual rate of 6.10 million homes sold, compared with 5.88 million homes in August.
Dow, Freeport-McMoRan , Genuine Parts , Southwest Airlines , Valero Energy , Blackstone, Quest Diagnostics , Snap-on , Tractor Supply , Barclays , Danaher, AT&T , Nucor , American Airlines Group , AutoNation, Valero Energy, SL Green Realty , Intel , Snap, Boston Beer , Mattel , and Chipotle Mexican Grill host earnings conference calls to discuss quarterly results.
The Philadelphia Fed diffusion index, a measure of overall manufacturing activity, is expected to fall to 24 in October from September’s 30.7 reading.
The Conference Board releases its Leading Economic Index for September. Expectations are for a 0.50% rise, after August’s 0.90% gain.
Friday 10/22
IHS Markit releases the Manufacturing and Services Purchasing Managers’ indexes for October. Consensus estimate for the Manufacturing PMI is 60.3, while the Services PMI is expected to be 54.7, compared with 60.7 and 54.9, respectively, in September.
Whirlpool , Honeywell , Cleveland-Cliffs , Celanese , HCA Healthcare , Schlumberger , Seagate Technology Holdings , VF Corp.
, and American Express host investor conference calls.
Write to Al Root at [email protected]
