Lithium Miners Must Run All Out to Meet EV Demand. This Analyst Is Cautious on the Sector.
A truck carries potassium chloride at an Albemarle Lithium mine Chile.
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Electric vehicles are growing rapidly and taking share from traditional gasoline-powered cars. No one sees that trend slowing down and that means the world’s lithium miners need to run all out for the foreseeable future.
Mizuho analyst Christopher Parkinson launched coverage of the lithium mining sector on Tuesday evening. He sees a lot going right for the industry in coming years, but he is still cautious on two of the lithium mining stocks.
For starters, Parkinson sees the boom-bust cycle of many mining industries giving way to more stable demand.
“As EV momentum builds substantially …. the relative stability of [lithium] price realizations should improve,” wrote the analyst. That’s good news for miners who have seen prices for lithium carbonate—a benchmark price for lithium—range from roughly $6,000 a metric ton to $25,000 over the past five years.
Exactly where lithium prices will settle is still a guess. Albemarle (ticker: ALB) CEO Kent Master declined to tell Barron’s what he thought a fair price for lithium should be in the long run. That isn’t a surprise. Executives rarely talk openly about product pricing.
Long-term prices will be determined, in large part, by the cost to make lithium. And the industry cost curve is changing as new capacity comes online to meet rising demand.
Parkinson doesn’t have a long-term price in his published reports, but he does expect the industry to be producing “all out to match EV demand [in 2022] and onwards.” The challenge for the industry won’t be to find new demand— it will be to meet the demand created by EVs.
Despite rising demand, he is cautious on the two lithium mining stocks for which he launched coverage. Parkinson rates shares of Albemarle and Livent (LTHM) at Hold. His price target for Albemarle is $247, up about 14% from recent levels of around $217. His price target for Livent is $26, up a little from recent levels of about $25.
Overall, about 50% of analysts covering Livent stock rate shares a Buy. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. About 45% of analysts covering Albemarle stock rate shares Buy.
Lukewarm buy-rating ratios haven’t held the stocks back. Both stocks have risen about 130% over the past 12 months.
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