It’s been a rough year for the lithium industry, along with many renewable energy companies more broadly. Weak demand out of China has led the benchmark price of lithium to decline by more than two-thirds from its 2022 highs.
While lithium is still selling above pre-pandemic price levels, lithium firms’ profits have been greatly curtailed due to the unfavorable pricing environment this year.
However, long-term investors shouldn’t fret too much about the volatility in lithium prices. Over time, demand is set to rise sharply as electric vehicles continue to take share in the automobile market. While 2023 has been a rough year for lithium, things could turn around as soon as 2024.
Let’s delve into three lithium stocks well-positioned for the industry’s continuing growth.
Albemarle (ALB)
North Carolina-based Albemarle (NYSE:ALB) is a leading multinational specialty chemical and lithium company, with lithium mining operations spanning North America, Chile, and Australia.
ALB stock has declined more than 50% over the past year. This is partly because of political jitters in Chile, along with the plunge in lithium prices. However, Albemarle is well-positioned due to its wide geographic footprint with mines on multiple continents. Management is looking to make more acquisitions as well.
Albemarle has been in business for decades, building up a tremendous track record of profitability and stability. In fact, the company is a Dividend Aristocrat, meaning it has increased its dividend for more than 25 consecutive years. Quite a remarkable feat for a chemicals and mining company, it speaks to management’s prudence in operating the business.
Sociedad Quimica y Minera de Chile (SQM)
Sociedad Quimica y Minera de Chile (NYSE:SQM) is Chile’s leading specialty chemical producer, focusing on the lithium industry.
SQM stock has had an eventful 2023. Misleading media reports around a purported nationalization of the Chilean lithium industry sent SQM shares crashing this spring. However, they partially recovered once Chile clarified it was seeking a public-private partnership for the industry rather than aiming to expropriate any lithium assets.
Yet, the relief was short-lived. Giving the ongoing decline in lithium prices, SQM stock has tumbled amid falling earnings estimates. But management is making the best of the situation. In fact, it is taking advantage of the temporary market weakness to expand.
SQM just announced a 1.6 billion Australian Dollar ($1.0 billion) deal to purchase Azure Minerals (OTCMKTS:AZRMF). This will broaden SQM’s reach and reduce its reliance on the Chilean market.
Lithium Argentina Corp. (LAAC)
Lithium Argentina Corp. (NYSE:LAAC) is one of the newest publicly-traded lithium companies. It came about thanks to a recent spin-off from Lithium Americas (NYSE:LAC) which split its business in two.
Lithium Americas divided its operations reportedly to “cut ties” with a key Chinese strategic investor, which complicated the firm’s positioning in the U.S. market.
This deal creates an interesting opportunity for investors. Before, the combined company was hard to value. Much of its worth was tied up in Thacker Pass. The project still faces significant hurdles before it becomes an operating mine.
By contrast, Lithium Argentina is already ready to begin production and start generating cash flow for investors. Also, an upcoming election in Argentina could swing that country back toward a pro-business government. Indeed, that would likely have a favorable impact on LAAC’s stock price.
On the date of publication, Ian Bezek did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
