Albemarle Struggles as Lithium Prices Continue to Fall
While the demand for rare and precious metals used in electric vehicle battery production remains strong, investors are facing a unique situation where prices have fallen to record lows. One key metal, lithium, has seen its prices fall by more than 40% in the past year, a decline that has eaten into the profit margins of top producers and wiped out the majority of their share price gains over the past couple of years.
Among the companies hit the hardest by falling lithium prices is Albemarle (NYSE: ALB), the world's largest lithium miner. With a market cap of $6.54 billion, shares of the lithium mining giant have fallen by 33.1% over the past few six months and 55% from its 2017 high. This drop isn't due to investors having a problem with Albemarle as a company but rather was caused by falling lithium prices. As such, many are now saying the stock is undervalued and could be a good investment today.
Despite the fact that lithium demand is expected to explode over the coming years with demand for electric vehicles projected to skyrocket, the metal's prices in 2019 have been falling due to an oversupply problem caused by an avalanche of new lithium supplies. Australia, which is the world's leading producer of the battery metal with an output of 51,000 tons per year, has seen six new major lithium mines begin operations since 2017. Chile is the second-largest producer with 16,000 tons of annual output and it has opened its door to foreign companies looking to explore for lithium in the resource-rich Atacama salt flat. Over the past two decades, output from Chile has quadrupled with other countries seeing a similar increase in production over the same period.
Source Fool.com
