Albemarle-Aktie is a symbol of the problems on the lithium market. But take a look for yourself (as of November 30, 2023, 9:00 am, Stuttgart Stock Exchange):

Albemarle-Aktie and Lithium: Who flies high, falls deep The stock of the US lithium giant has lost a whopping 45 percent in value between the beginning of 2023 and the end of November. Currently, the title is trading at roughly the same level as at the end of November 2020. The great lithium rally that had catapulted the share price sky high in 2021 and especially 2022 has been wiped out.

The cause for this is the now significantly lower market price for lithium and its chemical compounds. The reference price for lithium carbonate in China was around 126,500 yuan (approx. €16,310) per tonne on November 30th. Just under a year ago the same amount of battery material was still worth around 580,000 yuan (approx. €74,782). The market price has therefore fallen by around 78 percent within 12 months.

Consequently, Albemarle also had to make considerable concessions as a lithium seller. In the third quarter of 2023 alone, operating income (adjusted EBITDA) plunged by almost 62 percent to 453.3 million US dollars year-on-year.

Why has lithium devalued so much? The reasons for the price collapse can be found on both the supply and demand sides. In recent years, new lithium mines have literally sprung up around the globe. According to data specialist GlobalData, global production will be around 31 percent higher than in the previous year in 2023. And by 2030 the annual growth rate (CAGR) is expected to settle at around 14 percent.

On the other hand, demand is under pressure – due to macroeconomic uncertainties in China and other large economies. Above all, the high interest rates, which make loans for electric cars more expensive, and the increased living expenses are proving to be brakes. All of this leads to a tendency for an oversupply of batteries and corresponding raw materials. In addition to lithium, nickel is also affected, for example.

The result: Major lithium suppliers want to reduce their production in order to at least stabilise the market value of the battery metal. Albemarle, for example, had announced such a measure in the context of its Q3 presentation. Whether this will be enough remains to be seen. The experts at Benchmark Minerals, however, expect the global lithium market to show a deficit again not until 2028.

Electric vehicle manufacturers and consumers could benefit In fact, the lithium weakness also holds potential – for the broad breakthrough of electromobility. The major electric car companies have been outbidding each other for months with ever higher discounts to keep the consumers on board in times of economic uncertainty. Price wars are currently taking place above all in the USA, Europe and China.

The result: The profitability of the carmakers is being massively undermined. Tesla, for example, had achieved an operating margin of 7.6 percent in the third quarter of 2023. That was still partly significantly more than the competition. But in the previous year, the margin had been 17.2 percent.

If the lithium prices remain relatively low on a sustainable basis, the costs for the batteries would decrease. This would give carmakers the opportunity to increase their profit margins and offer attractive offers to consumers at the same time. As a result, growth investments in the sector would probably increase, which would also improve the cost structure in the medium to long term. Cheaper lithium would therefore be an accelerator for electric cars in this scenario.

My conclusion for you Enthusiastically, the stock exchange had praised the lithium stocks up last year. But now the market has come down to earth. Electromobility has come to stay, but the transition to electric power is not invulnerable – despite government support.

As an investor, however, you should not underestimate stocks like Albemarle. Due to the massive share price slump, the title is now significantly better valued. The price-earnings ratio (P/E) expected for 2023 is only around 6 points. For comparison: In 2022 it had been more than 220 points. The title therefore still has potential for growth, albeit at a lower level. This is also what many analysts believe. According to CNN, 20 out of 29 experts currently recommend buying the stock.