If you are a big believer in the electric vehicle market and its growth potential going forward, lithium stocks should be of great interest to you. Since most EVs rely on lithium-ion batteries for power, companies that either mine or manufacture this valuable commodity are set to play a key role in helping the industry expand and could be huge winners for investors that are ahead of the curve. When you also consider the fact that lithium is used in energy storage batteries and digital devices like cell phones, laptops, and grid storage, it’s easy to see the potential for companies that can produce this limited resource.
The lithium-ion battery market value is expected to reach roughly $46 billion by the year 2026, which tells us that there will certainly be several winners that separate themselves from the competition in the coming years. If you are interested in some of the best options in this space, check out these 3 lithium stocks to watch in 2021.
1. Albemarle
It makes a lot of sense to explore the leading producers of this important commodity, which is why Albemarle (NYSE:ALB) is one of the best options in the space. It’s a company that manufactures specialty chemicals and is the world’s largest lithium producer. Albemarle produces products like lithium carbonate, lithium hydroxide, lithium chloride, and other value-added lithium specialties, and it has big plans to expand its production capacity so that it can keep up with heavy demand as the electric vehicle industry continues its rapid growth.
Albemarle obtains this powerful commodity with solar evaporation of its ponds that are located in Chile and Nevada and also retrieves lithium with hard rock mining. In addition to lithium, the company has a bromine specialties business segment which includes products for fire safety and water treatment facilities. Since it’s the world’s second-largest producer of bromine, it’s nice to know that the company isn’t 100% reliant on one product. Albemarle stock also offers investors a 1.03% dividend yield, which is intriguing because the majority of stocks that offer investors exposure to the EV market don't pay dividends.
2. Livent Corp
Livent Corp (NYSE:LTHM) is a top-five lithium hydroxide producer that is the result of a spin-off from chemical company FMC Corporation (NYSE:FMC). It’s a lithium pure-play that has a lot of things working in its favor at the moment, which is why investors should take note. First, you have the fact that Livent is a key supplier for Tesla (NASDAQ:TSLA) and has a lithium hydroxide supply contract in place through the end of 2021. Livent also recently inked a supply deal with BMW, and there’s a good chance that Tesla and Livent end up forming a long-term partnership, which is a strong reason to watch this stock going forward.
Livent is also intriguing since lithium is used in a lot of other products besides EV batteries that could provide growth potential. That includes things like portable electronic devices, pharmaceuticals, and aerospace manufacturing. The stock was recently upgraded by Evercore ISI to an “outperform” rating and given a $22 price target, which could be a positive catalyst for the stock in the coming trading sessions.
3. Sociedad Quimica y Minera
Last on the list of lithium stocks to watch this year is Sociedad Quimica y Minera (NYSE:SQM), a Chilean chemicals company that produces commodities such as lithium, iodine, and nitrates that are used in specialty fertilizers. What’s noteworthy about this company is that it has access to one of the best lithium deposits in the world at the Salar de Atacama salt flat. This mesmerizing area of land located in the Chilean desert has the highest concentration of lithium in the world and benefits from conditions that allow for high evaporation rates.
Sociedad Quimica y Minera saw its lithium volumes double year-over-year to about 26,000 metric tons last quarter, confirming that the demand for lithium is picking up thanks to increased electric vehicle adoption. This company is also a market leader in potassium nitrate and the world’s largest producer of iodine, which means it is a diversified chemicals company that should be able to handle price fluctuations in lithium over time. Sociedad Quimica y Minera stock also pays a 0.84% dividend yield and is a great option for investors that are interested in a low-cost lithium producer with a unique set of assets.