While lithium prices have improved since the beginning of the year, the increase is not significant enough to resolve long-term market uncertainties or positively impact the likes of Albemarle Corporation (NYSE:ALB, ETR:AMC), says UBS.
The Swiss bank revised down its 12-month price target to $124 from $132.
Analysts said they expect Albemarle stock to remain range-bound until there is more clarity on normalized lithium price levels and demand growth.
UBS adjusted down its performance estimates for Albemarle for 2024 to 2026, citing slower-than-expected improvements in lithium prices and supply responses.
UBS estimates that lithium prices need to be around $22-23/kg to incentivize further growth in western lithium supply.
The base case for Albemarle suggests the company will consume approximately $1.9 billion in 2024 and $0.8 billion in 2025, which may require additional funding through normal debt markets.
UBS highlights that a significant rise in lithium prices could positively impact Albemarle's stock and improve the company's free cash flow, making growth investments more likely.
However, the report also notes that investors have become more bullish on the potential of stationary energy storage, although electric vehicles remain the primary driver of lithium demand.