New Trade for December 16th, 2020

The stock market is looking to start the day on a positive note this morning as the vaccine finds its way to more distribution sites.  The vaccine has inspired confidence in the long term outlook, but short term, volatility will likely remain as new data surfaces surrounding the negative impact the pandemic has had thus far.  

Our trade today highlights an alternative way to benefit from the EV revolution you may not know about yet.  

Albemarle (ALB) is one of the world’s top producers of lithium, which is used in batteries for electric vehicles and mobile devices, among other applications.  It produces lithium from its own assets in Chile, Nevada and in Australia.  The Chilean operation is among the world’s lowest-cost sources of lithium, according to Morningstar analyst Seth Goldstein.  

Demand will likely keep rising as electric vehicle use takes hold in the mainstream.  “Today’s consumer profile in the electric car market is evolving from early adopters and technophile purchasers to mass adoption.”  the International Energy Agency (IEA) wrote.  

Sales of electric vehicles hit a record in 2019, according to a June 2020 report by the IEA.  Consider that in 2010, there were only 17.000 electric cars on the roads globally.  By 2019, that number had grown to 7.2 million, half of which are in China.  

Greater adoption of EVs and buildout of large batteries for energy storage is expected to drive lithium demand growth 600% over the next decade, according to Goldstein.  Albmarle plans to nearly double its lithium production by the end of 2021.  Moreover, “We expect the company to continue investing in increasing its Lithium capacity after 2021,” the analyst says, likely through acquisitions or brownfield capacity expansions.  

Albemarle – also a supplier of catalysts for the petroleum refining and chemical industries – suffered a big hit to sales and profits in 2020, but both are expected to rebound in 2021.