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Stock Strategist

Electric Vehicles Will Fuel Growth in Lithium and Chemicals Companies

To meet the higher demand for lithium, specialty-chemical companies will have to turn to higher-cost sources.

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After updating our forecast for lithium prices because of the increasing popularity of electric vehicles globally, we are increasing our fair value estimates for the specialty-chemicals companies we cover,  Albemarle (ALB),  Sociedad Quimica (SQM), and  FMC (FMC).

Whereas our previous price forecast for lithium of $6,000 per metric ton was based on the marginal operating cost of existing production, our new forecast of $10,000 is based on the incentive price needed to bring sufficient production on line to close a looming supply shortfall. This shortfall should widen in the coming years as strong demand growth outstrips the supply growth pipeline.

David Wang, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.