13 Best Commodity Stocks To Buy According to Analysts

2. Albemarle Corporation (NYSE:ALB)

Upside Potential: 49.45%

Albemarle Corporation (NYSE:ALB) is among the biggest producers of lithium worldwide. Most of the demand for lithium in the industry originates from batteries, which employ lithium as an energy storage material, especially in electric vehicles. It is a manufacturer of lithium, accounting for the majority of its total revenue. Its upstream resources consist of two joint venture hard rock mines in Australia and salt brine deposits in the US and Chile. The firm runs lithium refining facilities in China, Australia, the US, and Chile. When it comes to producing bromine, which is used in flame retardants, Albemarle is a world leader. It also produces a significant amount of catalysts for oil refinement.

Through two joint venture stakes in Australian mines, Talison (Greenbushes) and Wodgina, as well as its own salt brine assets in Chile and the United States, it produces lithium. One of the most affordable sources of lithium in the world is the Chilean operation. Since spodumene can be immediately turned into hydroxide, talison is one of the best spodumene resources in the world, enabling Albemarle to be one of the most affordable producers of lithium hydroxide. The company also possesses a third sizable resource in the form of Wodgina, a high-grade spodumene asset that is more expensive than Talison.

The fall in lithium prices was reflected in Albemarle’s Q2 2024 results, as adjusted EBITDA for the entire firm fell by 70% YoY. In reaction to declining lithium prices, management announced more reductions in capital expenditures and cost-cutting measures. Most significantly, the company announced that it would cease work on phase three of the Kemerton lithium hydroxide processing facility and place phase two under care and maintenance. Additionally, it will further reduce capital investment in 2025 and beyond and lower unit production costs to increase profits in the aftermath of lower lithium prices.

Nonetheless, being one of the most affordable sources of lithium production in the world, Albemarle Corporation (NYSE:ALB)’s brine operations in Chile and spodumene hard-rock activities in Western Australia provide it with superior lithium assets. Hence, the average price objective of $117.18 indicates a possible gain of 49.45% from the current stock price.