Because lithium plays a crucial role in electric vehicle batteries, demand for the commodity is skyrocketing. And the demand-supply imbalance has caused record high lithium prices and pushed some stocks to trade at lofty valuations. Albemarle (NYSE:ALB) and Livent (NYSE:LTHM) are two lithium stocks that look overvalued at their current price levels, and we think are best avoided now. Read on.The demand for lithium is showing no signs of relenting. Lithium is a crucial component in electric vehicle (EVs) batteries, and demand for it has ballooned almost in sync with the burgeoning demand for EVs. The demand for lithium has now outstripped its supply, leading to record high lithium prices.
With supply constraints expected to remain well into 2022, lithium prices are expected to remain elevated. According to an S&P Global Market Intelligence forecast, lithium supply will rise to 636,000 MT from an estimated supply of 497,000 MT in 2021, while lithium demand in 2022 will be 641,000 MT LCE, up from an estimated 504,000 MT in 2021, which indicates that there will be a 5,000 MT LCE supply deficit in 2022. With the supply of lithium failing to meet growing demand, there has been a rise in interest in alternatives to lithium-ion batteries, such as hydrogen fuel cells, graphene supercapacitors, aluminum graphite batteries, solid-state batteries, and others.
Against this backdrop, we think it could be wise to avoid lithium stocks Albemarle Corporation (ALB) and Livent Corporation (LTHM). They look overvalued at their current price levels. Also, analysts have recently downgraded them.