LTHM - Livent's Move for Lithium Market Share Is Crushing Its Stock
Global lithium markets sure have been moody lately. On the one hand, the world will need to significantly increase production of lithium materials by the end of the 2020s to keep pace with soaring demand, spurred by electric vehicle (EV) production plans from major automakers. On the other hand, lithium producers need to expand operations to meet future demand without oversupplying markets in the near term.
As the unexpected economic slowdown in China demonstrates, getting the timing right requires a delicate -- and perhaps impossible -- balance. Investors can probably expect lithium markets to remain volatile for the foreseeable future. For what it's worth, major suppliers Albemarle (NYSE: ALB) and Sociedad Quimica y Minera (NYSE: SQM) (SQM) have announced that they'll hold off on expansion plans to help rebalance markets, which will have the added benefit of improving the sustainability of operations from a cash flow standpoint.
Apparently, Livent (NYSE: LTHM) didn't get the message. The company continues to forge ahead with expansion efforts and is churning out record levels of lithium from its operations in Argentina. Investors haven't agreed with the aggressive strategy, as evidenced by the 48% year-to-date decline in value of the lithium stock -- by far the worst among the big three producers. Is Livent wrong to pursue growth in the current environment?