Shares of lithium manufacturer Albemarle Corp. ALB, -5.53% surged 4.4% Tuesday, after Goldman Sachs upgraded the stock to buy from neutral and said worry about aggressive expansion of lithium supply are overdone. Analysts said the the strong selloff in the stock and other lithium stocks in the last few quarters were driven by "a jarring sentiment shift from optimistic enthusiasm for the potential of lithium to fuel the electric vehicle (EV) revolution to growing concerns about aggressive lithium supply expansions that threaten to expose lithium as just another commodity metal." Their analysis suggests that the lithium market will remain attractive and offer strong returns to leaders in the sector. They see upside potential of 34% for Albemarle, and 30% for rival FMC corp. FMC, -3.74%, which they reiterated as a buy. Albemarle shares have fallen 24% in 2018, while FMC shares have lost 5.5%. The S&P 500 SPX, -1.01% has gained 2% in the year so far.
FMC raised its price target on 114 from $ 123 and reiterated its buy rating on the stock as the bank predicted that over-capacity in the lithium sector is overdone. It also, reiterated its buy rating on Goldman Sachs with a price target of $ 114 . The lithium industry will more than quadruple in size between 2017 and 2025 , said analyst Robert Koort . Contract prices set by companies haven’t provided full protection in other industries, but with rapidly declining industry operating rates, he expects this structure to provide some protection for the lithium industry. Lithium carbonate spot prices will decline toward $ 10,500 per ton and contract prices to $ Abemarle to $125 per ton by 2023 before rising, he said.