What happened

Shares of Sociedad Quimica y Minera de Chile (NYSE:SQM), or SQM, which is the world's second-largest lithium producer and what I consider to be one of the three best lithium stocks for most investors, jumped 19.6% in September. For context, the S&P 500 returned 2.1% in the month.

The specialty chemical company's stock has returned a scorching 99.2% so far in 2017, through Oct. 2, crushing the S&P 500's 14.7% return over this period. 

SQM Total Return Price Chart

Data by YCharts.

So what

We can likely attribute SQM stock's strong performance in September to three catalysts, one that occurred in September, and two that occurred in the months before and could have still been exerting some tailwinds:

  • Sept. 11: News came out that China had started exploring a ban on the production of cars fueled by petroleum, meaning gasoline and diesel. Such a ban would be great news for electric vehicles (EVs) and, hence, lithium producers like SQM, since lithium is an essential material in the lithium-ion batteries that power EVs. SQM stock jumped 7% on this day alone.
  • Aug. 23: SQM reported second-quarter earnings that were essentially in-line with Wall Street analysts' estimates. The company said that it expects the average price of lithium to be higher in the second half of the year than the first half -- which was likely the catalyst for the stock's 7.5% pop over the two trading days following the release. 
  • July 5: Reuters reported that Chinese private equity firm GSR Capital is exploring buying a substantial stake in SQM. 
Electric car charging at an outdoor charging station.

Image source: Getty Images.

Now what

SQM stock and lithium stocks in general have been on a tear since 2016. So they could be ripe for some pullbacks. Nonetheless, select higher-quality lithium stocks should have solid long-term growth potential thanks to the growing popularity of EVs.

Investors considering investing in SQM should keep in mind two things -- it's not a pure play on lithium, so the stock's performance will also be affected by its other businesses, and it's headquartered in Chile, so it has risks associated with emerging markets.

Beth McKenna has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.