What happened

Shares of Albemarle (NYSE:ALB), which is the world's biggest producer of lithium and what I consider to be one of the three best lithium stocks for most investors, jumped 17.3% in September, according to data from S&P Global Market Intelligence. For context, the S&P 500 returned 2.1% in the month.

The specialty chemical company's stock has returned a whopping 60.6% so far in 2017, through Oct. 3, crushing the S&P 500's 14.9% return over this period. 

Outdoor sign with an image of a car with an electrical cord attached to it -- concept for an electric car. Sign indicates a charging station.

The growing popularity of electric vehicles is "driving" demand for lithium to make lithium-ion batteries. Image source: Getty Images.

So what

We can surely attribute Albemarle stock's robust performance in September to at least one catalyst, and perhaps more than one. On Sept. 11, news broke that China had begun looking at a ban on the production of petroleum-powered cars. Such a ban by the world's largest auto market would be a boon for electric vehicles (EVs), and, therefore, lithium producers because the metal is needed to make the lithium-ion batteries that power EVs. Albemarle stock jumped nearly 5% on this day alone. 

It seems likely that the stock's performance in September was also at least partially due to a bounce back after the stock seemed to be unduly punished in August after the company announced very solid second-quarter earnings. The stock closed down 6.2% on the first trading day after earnings were released and continued to lose ground for several days. Though Albemarle missed Wall Street analysts' quarterly revenue expectations, it beat on the earnings side. 

Now what

Albemarle stock, along with most lithium stocks, has been red-hot since early last year. So it's very possible that sizable pullbacks could be on the horizon. That said, the long-term picture still looks bright due to the growing popularity of EVs.

Investors, however, need to keep their eyes on the lithium supply side. For now and for the near term, it looks like supply will have a hard time keeping up with growing demand, but that could change down the road.

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.