What happened
Shares in specialty chemicals company Albemarle (ALB 3.37%) rose 14.2% in the first half of 2021, according to data from S&P Global Market Intelligence. The move merely tracks the 14.4% gain in the S&P 500 index over the same period. However, it's been anything but an index-hugging year for the stock.
In fact, Albemarle's stock price has been pretty volatile so far this year.
Data by YCharts
The reason comes down to a combination of factors. The company is best known for its production of lithium products. For reference, Albemarle obtains lithium from its ponds and by buying from its joint venture.
Given that lithium is a crucial component in electric vehicle (EV) batteries and electrical storage, it's no surprise to see investors buying into the stock as a way to play the Biden administration's commitment to green energy. That goes a long way to explaining the pop in January and the sporadic bumps in the stock price following investor sentiment over the feasibility of legislation aimed at "greening" the U.S. economy.
A lithium-producing pond. Image source: Getty Images.
That's the central part of the story. Still, readers should note that the specialty chemicals company also sells bromine products (used in fire safety and flame retardants) and catalysts (used in refining and clean fuel technologies).
During the earnings call in May, Albemarle's management said that the outlook for its lithium segment "has improved" with bromine "unchanged" and catalysts "lower." Winter storms hit bromine products production on the Gulf Coast, but that's been offset by improved end markets. However, those same storms negatively impacted catalyst sales due to lower customer activity and a "change in order patterns from a large North American customer."
So what
Management didn't adjust its full-year 2021 guidance in May. Still, given the improving economy, it wouldn't be a surprise to see an upgrade to bromine and/or catalyst sales expectations when the company reports second-quarter earnings in early August.
However, the underlying long-term story over lithium demand for EV battery production, and Albemarle's opportunity to take advantage of it, remains the key mover of the stock.
Now what
Investors will get a read on conditions in its bromine and catalyst end markets when the company reports in August, and any pickup in EV vehicle production will be good news for the stock. Meanwhile, keep an eye on the progression, or not, of an infrastructure bill that includes taxpayer-funded subsidies for green energy.
