Why Albemarle Stock Crashed 10% Friday

What happened

Lithium investors are having a bad day Friday, as reports out of Chile that President Gabriel Boric intends to nationalize the Chilean lithium industry devastate shares of lithium companies with interests in the country.  

This is bad news for investors in lithium stock Albemarle (ALB 4.02%), shares of which are down 10.4% as of 3 p.m. ET on the news. There's good news for Albemarle investors, too, however.

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NYSE: ALB

Albemarle

Today's Change

(-4.02%) $-6.56

Current Price

$156.70

Key Data Points

Market Cap

$18B

Day's Range

$154.69 - $164.20

52wk Range

$49.43 - $206.00

Volume

2.9M

Avg Vol

2.8M

Gross Margin

13.06%

Dividend Yield

1.03%

So what

Specifically, the good news is that while Albemarle may be hurt by Chile's action, it won't be hurt as badly as Sociedad Quimica y Minera de Chile (SQM 4.69%), another lithium miner that's seeing its shares devastated today. Both companies, you see, are now staring down the risk that Chile's government will confiscate their assets in the country, pay less than these assets are worth in compensation (or not pay compensation at all), and thus render their businesses significantly less valuable than they were just 24 hours ago.

However, in contrast to SQM, which has 79% of its assets in Chile -- and is thus under threat of imminent nationalization -- only 26% of Albemarle's assets are in the country, according to data from S&P Global Market Intelligence. This means that Albemarle faces significantly less risk from this action than SQM does.

Now what

Indeed, with the majority of its assets outside Chile, and in "safer" locations (gauged by political risk) such as the United States and Australia, it's possible that this week's action by Chile's government might make Albemarle look like a relatively more attractive investment than SQM, thus potentially benefiting the stock in the long run.

Elsewhere in the industry, companies like Lithium Americas (LAC +0.00%), which has mines in both Nevada (low political risk) balancing out its holdings in Argentina (higher risk) and Piedmont Lithium (PLL +0.00%), with assets in North Carolina, could benefit even more from Chile's actions.

If you're an investor in lithium stocks, right now any of these alternatives must look more attractive than an investment in Sociedad Quimica y Minera de Chile -- and you have President Gabriel Boric to thank for that.