It's been a difficult few years for lithium and bromine production company Albemarle (ALB 2.55%). A weaker-than-expected electric vehicle (EV) battery market (as EV sales have disappointed compared to expectations) caused falling lithium prices and a market oversupply.
However, its end-market conditions are likely to turn in a big way in 2026. Here's why.
Albemarle's earnings
The chart below shows Albemarle's earnings before interest, taxes, depreciation, and amortization (EBITDA) over the last few years, along with the Wall Street analyst consensus estimates for the 2025-2027 period.
The drop in 2024 and 2025 is due to the crash in lithium prices, as the rate of growth in EV investment slowed following the previous boom, while automakers rushed to increase EV investment during the lockdowns.
Data source: marketscreener.com
However, as the chart also indicates, analysts see a sharp recovery in earnings, driven by a lithium market recovery, and management refocusing the business on its core strategy after divesting stakes in refining catalyst and catalyst services businesses worth about $660 million.
At the same time, management believes that cost and productivity actions are expected to deliver $450 million in cost reduction, ahead of an initial target of $300 million to $400 million. The cost cuts and cash-raising divestitures will enable Albemarle to invest in potential expansion in lithium production, while securing its balance sheet.
A lithium price recovery will boost Albemarle's prospects
Analyst expectations are fine and worthy, but it's also important to understand why they are turning bullish on the company. In reality, Albemarle will never escape the orbit of lithium prices.
Here's the good news: The price of lithium carbonate in China (the key driver of lithium demand) has increased by 51% over the last month and 85% over the last year.
Image source: Getty Images.
The move appears to have legs and is driven by a mix of growing energy storage demand (Albemarle's energy storage volumes have been better than expected in 2025), data center demand, and large-scale battery demand.
In addition, ongoing strength in the Chinese EV market and the potential for at least a stabilization in U.S. and European EV battery investment support further lithium price improvement. Looking longer term, the International Energy Agency (IEA) expects a 40% lithium supply shortfall in 2035 under current policies.
NYSE: ALB
Key Data Points
Higher risk, higher reward
Albemarle's divestitures have reduced risk; the growing importance of demand from China has arguably increased risk in Albemarle's business. One reason comes down to the fact that China's lithium market is a spot market (the commodity is sold immediately at a cash price rather than on a contract price), and the shift in importance of China means that about 50% of Albemarle's sales were at spot prices in 2025 compared to about 33% in 2024.
That shift increases Albemarle's exposure to the spot market for lithium, and while investors often focus on downside risks, there's also significant upside to Albemarle's earnings if lithium prices rise through 2026, driven by booming energy storage demand.
