Albermarle Stock Drops 10%. The Lithium Rally Is ‘Transitory.’

Albemarle produces lithium, a key component in lithium-ion batteries like the one above. (DENIS CHARLET/AFP via Getty Images)

Shares of lithium producer Albemarle fell on Monday. Investors were probably taking some profits.

Albemarle stock dropped 10.7% on Monday, closing at $74.77. The S&P 500 finished flat, and the Dow Jones Industrial Average dropped 0.1%.

Coming into the week, Albemarle was up almost 30% from April lows. Helping was a rally in benchmark lithium prices, which have risen this year from about $8,200 a metric ton to $10,300.

That’s still a far cry from peak levels. Lithium is a key component in the lithium-ion batteries that power electric vehicles made by Tesla and others.

In late 2022, when EV demand was outstripping EV supply, lithium traded above $80,000 a metric ton. Albemarle stock was above $300.

Why the Monday dip is still a good question. Scotiabank analyst Ben Isaacson wrote that the rally in lithium prices was “transitory.” Some lithium mines are expected to restart production soon, which would add supply and pressure prices.

That appears to be enough to have traders looking to lock in profits. Shares of Lithium Americas dropped 7.2%. China’s Ganfeng Lithium Group fell almost 3% in overseas trading.

Isaacson rates Albemarle stock Hold and has a $65 price target. Overall, 41% of analysts covering the company rate shares Buy, according to Bloomberg. The average Buy-rating ratio for stocks in the S&P 500 is about 55%. The average analyst price target for Albemarle stock is about $80.

Write to Al Root at allen.root@dowjones.com