China Plans to Sideline Lithium Competition. Albemarle Stock Rises.

The Albermarle Corp. lithium processing facility in Antofagasta, Chile. (Cristobal Olivares/Bloomberg)

Shares of lithium producer Albemarle rose on Friday after China announced plans to curb competition in several industries, according to FactSet.

The plan includes industries involved in creating batteries for electric vehicles, which lithium is a key component in. Albemarle stock closed up 2.9% at $81.54, while the and fell 0.3% and 0.5%, respectively.

China has recently been trying to manage capacity in some of its critical industries. In August, the Chinese Ministry of Industry and Information Technology announced plans to stabilize the country’s steel industry. That plan called for no increase in steel capacity and an improvement of the product mix. China is the world’s largest steel producer.

The country is also the largest producer of EV batteries and one of the largest producers of lithium. China is big enough to influence global commodity markets, and its plan aims to rein in excess capacity that has punished profits along the EV supply chain.

Albemarle earned $2.5 billion in 2022 operating profit when the market for lithium was tighter: EV demand was ramping up, and commodity producers struggled to keep up. It is expected to earn $1 million in operating profit this year, according to FactSet.

For comparison, China’s Ganfeng Lithium earned $3.3 billion in 2022 operating profit. It is expected to earn $137 million in 2025.

Contemporary Amperex Technology earned $5.2 billion in 2022 operating profit. CATL, which is the world’s largest EV battery maker, is expected to earn $10.7 billion in 2025. Lithium is a cost input for CATL, so it initially benefited from lower lithium prices. But it recently had to curtail its lithium production because of low prices. That helped send shares of Albemarle up 20% over the past month.

Capacity reductions have sent benchmark lithium prices to about $10,000 a metric ton from recent lows of about $8,500. Lithium peaked at about $85,000 in Nov. 2022. Albemarle stock peaked at $334.55 in the same month.

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