According to Keybanc, both stocks are likely to rise as China’s demand for lithium increases. Analyst Aleksey Yefremov upgraded chemicals makers Livent and Albemarle to Overweight from Sector Weight. Both upward revisions were related to improving demand for lithium in China following the economic downturn that began in November. Yefremov said inspections of China’s lithium industry showed that inventories at battery and electric vehicle OEMs were falling and could bottom out in the coming months. Meanwhile, purchase orders from big buyers are likely to resume in the near future. Spot lithium has turned from bullish to tight after bouncing off the bottom line of costs, he said. Yefremov noted that the spot price of lithium carbonate was up $3,977 a tonne, or about 17%, from the end of April. Sales of electric vehicles, which typically use lithium in batteries, are also rebounding from a slowdown in late 2022, he said. Yefremov said recent price cuts by original manufacturers for electric vehicles could further boost demand. Outside of EVs, demand for lithium remains strong, with Yefremov pointing to a nearly 200% increase in stationary shortages in the first quarter. He said the outlook for supply and demand next year should be “balanced”, helping to keep prices at current levels. Livent remains on track to expand its lithium offerings, which Yefremov said will help sales in the coming years. He also said there is less downside risk to Livent’s contract portfolio, which was announced this week in an all-stock merger with Allkem. Yefremov has a $30 price target on Livent, up 17.6 percent from the stock’s Wednesday close. For Albemarle, Yefremov said stable supply and demand could help EBITDA expansion. He said downside risk to the company is limited after the recent guidance cut. Albemarle is also likely to beat the consensus forecast for 2024, Yefremov said, as the cost of spodumene, used in products such as ceramics and enamels, catches up to cooling market prices. Yefremov’s $270 price target implies the stock could gain 38.8% over the next year from Wednesday’s close. “Albemarle has world-class resources at the bottom of the cost curve and the ability to nearly triple lithium production from 2023 over the next decade,” he said. — CNBC’s Michael Bloom contributed to this report.