Chilean lithium producer Sociedad Química y Minera de Chile (SQM) is a leading lithium producer. Its stock has been outperforming the benchmark S&P 500 index lately, thanks to surging investor optimism around lithium stocks as the metal’s prices hover near their three-year highs. But, mixed sentiment from analysts means that the stock may not be able maintain its momentum. Read more to find out.Headquartered in Chile, Sociedad Química y Minera de Chile S.A. (SQM) produces lithium and its derivatives, iodine, and various specialty plant nutrients. The company’s lithium products have applications in electrochemical materials for batteries that power electric vehicles (EVs). Shares of SQM have gained 65.8% in price over the past year and 22.7% over the past three months, outperforming the benchmark S&P 500 index’s 32.4% and 6.1% returns, respectively.

The EV industry’s growing demand for lithium caused prices to reach three-year records on September 13. Given the limited availability of the metal and the rising demand, analysts predict a global shortage. This is due to the adoption of EVs by major economies. Regarding this, Benchmark Mineral Intelligence Analyst George Miller said, “Things are heating up and there is huge anxiety about where lithium supply is going to come from in the near future.”

Because countries worldwide are investing heavily to phase out fossil-fuel-powered vehicles and replace them with EVs, the demand for lithium is expected to remain strong for the foreseeable future. Consequently, surging lithium prices should boost SQM’s profit margins substantially in the near term.

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