Albemarle's (ALB) outlook is improving as firmer signs of a lithium market recovery emerge, with global inventories at their lowest levels since 2023 amid improving demand, keeping prices up, RBC Capital Markets said in a note Sunday.

The company raised its 2025 volume outlook to above 10%, up from the previous guidance of high end of 0% to 10% range, as output increased across its global conversion network, according to the note. Lithium prices have risen about 5% to 10% so far this year, supported by solid demand and slower supply growth, analysts said.

They now project earnings before interest, taxes, depreciation, and amortization of $1.01 billion in 2025 and $1.17 billion in 2026, with further improvement expected as lithium supply-demand dynamics continue to normalize.

RBC noted that about 45% of Albemarle's 2025 lithium salts will be sold under long-term contracts, while inventories of carbonate and hydroxide remain at multiyear lows. The global market surplus has narrowed to around 10% to 15%, with potential to tighten further by 2026, the firm said.

The firm added that Albemarle's sale of a 51% stake in Ketjen to KPS Capital Partners for $660 million should strengthen liquidity and support debt reduction.

RBC raised its price target to $120 from $117, and maintained its outperform rating on the stock.

Shares of Albemarle were up more than 5% in recent trading Monday.

Price: 102.16, Change: +4.98, Percent Change: +5.12