Why Lithium Stocks SQM and Albemarle Soared 7% and Nearly 5% Today

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What happened

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Shares of the world's biggest lithium players -- Sociedad Quimica y Minera de Chile (NYSE: SQM), or SQM, and Albemarle (NYSE: ALB) -- jumped 7% and 4.7%, respectively, on Monday.

This brings their year-to-date 2017 returns to a torrid nearly 86% and 45%, respectively. For context, the S&P 500 has returned 12.7% so far this year.

So what

We can probably attribute the rise in the stock prices of SQM and Albemarle to reports that a Chinese government official said over the weekend that China had started looking at banning the production of petroleum-fueled cars. Such a ban would give a boost to electric vehicles -- and lithium is an essential component in the lithium-ion batteries used in EVs. Reports didn't indicate a timeline for such a ban.

This news out of China is no doubt the biggest driving force behind Monday's movements in SQM and Albemarle. However, SQM stock may also still be getting a lift from Reuters' report in July that Chinese private-equity firm GSR Capital is looking at buying a substantial stake in the Chilean lithium producer. 

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Now what

If this ban comes to fruition -- and my guess is that it will -- it will be great news for the electric-vehicle space, which includes EV makers, lithium producers such as SQM and Albemarle, and others. China is the world's largest auto market, so a ban on producing gasoline and diesel-fueled cars could give the already powerful electric vehicle movement a huge charge. 

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Beth McKenna has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.