With the advancement of the clean energy market and particularly the rise of electric vehicles, lithium is increasingly in demand, even as global supplies are getting harder to come by.
All told, the global lithium market stood at $7.5 billion in 2022, and is expected to rise by a compound annual growth rate of 12.3% between 2023 and 2030, according to Grand View Research.
That growth is fueled by the electrification of vehicles, which is “projected to attract a significant volume of lithium ion,” Grand View states. “The automotive application segment is expected to witness substantial growth over the forecast period, driven by stringent regulations for automakers imposed by government bodies to reduce carbon dioxide emissions from vehicles.”
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Government subsidies for EVs are expected to act as an additional booster of growth in the lithium market, Grand View adds.
On the downside, inventory may be a problem with lithium by 2025, especially in China, as global shortages may counteract rising demand for the commodity, BMI Research reports.
“We expect an average of 20.4% year-on-year annual growth for China’s lithium demand for EVs alone over 2023-2032,” BMI states. However, China’s lithium production is only expected to grow by 6% in that time frame.
With a volatile lithium market at hand and as demand for the battery power source skyrockets, some companies will be in a better position than others to take advantage.
These companies and their beaten-down stocks, as well as some lithium-focused ETFs, are particularly well positioned to profit from a rebound as demand rises and supply tightens:
| Stock | YTD return as of Oct. 4 | 3-month return as of Oct. 4 |
| Albemarle Corp. (ticker: ALB) | -26.5% | -30.8% |
| Mineral Resources Ltd. (OTC: MALRY) | -23.4% | -15% |
| Livent Corp. (LTHM) | -12.5% | -38.4% |
| Lithium Americas Corp. (LAC) | -38.2% | -42.6% |
| Sigma Lithium Corp. (SGML) | 5.9% | -25.1% |
| Horizons Global Lithium Producers Index ETF (HLIT.TO) | -14.9% | -27.8% |
| Global X Lithium & Battery Tech ETF (LIT) | -9.2% | -20.7% |
Albemarle Corp. (ALB)
This Charlotte, North Carolina-based chemicals provider stands as one of the largest producers of lithium in the world in late 2023. Yet storm clouds have gathered over Albemarle after a foreign bribery probe resulted in a $218 million fine against the company related to violations of the Foreign Corrupt Practices Act.
The finding, along with a downward price correction in lithium products, was a sore spot for some investors, resulting in a 30.8% decline in ALB stock over the past three months as of Oct. 4.
Still, Albemarle’s burgeoning reputation as the world’s most valuable lithium manufacturer, with a market capitalization of $17.9 billion, gives it plenty of momentum as the market for EV batteries explodes.
Thanks to a recent internal lithium conversion capacity expansion, ALB says its lithium sales volume should grow by 20% to 30% through 2027, making it a solid longer-term lithium stock to buy.
Mineral Resources Ltd. (OTC: MALRY)
This Perth, Australia-based mineral properties miner and processor is one of the lithium market’s more robust dividend bets, with a solid 2.9% forward yield.
The company’s stock has slid by 15% in the past three months, mostly due to lower lithium prices, a trend that’s expected to revert as demand for lithium rises and supply wanes in the next 12 to 24 months.
The company’s deal with Albemarle involves the U.S. company paying Mineral Resources $380 million to $400 million to expand its partnership in the Wodgina lithium mine in Australia to 50% from 40%, with Mineral Resources owning the remaining 50%. The mine is one of the largest-known hard-rock lithium deposits in the world and has an estimated mine life of 30 years or more, giving Mineral a long runway to capitalize on the worldwide demand for lithium.
Mineral Resources also owns half of the Mt. Marion lithium operation in Western Australia, along with China-based Ganfeng Lithium Group Co. Ltd. (OTC: GNENF), one of the largest lithium mining companies in the world.
This ownership stake, along with the Australian company’s partnership with Albemarle, offers some risk mitigation.
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Livent Corp. (LTHM)
Livent is currently trading near 52-week lows and its share price is down 38.4% over the past three months as of Oct. 4. That’s generally not a green light for profit-minded investors.
But savvy investors know how to see a green beacon in the distance, and that could be the case with Livent, a producer of lithium hydroxide, lithium carbonate and lithium chloride. In particular, the company brings a six-year supply agreement with General Motors Co. (GM) to the table, with the partnership expected to deliver lithium hydroxide starting in 2025.
Livent also has a deal with Ford Motor Co. (F) to deliver 13,000 metric tons of lithium hydroxide per year for 11 years, and it has partnered with Sakuu Corp. to manufacture 3D printable lithium-ion batteries, which could eventually be a game-changer for the entire industry.
The company is also merging with Allkem Ltd. (OTC: OROCF), a multinational company with lithium brine operations in Argentina, a hard-rock lithium operation in Australia and a lithium hydroxide conversion facility in Japan.
The combined company, which reported sales of about $1.9 billion last year and adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, of about $1.2 billion, could produce about 250,000 metric tons of lithium carbonate equivalent per year by 2027.
Lithium Americas Corp. (LAC)
With EV sales more than tripling in the last three years and with a 35% year-over-year boost in EV sales, investors shouldn’t get too discouraged over the short-term trend of lower lithium prices. That’s the case even as Benchmark Mineral Intelligence’s global weighted average lithium-ion battery cell price is down 33% from March 2022.
The fact is that the lithium production sector has skilled and knowledgeable companies like Lithium Americas that are able to ride out the current dip in raw lithium products and will be ready to roll in 2024.
Lithium Americas, like several industry companies, has inked pacts with major auto industry manufacturers to secure lithium supplies in the coming years. General Motors is backing Lithium Americas with a $650 million lithium development bankroll, and the U.S. Department of Energy is in discussions to lend Lithium $1 billion to boost lithium battery product development.
That cash would come in handy given Lithium owns one of the world’s potentially richest lithium deposits, at the Nevada-Oregon border. The tract could hold 20 million to 40 million metric tons of lithium, which would make it the largest single deposit area in the world.
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Sigma Lithium Corp. (SGML)
This Vancouver, British Columbia-based lithium producer with a big position in the Minas Gerais region of Brazil is one of the few lithium producers with shares in the black year to date, as its stock price is up 5.9% so far in 2023.
SGML says it’s been approached by several firms looking to acquire the company; Tesla Inc. (TSLA) was reported to be one of them. The proposals are coming from multiple strategic partners, “including global industry leaders in the energy, auto, batteries and lithium-refining industries,” according to the company.
The company is also firing on all cylinders in phase one of its lithium production plan, as it’s set to produce an estimated 130,000 metric tons of lithium in 2023 and is on track to become one of the world’s largest lithium producers.
Analysts weighing in on TipRanks call SGML a “strong buy” with an average price target of $47.75 per share. The stock closed at $29.88 per share on Oct. 4.
Horizons Global Lithium Producers Index ETF (HLIT.TO)
An exchange-traded fund, or ETF, can be a solid way to play the lithium production market, offering investors the chance to own multiple companies packaged in a single fund. That scenario offers investors diversification between individual companies with various fundamentals and geographic concentrations.
The Horizons fund does just that, as it targets global companies that mine or produce lithium, lithium compounds and lithium-related components.
Its largest position is in Mineral Resources Ltd. (MIN.AX), which accounts for 12.1% of its portfolio, followed by Pilbara Minerals Ltd. (OTC: PILBF) (10.6%), owner of the Pilgangoora lithium project, one of the largest hard-rock lithium operations in the world. The fund also holds shares in Albemarle, Livent and Sigma Lithium, which account for 8.7%, 6% and 5.9% of the ETF’s portfolio, respectively.
The fund, traded on the Toronto Stock Exchange, has an expense ratio of 0.89% and an annualized distribution yield of 2.2% as of Oct. 4. It’s on the smaller side for an ETF, holding $25.3 million in net assets.
Global X Lithium & Battery Tech ETF (LIT)
Global X is another worthwhile lithium industry ETF, especially since the U.S. government has poured billions of dollars into the clean-technology industry in recent years.
LIT holds $2.5 billion in assets and has significant positions in industry heavyweights such as Albemarle (8% of its portfolio), Tesla (7.9% of the portfolio) and Rivian Automotive Inc. (RIVN) (7.2%). All these companies have benefited from the recently enacted CHIPS and Science Act ($280 billion in new funding) and the Inflation Reduction Act ($580 billion in new funding). The ETF has an expense ratio of 0.75%.
ETFs like LIT can provide asset diversification across different parts of the lithium supply chain, which can provide cushioning against lithium price volatility. For example, if prices fall, that’s a negative for producers but a positive for companies that buy lithium to make value-added products.
By owning mining, refinery and battery production companies in the fund, Global X has its fingers in multiple parts of the lithium industry “cutting across traditional sector and geographic definitions,” the fund’s website says.
Thus, lithium ETFs can be a great way to invest in a high-growth industry that produces what Tesla CEO Elon Musk calls “the new oil.”
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7 Best Lithium Stocks and ETFs to Buy Now originally appeared on usnews.com
Update 10/05/23: This story was previously published at an earlier date and has been updated with new information.
