Lithium, nicknamed “white gold,” is making waves across the business and financial markets due to its standing as a critical component in rechargeable batteries. Its use in charging smartphones over the years has raised its profile, but lithium is also sparking interest these days for its role in powering electric vehicles.
Not all the news coming out of the EV market is boosting lithium’s fortunes in early 2024. A rising supply of lithium mined in Africa and Australia is tamping down prices, while reports of lower consumer demand for EVs in the U.S. and China may drive lithium prices down even further.
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There’s also a recent report on a new substance, discovered by artificial intelligence in a collaboration between Microsoft and the Pacific Northwest National Laboratory, that could reduce lithium use by up to 70%. The solid-state electrolyte, known as N2116, is in the prototype phase and needs to be tested more thoroughly before any commercial release occurs. However, the report says it could lower lithium’s use for charging EVs, phones and other products in the years to come.
Meanwhile, benchmark lithium exchange-traded funds, or ETFs, have been underperforming of late. Consider that the Global X Lithium & Battery Tech ETF (ticker: LIT), with $2.1 billion in net assets, is down 10% on a year-to-date basis and down 27.9% over the past year as of Jan. 16.
How is the latest news impacting the biggest lithium stocks in 2024? Here’s a look at the six most promising lithium stocks and ETFs and how they stack up in mid-January. These beaten-down stocks and lithium-focused ETFs are particularly well positioned to profit from a rebound when demand eventually rises and supply tightens:
| Lithium stock/ETF | YTD return as of Jan. 16 | 3-month return as of Jan. 16 |
| Albemarle Corp. (ALB) | -12.8% | -24.7% |
| Mineral Resources Ltd. (OTC: MALRY) | -18.6% | 0.2% |
| Arcadium Lithium PLC (ALTM) | -69.8% | -70.3% |
| Lithium Americas Corp. (LAC) | -18.6% | -44.2% |
| Horizons Global Lithium Producers Index ETF (HLIT.TO) | -17.6% | -20.8% |
| Global X Lithium & Battery Tech ETF (LIT) | -9.8% | -12.8% |
Albemarle Corp. (ALB)
Like lithium ETFs, Charlotte, North Carolina-based Albemarle has been on a downward slide, with its share price down 12.8% in the first two weeks of January and down 47.8% over the past year.
A big part of the problem impacting ALB and other battery stocks is reduced demand from consumers, which has caused EV automakers like Tesla Inc. (TSLA), Ford Motor Co. (F), General Motors Co. (GM) and Rivian Automotive Inc. (RIVN) to curb production. Additionally, Toyota Motor Co. (TM) has slashed its EV sales forecast by 40% in 2024 due to lower demand in China.
That’s a significant concern for Albemarle, which specializes in the development, manufacturing and marketing of chemicals for consumer electronics and battery charging units, among other uses. Yet with rising EV sales a long-term matter of not if, but when, lower battery demand should only be temporary, allowing growth-minded investors to buy a solid long-term lithium stock on a big dip.
ALB still has a huge contract to sell Ford 100,000 metric tons of lithium hydroxide for batteries starting in 2026. A similar deal with construction equipment giant Caterpillar Inc. (CAT) is also in the works.
Toss into the mix the U.S. Department of Transportation’s Jan. 11 announcement of $623 million in grants to boost the U.S. charging network, as well as EV industry revenues expected to top $623 billion in 2024, and it may not be a good idea to ignore one of the world’s biggest lithium battery plays.
Mineral Resources Ltd. (OTC: MALRY)
This Perth, Australia-based mining and processing mineral properties company is one of the lithium market’s more robust dividend bets, with a solid 3.1% forward yield, and that may be enough to get an income-minded investor’s attention.
The stock also may be headed for an upswing in 2024. A FactSet consensus forecast from 18 market analysts leans toward “overweight” on MALRY, with a target price of $70.41 per share. (MALRY stock closed at $40.04 per share on Jan. 16.)
One reason for the upbeat outlook is that MALRY does a good job of partnering with industry leaders to open up more mining opportunities. Exhibit A is Mineral Resources’ investment deal with lithium business Kali Metals (KM1.AX). The company holds 1,488 square miles of land in lithium-rich Western Australia, much of it reportedly on or near lithium deposits with existing infrastructure to extract that lithium.
Kali debuted in early January on the ASX exchange to much fanfare, backed by Australian billionaires, and Mineral Resources has recently taken a 10% stake in the company.
While Mineral Resources has plans to mine more lithium, it has proven its ability to piggyback on established mining sites where the likelihood of successful lithium mining outcomes is fairly high.
The company already has a deal with Albemarle that pays Mineral $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, alongside China-based Ganfeng Lithium Group Co. Ltd. (OTC: GNENF), one of the largest lithium mining companies in the world.
For its strong dividend and robust deal-making ability alone, MALRY deserves a closer look by investors in a promising, but volatile, lithium market in 2024.
Arcadium Lithium PLC (ALTM)
Formerly known as Livent and now called Arcadium Lithium after Livent’s Jan. 4 all-stock merger with Allkem, this pure-play lithium stock may need some time to get its act together as the new partnership develops.
On the upside, Arcadium holds 7% of the lithium industry market share, and it should also benefit from Livent’s previously inked deal with General Motors Co. (GM), with the partnership expected to deliver lithium hydroxide starting in 2025.
Livent also had a deal in place 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.
Industry analysts are already initiating coverage on the new ALTM, and the long-term outlook is highly favorable. For instance, BMO Capital issued a “market perform” call on Jan. 10, and the consensus one-year price target is $71.40 per share, according to Fintel. ALTM stock closed at $5.43 on Jan. 16, so that represents massive upside potential.
The lithium provider should be, as new CEO Paul Graves says, “one of the leading producers of lithium chemicals in the world” once it finds its footing.
[READ: 7 Best EV Stocks to Buy in 2024]
Lithium Americas Corp. (LAC)
This 16-year-old company based in Vancouver, Canada, is on the move after a tough last quarter of 2023.
The company has a major stake in Thacker Pass, one of the largest lithium resources in the U.S. Thacker Pass, currently valued at about $5.7 billion, is fully permitted and comes with a 40-year mine life, giving lithium investors a domestically qualified long-term investment.
Lithium Americas has partnered with General Motors, which has made a $650 million investment in its Thacker Pass endeavor, giving Lithium Americas a powerful funding partner on a long-hail lithium mining project. Construction on Thacker Pass is set for June 2024, while lithium mining is expected to begin in 2026. 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.
Horizons Global Lithium Producers Index ETF (HLIT.TO)
An 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.
A lithium ETF is also a worthy bet if you believe the lithium market is on a path of significant upward mobility. The data shows that scenario should be the case going forward.
The global lithium market stood at $22.2 billion in 2023 and is expected to rise to $89.9 billion by 2030, according to Fortune Business Insights. Additionally, worldwide lithium production is expected to rise from 964,000 metric tons in 2023 to $1.2 million metric tons in 2024, signaling a further increase in overall lithium industry activity.
The Horizons fund, launched in June 2021, looks to leverage that situation, targeting global companies that mine or produce lithium, lithium compounds and lithium-related components.
Its largest position is in Mineral Resources, which accounts for 12.2% of its portfolio, followed by Pilbara Minerals Ltd. (OTC: PILBF), owner of the Pilgangoora lithium project, one of the largest hard-rock lithium operations in the world, at 11.4%. The fund also holds shares in Albemarle, Arcadium and Sigma Lithium Corp. (SGML), which account for 9.2%, 8.8% and 6.6% of the ETF’s portfolio, respectively.
The fund, which trades on the Toronto Stock Exchange, has an expense ratio of 0.89% and an annualized distribution yield of 3.1% as of Jan. 16. It’s on the smaller side for an ETF, holding $27 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 has significant positions in industry heavyweights such as Albemarle (9.6% of its portfolio), Tesla (4%) and Mineral Resources (4.4%). All these companies have benefited from the billions in funding freed up by the recently enacted CHIPS and Science Act and the Inflation Reduction Act.
ETFs like LIT can provide asset diversification across different parts of the lithium supply chain, which can cushion 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, especially with a key focus on China (about 37% of fund exposure) and the U.S. (21%), Global X has 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.”
The ETF has an expense ratio of 0.75%.
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6 Best Lithium Stocks and ETFs to Buy in 2024 originally appeared on usnews.com
Update 01/17/24: This story was previously published at an earlier date and has been updated with new information.
