Lithium has turn into one of the crucial in-demand commodities within the final decade. It was already helpful for lithium-ion batteries for electronics, however it’s actually EVs (Electrical autos) that boosted the demand.
One other rising sector is stationary storage, storing electrical energy in massive batteries for houses, business, and even the entire electrical grid.
China is the biggest market resulting from its concentrate on EVs, which signify 1 in 4 automobiles offered there. However an bold plan to ban ICE (Inner Combustion Engines) autos by 2035 within the EU and a few US states ought to increase demand within the West as properly.
This could improve lithium demand by 3x to 6x by 2030. Lithium costs have been extraordinarily risky just lately, going from a low of $7/kg in 2020 to a excessive of $80/kg on the finish of 2022, to the present $25/kg after a precipitous fall.
Greatest Lithium Shares
Most trendy batteries use lithium in a single type or one other. Whereas we are able to talk about if cobalt or different battery metals will nonetheless be wanted in newer generations (stable state, iron phosphate batteries), it’s possible that each lithium and copper will likely be required in large quantities for batteries.
So let’s take a look at one of the best lithium shares.
These are designed as introductions, and if one thing catches your eye, you’ll wish to do further analysis!
1. Sociedad Química y Minera S.A (SQM)
| Market Cap | $18.1B |
| P/E | 4.65 |
| Dividend Yield | 16.63% |
SQM is the world’s largest lithium producer whereas additionally being energetic in a couple of different sectors.
It’s an more and more environment friendly enterprise, planning to scale back lithium brine extraction by 50% by 2030, and water utilization by 50% by 2025.
Most of its manufacturing comes from Chilean mines, with growth plans in China and Australia.
The corporate seems optically low cost however has been within the highlight resulting from the latest proposal in April 2023 of Chile to nationalize the lithium business, an alarming concept for any mining enterprise. The present licensing contract for SQM might expire by 2030, and lithium miners should settle for private-public partnerships.
So this can be a inventory for worth traders prepared to take a big leap of religion that the following 6 years of absolutely owned manufacturing, and no matter comes after, is justified by the present valuation.
2. Albemarle (ALB)
| Market Cap | $20.6B |
| P/E | 7.71 |
| Dividend Yield | 0.92% |
Abermale is the opposite massive Chilean lithium producer. As a consequence of its lithium licensing contract working as much as 2043, it’s much less affected by the nationalization plans. The corporate has even declared to be open to an early renegotiation.
The corporate additionally has slightly extra room for change because it produces lithium in North America and Australia as properly. Chilean manufacturing was 10,000 tons in 2022 versus 22,000 tons in Australia and a pair of,000 tons within the USA.
Abermale additionally refines lithium, with conversion capability anticipated to triple by 2027.
Its $3.2B debt at a mean of 4% rate of interest could be seen as a safety in opposition to inflation and rising charges.
3. Ganfeng Lithium Group Co., Ltd. (GNENF)
| Market Cap | $17.8B |
| P/E | 4.36 |
| Dividend Yield | 0.66% |
This can be a Chinese language firm based in 2000 that has massively benefited from the demand for lithium in China. It’s the largest lithium producer in China and the third largest on the earth. It is usually the second-largest refiner of lithium on the earth.
Most of its income comes from lithium, even when the battery enterprise represents 1/3 of yearly revenues in 2022 (down in percentages from 2021 resulting from exceptionally excessive lithium costs).
1/3 of the corporate’s revenues are made abroad, with the remainder in China.
It is usually growing a recycling exercise that’s poised to continue to grow over the following years, with extra EVs reaching the tip of their life cycle.
Its management in China and the Chinese language lithium business is a power as a result of nation’s significance within the lithium market. It is usually a weak spot, with rising tensions and accusations thrown at Chinese language corporations, just like the latest declaration of Justin Trudeau that “China makes use of slave labor in lithium manufacturing”. So the corporate carries vital geopolitical danger, completely different from the nationalization danger of Chilean miners.
4. Piedmont Lithium Inc. (PLL)
| Market Cap | $1.01B |
| P/E | – N/A |
| Dividend Yield | – N/A |
With jurisdiction (Chile) or geopolitical danger (China), some traders will favor to maintain their lithium investing at dwelling. This additionally goes alongside the pattern of eager to “carry again dwelling” key industries, just like the EV provide chain.
The corporate’s precedence is 2 mines in improvement within the USA, in Tennessee and North Carolina, for a complete of 60,000 tons per yr of projected manufacturing. Piedmont additionally has a 50% participation in a mine in Ghana projected at 255,000 tons of manufacturing and a 25% in a Quebec mine projected at 190,000 tons of manufacturing.
The Quebec mine is anticipated to begin manufacturing in 2024, and the opposite mines ought to be producing in 2025-2027. It is going to want additional financing to complete constructing the Tennessee mine.
The corporate expects to have the ability to make a revenue so long as lithium costs keep above their pre-2021 common.
Between mines nonetheless in improvement and comparatively excessive manufacturing prices, Piedmont avoids geopolitical danger however will want excessive lithium costs to remain worthwhile. So that is for traders optimistic concerning the future want for lithium however afraid of worldwide dangers.
5. Pilbara Minerals Restricted (PILBF)
| Market Cap | $8.4B |
| P/E | 7.58 |
| Dividend Yield | 5.23% |
Pilbara is an Australian firm proudly owning the world’s largest hard-rock deposit of lithium (in opposition to the brines within the lithium triangle between Argentina-Chile-Bolivia).
The corporate has anticipated reserves of 25+ years. Present manufacturing is 580,000 tons per yr, with a progressive growth deliberate to achieve 1-1.3 Mtpa.
The corporate has been distributing a big a part of its 2022 windfall revenue, in addition to utilizing the cash to build up money that can be utilized to finance the deliberate extension. Whereas probably not worthwhile, operations have been cashflow optimistic on the depressed costs of 2020.
The corporate can be investing in a 43,000 tpa refining facility in South Korea.
6. Vulcan Power Sources Restricted (VUL.AX)
| Market Cap | $739M |
| P/E | – N/A |
| Dividend Yield | – N/A |
Most lithium corporations are required for the inexperienced transition. And they’re working exhausting at lowering their environmental footprint from water and power consumption to carbon emissions. However few are as “inexperienced” because the idea behind German Vulcan Power.
The core concept is to supply power by means of geothermal whereas additionally extracting lithium from the geothermal brines. The warmth power created can be utilized to energy the lithium extraction carbon-free and/or be offered to the market, both as warmth (Germany has a variety of district heating services) or as energy. You’ll be able to learn concerning the technical particulars within the devoted presentation.
The challenge is positioned within the Rhine Valley, north of Strasbourg. This could produce sufficient warmth/energy for 1 million individuals and sufficient lithium for 1 million EVs per yr.
In 2022 the corporate secured $76M from Stellantis (Peugeot, Citroen, Opel,…) and $177M from chemical firm Nobian GmbH on April 2023. As well as, offtaking agreements have been signed with LG, Volkswagen, Renault, and Umicore.
The backing of European business leaders is making the potential lithium miner safer and may flip it right into a key a part of the EU plans to carry dwelling the EVs provide chain. Manufacturing and ramping up ought to begin on the finish of 2025 or 2026.
This can be a good match for traders in search of a really inexperienced lithium producer whose prices are unbiased of each world power costs and whose provide is safely positioned within the coronary heart of European business.
Greatest Lithium ETFs
In a sector rising as rapidly and as risky as lithium (it barely mattered a decade in the past), diversification could be essential. So that you could be taken with ETFs concentrating on the sector as a complete.
1. World X Lithium & Battery Tech ETF (LIT)
This ETF invests in each lithium producers and the principle customers of lithium, battery producers. Its high holdings embody Albemarle, Panasonic, BYD, Telsa, Samsung, and many others…, with publicity to China for 39% of the ETF and 22% to the USA.
2. VettaFi Amplify Lithium & Battery Expertise ETFF (BATT)
Extra targeted on batteries, this ETF additionally consists of lithium producers and miners of different battery metals like BHP, Glencore, and Albemarle. It may be engaging for traders in search of publicity to the EV provide chain however wanting to scale back the volatility resulting from lithium worth fluctuations.
Conclusion
Battery demand is right here to remain, with even essentially the most skeptical admitting that EVs, or on the very least hybrid autos, are possible the way forward for mobility in the long run. Lithium is on the core of each battery expertise resulting from its distinctive chemical properties, so it’s right here to remain as properly.
So traders could be to get publicity to this key commodity with a powerful consideration to each valuations and jurisdiction/geopolitical danger.