Lithium has change into one of the vital in-demand commodities within the final decade. It was already helpful for lithium-ion batteries for electronics, however it’s actually EVs (Electrical automobiles) that boosted the demand.
One other rising sector is stationary storage, storing electrical energy in massive batteries for properties, business, and even the entire electrical grid.
China is the biggest market as a consequence of its concentrate on EVs, which signify 1 in 4 automobiles bought there. However an bold plan to ban ICE (Inside Combustion Engines) automobiles by 2035 within the EU and a few US states ought to enhance demand within the West as nicely.
This could improve lithium demand by 3x to 6x by 2030. Lithium costs have been extraordinarily unstable not too long ago, 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 kind or one other. Whereas we will focus on 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 can be required in huge quantities for batteries.
So let’s have a look at the perfect lithium shares.
These are designed as introductions, and if one thing catches your eye, you’ll need to do extra 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 number 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 appears optically low-cost however has been within the highlight because of the current proposal in April 2023 of Chile to nationalize the lithium business, an alarming thought for any mining enterprise. The present licensing contract for SQM may expire by 2030, and lithium miners must settle for private-public partnerships.
So this can be a inventory for worth traders prepared to take a big leap of religion that the subsequent 6 years of totally 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 result 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 a bit extra room for change because it produces lithium in North America and Australia as nicely. 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 may be seen as a safety towards inflation and rising charges.
3. Ganfeng Lithium Group Co., Ltd. (GNENF)
| Market Cap | $17.8B |
| P/E | 4.36 |
| Dividend Yield | 0.66% |
It is 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 this planet. Additionally it is the second-largest refiner of lithium on this planet.
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 as a consequence of exceptionally excessive lithium costs).
1/3 of the corporate’s revenues are made abroad, with the remainder in China.
Additionally it is creating a recycling exercise that’s poised to continue to grow over the subsequent years, with extra EVs reaching the top of their life cycle.
Its management in China and the Chinese language lithium business is a power because of the nation’s significance within the lithium market. Additionally it is a weak point, with rising tensions and accusations thrown at Chinese language corporations, just like the current declaration of Justin Trudeau that “China makes use of slave labor in lithium manufacturing”. So the corporate carries important 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 choose to maintain their lithium investing at dwelling. This additionally goes alongside the development of desirous to “convey 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 predicted to start out manufacturing in 2024, and the opposite mines must 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 in regards to 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 had 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 Vitality Assets 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 onerous at decreasing their environmental footprint from water and vitality consumption to carbon emissions. However few are as “inexperienced” because the idea behind German Vulcan Vitality.
The core thought is to supply vitality by means of geothermal whereas additionally extracting lithium from the geothermal brines. The warmth vitality created can be utilized to energy the lithium extraction carbon-free and/or be bought to the market, both as warmth (Germany has a variety of district heating services) or as energy. You may learn in regards to the technical particulars within the devoted presentation.
The venture is situated within the Rhine Valley, north of Strasbourg. This could produce sufficient warmth/energy for 1 million folks 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 possible lithium miner safer and may flip it right into a key a part of the EU plans to convey dwelling the EVs provide chain. Manufacturing and ramping up ought to begin on the finish of 2025 or 2026.
It is a good match for traders searching for a very inexperienced lithium producer whose prices are impartial of each world vitality costs and whose provide is safely situated within the coronary heart of European business.
Greatest Lithium ETFs
In a sector rising as rapidly and as unstable as lithium (it barely mattered a decade in the past), diversification may be crucial. So that you could be concerned with ETFs focusing on the sector as an entire.
1. International X Lithium & Battery Tech ETF (LIT)
This ETF invests in each lithium producers and the primary customers of lithium, battery producers. Its high holdings embody Albemarle, Panasonic, BYD, Telsa, Samsung, and so on…, 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 searching for publicity to the EV provide chain however wanting to scale back the volatility as a consequence of lithium value fluctuations.
Conclusion
Battery demand is right here to remain, with even probably the most skeptical admitting that EVs, or on the very least hybrid automobiles, are possible the way forward for mobility in the long run. Lithium is on the core of each battery expertise as a consequence of its distinctive chemical properties, so it’s right here to remain as nicely.
So traders could be to get publicity to this key commodity with a powerful consideration to each valuations and jurisdiction/geopolitical danger.
