Is It Too Late To Buy Lithium Stocks?

Is It Too Late To Buy Lithium Stocks? In the investment world, lithium is a hot element right now. From electric vehicles to smartphones, the element has a vast array of applications. But how do you gain exposure to upside in prices – can you buy lithium stock?

The short answer is that yes, you absolutely can buy all sorts of stocks and equities that are tied to lithium. In fact, there is quite a lot of choice available. You can look at lithium stocks by market or by region, or you can buy into an exchange traded fund (ETF) that tracks a basket of equities, where many or all of these may be based on lithium production, and even trade it during a market day.

It’s also an option to make a secondary play on companies related to the products that lithium is mined for. We’ll look at the biggest miners as a way of tethering to that investment option.

Why Are Lithium Stocks So Popular?

Lithium is popular now because it is a single commodity that’s powering a next-generation tech revolution.

That’s the electric car. Traders everywhere are seeing signs that the electric car industry is poised to take off in a big way.

For contrast, think about the production of smartphones. A few decades ago, nobody had a smartphone – now nearly all of us carry one at all times. In fact, if you wonder whether smartphones increased the demand for lithium, you guessed it – these devices use lithium batteries, too!

Smartphones took off quickly. That’s what people feel is going to happen with electric cars. Steadily and perhaps quickly, the car market is going to turn over, where a couple of decades from now, analysts expect the majority of drivers will be piloting electric vehicles.

It’s not a stretch to imagine. States like California have already mandated that all cars produced by 2035 are electric.

That demand, to put it simply, is explosive. It powers tremendous potential for stocks and equities based on lithium, because the lithium ion battery is key to the production of electric and hybrid vehicles.

Is Lithium A Good Buy?

Lithium is likely to expand greatly in demand as electric cars become more common on our streets. Specifically, some experts expect that demand for lithium will quadruple from 2020 to 2025.

Meanwhile, analysts looking at the allocation of mined lithium see that battery production is likely to constitute as much as 85% of lithium supplies in 2025, and 92% just five years later.

Lithium investments represent a unique opportunity right now – a choice that is relatively clear cut and easy to accept. It’s easy to see a positive roadmap for these stocks, because of the overwhelming evidence that electric cars are coming.

For years there have been emissions restrictions, new emissions goals, and other changes in auto production that favor hybrid and electric vehicles, and many believe we are now on the cusp of widespread adoption of electric cars, trucks, and SUVs.

Who Are The Biggest Lithium Suppliers?

When you think of “big lithium,” perhaps one firm that comes to mind is Albemarle (ALB).

This company has diversified holdings in operations – it also participates in bringing bromide materials to market for fire safety applications. With that in mind, a lot of Albemarle’s operations are based on lithium production and distribution.

Albemarle is widely considered the biggest lithium producer in the world, and has geographically dispersed operations in North America, Asia Europe and Africa.

For more on to what sorts of companies factor the most into lithium production, let’s look at a chart of the top five companies by market capital. First there’s Jiangxi Ganfeng Lithium with an estimated market cap of $27.3 billion, and then Albemarle with 16.7 billion.

Next there is Tianqi, with $11.7 billion, and Sociedad Quimica y Minera (SQM) valued at $6.3 billion. A firm called Mineral Resources Limited rounds out the top five list with a market cap of around $5.6 billion.

These are the biggest players in a lithium market that is potentially due for big gains in a relatively short time frame, if electric car growth projections are to be believed.

Is It Too Late to Buy Lithium?

Most of the experts who understand the value of lithium production would say that it’s nowhere near too late to be investing in lithium as a resource.

In fact, some of the most exciting news in the industry revolves around new ways to acquire bigger amounts of lithium to feed not only the electric vehicle market, but burgeoning markets for all sorts of electric gear using lithium ion batteries, from power tools to communications devices.

Companies are hard at work looking at new ways to get lithium from materials like hard rock, brine and clay sediment, and investigating how to balance the activities of mining and extraction with new methodology. Some companies are even using another company’s waste products to generate lithium, which is an interesting take on bringing new methods to market.

Although some detractors claim that high upfront capital costs will deter companies from this type of research and development, some of it clearly is underway and that could only be good for lithium stocks.

As more states adopt the CA 2035 initiative, it would be reasonable to expect demand for lithium and prices to rise accordingly. That doesn’t even factor in the international element. The likelihood is the trend will go global, certainly in Europe as a starting point. Already the UK has set a mandate for 2035 too and it’s unlikely Europe’s heads of state will want Britain to lead the pack alone following the Brexit fiasco. All these forces combined should be a boon for lithium for the foreseeable future.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.