New to Investing in Lithium? Start With This Overview of the Sector
Lithium is a soft, silvery-white metal that has the lowest density among metals. While abundant, lithium does not occur naturally in its elemental form because of its high reactivity. The metal is widely used in batteries for electric vehicles, phones, laptops, pacemakers, and more.
The Global Lithium Market
The global demand for lithium has increased in the past several years and is expected to continue growing. Fortune Business Insights estimates that the $3.83 billion market in 2021 will grow at a CAGR of 8.1% and reach $6.6 billion in 2028. Demand in the lithium-ion battery market will be one of the main drivers of growth. McKinsey reports that in 2015, batteries accounted for under 30% of the lithium demand, while in 2030 they will make up 95% of the demand.
The COVID-19 pandemic has had an adverse effect on the lithium market by slowing down growth. Factors that could affect the market in the future include the environmental and social impact of lithium extraction and the complicated nature of lithium product recycling. For instance, lithium produced from hard rock mines uses about 172 cubic meters of water per metric tonne of lithium and produces approximately 15,000 kilograms of carbon dioxide.
In terms of major manufacturers of batteries and electronics, China, South Korea, and Japan are the top consumers of lithium. In 2019, China led consumption with 39% of the world’s total, followed by South Korea with 20% and Japan with 18%.
The global production of lithium was estimated at 82,500 metric tonnes (MT) in 2020 and over 100,000 MT in 2021. With an estimated 55,000 MT, Australia was the largest producer of lithium in 2021. Chile was the second largest with 26,000 MT and China was third, producing 14,000 MT.
In terms of lithium reserves, Chile’s reserves of 9.2 million MT placed it in first place in 2021, well ahead of Australia with its 5.7 million MT. Argentina (2.2 million MT), China (1.5 million MT) and the U.S. (0.9 million MT) represented the top five.
How to Invest in Lithium
Lithium cannot be traded directly. Investors looking to add lithium to their portfolio can consider both lithium mining and development companies and ETFs. Keep reading for five lithium stocks for 2022.
1. Albemarle Corporation (NYSE:ALB)
A global leader in lithium production, Albermarle is a Charlotte, North Carolina-based global specialty chemicals company with three divisions: bromine, lithium, and catalysts. The company has a market cap of $33.2 billion and its stock price has risen 24.23% in the past 12 months, from $227 (August 23, 2021) to $283 (August 23, 2022).
ALB’s lithium division offers butyllithium and lithium aluminum hydride reagents for lithium batteries, thermoplastics for tires, lithium carbonate, and other lithium compounds, plastics, etc. In 2021, Albemarle reported attributable production of 122,000 tonnes of lithium carbonate equivalent (LCE). The company has plans to build integrated lithium operations in the United States and in Q2 2022, ALB reported net sales of $1.48 billion, a 91% year-over-year increase.
2. Sociedad Química y Minera de Chile (NYSE:SQM)
Sociedad Química y Minera de Chile is a chemical company operating in various segments, including lithium, industrial chemicals, and plant nutrients. The company’s stock price nearly doubled in the past year, appreciating to $99.12 (as of August 23, 2022) from $50.54 (August 25, 2021). SQM has a market cap of $28.32 billion.
SQM’s lithium segment includes lithium carbonate, lithium derivatives, air conditioning chemicals, casting powder, frits, pharmaceuticals, and heat-resistant glass. In 2021, SQM reported attributable production of 135,000 tonnes LCE. The company reported six-month revenue of $4,618.6 million for Q2 2022, with its lithium segment delivering a sizeable $1.846 million of the total.
3. Sigma Lithium Corporation (NDAQ:SGML, TSXV:SGML)
Sigma Lithium is a lithium exploration and development company. Its flagship project is underway at its Grota do Cirilo property in Brazil. The near-term producer has a market cap of $2.35 billion and a price of $23.38 as of August 23, 2022), a 231% rise during the last year (August 24, 2021).
SGML has been piloting the production of battery-grade lithium since 2018. The company expects to be a near-term producer, reaching attributable production of 37,000 tonnes LCE by 2023, which would make them the 4th largest producer globally. The company recently announced that Phase 1 construction is on track for commissioning to start in December of this year.
4. Lithium Americas (NYSE:LAC, TSX:LAC)
Lithium Americas is a Vancouver-based lithium company with lithium projects in Argentina and the United States. In Argentina, the company’s Caucharí-Olaroz Project is advancing towards first production and Pastos Grandes represents regional growth. In the United States, the Thacker Pass project is advancing towards construction.
LAC has a market cap of US$4.181 billion and a share price of $30.49 (September 8, 2022), a 47.56% year-over-year increase (compared to $20.80 as of September 8, 2021). The company expects to be a near-term producer, reaching attributable production of 18,000 tonnes LCE by 2023.
5. Global X Lithium & Battery Tech ETF (NYSEARCA:LIT)
Exchange-traded funds (ETFs) provide investors access to companies trading on different international exchanges as well as local. The Global X Lithium & Battery Tech ETF invests in the full lithium cycle, corresponding to the Solactive Global Lithium Index. LIT invests the majority of its assets in the securities of the Underlying Index as well as ADRs and GDRs.
LIT has net assets of over $4.78 billion and an expense ratio of 0.75%. The company’s top five holdings include Albermarle (12.77%), EVE Energy (6.84%), QUIMICA Y-SP ADR (5.31%), BYD (5.23%), and LG CHEM (5.23%). LIT has a price of $79.31 (August 23, 2022), a 6-month improvement of 7.54% ( as of February 24, 2022), and a 12-month decline of 6.63% (compared to August 24, 2021).
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