Lithium stocks to watch

Lithium is a type of precious metal within the commodity market​. It’s the world’s lightest metal and the most effective at conducting electricity. These factors make it a leading component in electronics, manufacturing and medicine.

Lithium comes from two main sources: spodumene, a mineral mined mainly in Australia, and from brine extraction, an industry concentrated mostly in South America. The salt flats of Brazil, Argentina and Chile are known as the ‘lithium triangle’ because they are thought to contain more than three-quarters of the world’s supply.

However, there is also a high concentration of lithium in salt lakes in China’s Sichuan province, with the country’s leading lithium manufacturers urging the government for support to accelerate its extraction to make China less reliant on foreign imports for its technology. Lithium is also found in Europe in much smaller quantities. There are believed to be sufficient UK lithium reserves in Cornwall, which could significantly increase the country’s reserves and global supply.

Lithium is the primary ingredient that powers rechargeable batteries in a vast range of electronic items, from phones and laptops to electric vehicles and solar power storage. Its numerous applications also include electric toothbrushes, vaping devices, e-bikes, electric wheelchairs, pacemakers, tools, remote car locks and many other products.

However, lithium also has a range of industrial applications. Lithium metal is made into alloys with aluminium and magnesium, making them stronger and lighter. Aluminium-lithium alloys are used in aircraft, car manufacturing, bicycle frames and high-speed trains, while magnesium-lithium alloys are used for armour-plating. Lithium oxide is used in special heat-resistant glass and ceramics. Lithium chloride is a key component of in air conditioning and industrial drying systems.

Lithium also plays a vital role in medicine. Lithium carbonate, also known as lithium salts, is used in medicine to stabilise mood disorders, and as a treatment for manic or depressive behaviour and conditions such as bipolar disorder, although its effect on the brain is not yet fully understood.

And that’s not all. Lithium stearate is used as an all-purpose and high-temperature lubricant and lithium hydride is used as a means of storing hydrogen for use as a fuel.

The two main types of lithium produced by companies are:

As a precious metal, lithium’s wide ranging use cases means that it’s not only a fundamental component within digital devices such as smartphones and laptops; it’s also a vital part of the broader energy transition to cleaner energy by powering the batteries for electric vehicles because of its energy density.

As a result, the overall race for lithium is forecast to expand the global lithium market from $3.83bn in 2021 to $6.62bn by 2028, at a compound annual growth rate (CAGR) of 8.1%, according to Fortune Business Insights.

Lithium stocks are the shares of companies that engage in the mining or processing of lithium. They can be separated into the following categories, which each provide benefits and drawbacks.

US-based Albermarle is one of the largest providers of lithium for batteries that power electric vehicles. It produces both carbonate and hydroxide, as the company sources lithium through its brine and rock mining operations within several countries. As well as being immensely successful in the electric car industry, the company also produces more than 100 lithium-based products for a range of other industries. In order to protect itself from any great potential losses from volatility in the market, this lithium mining stock also benefits from the success of its bromine segment.

Chilean chemical company Sociedad Química y Minera de Chile is one of the world’s largest lithium producers. Founded in the late 1960s, the company benefits from the fact that its home country has one the largest reserves in the world. Given the fast-growing demand within the electric vehicle industry, Sociedad Química y Minera de Chile expanded its production of lithium to both the main types: carbonate and hydroxide, which it produces in the Salar de Atacama in the Atacama Desert of Northern Chile. The company also benefits from its production of potassium nitrate and iodine.

Allkem is an Australian mineral resources company that formed from the merger of Orocobre and Galaxy Resources in 2021. The Brisbane-based company focuses on lithium carbonate and other mineral mining operations within Argentina. Allkem is in partnership with Toyota Tsusho, and they are looking to grow their Argentinian-based flagship project, the Olaroz Lithium Facility. The capacity of this facility has increased to over 17,000 tonnes per annum of lithium carbonate. The two companies are also looking to construct a plant in Naraha, Japan, in order to expand their production of lithium hydroxide.

Livent is a US company. It owns and operates a mine in Argentina, which is the key to the company’s success in terms of output and production of lithium hydroxide. As well as supplying lithium for products with special performance requirements, Livent also produces other types, which can be used in pharmaceutical products and non-rechargeable batteries. The company is one of Tesla’s main suppliers of lithium. With the aim of expanding its presence in Europe and North America, Livent became a part owner of mining company, Nemaska Lithium, which owns and operates a large mine in Canada.

Ganfeng, the largest related company in China, describes itself as the “world’s leading lithium eco-enterprise”. It has operations in Australia and Chile and its business integrates lithium refinement and processing, battery manufacturing and recycling. Its patented inventions around extraction technologies and recycling lithium waste, which it claims gives it a high energy conversion rate. It supplies lithium to Volkswagen and in late 2021 signed a three-year deal to supply Tesla.

An alternative method of gaining access to lithium is by spread betting or trading CFDs on ETFs. Exchange-traded funds (ETFs) provide exposure to underlying share prices of lithium-related companies, and due to the fact that the risk is spread across multiple securities at the cost of only one trade, many consider ETFs to be a low-risk trade.

However, remember that leveraged ETFs are complex financial instruments that carry significant risks. Certain leveraged ETFs are only considered appropriate for experienced traders. Below are some examples of lithium ETFs to watch right now.

This ETF covers the entire journey of lithium battery manufacture, from mining and refining to battery production. Almost all of its holdings are in basic materials, industrials or consumer goods and typically include mining companies such as Albemarle, SQM and Ganfeng. It also covers firms that apply the technology, such as Tesla, Samsung and Panasonic.

This product, launched in 2018, invests at least 80% of its assets in securities comprising the EQM Lithium and Battery Technology Index, which provides exposure to global companies associated with the development, production and use of lithium battery technology. Its holdings are drawn mainly from companies concerned with the extraction and refinement of the commodity and the application of its technologies.

When you trade with us, you don’t take ownership of the physical asset but instead speculate on its price movements using our derivative products. We offer the following: