Lithium is one of the key ingredients used to power the modern world. Whether it's rechargeable batteries for phones, electric vehicles or grid storage, chances are it contains some sort of lithium.
The good news for local investors is that Australia is one of the world's biggest lithium producers and home to several ASX lithium stocks. As such, Australian investors are well placed to cash in on the latest hot stock. However, like any trend, there will be major winners and losers along the way.
Read on to find out what you need to know about lithium shares.
Lithium stocks are companies in the lithium industry. There are 2 main types of lithium companies: lithium producers and companies that rely on lithium as a raw material.
Companies that produce lithium can either mine hard rock or harvest lithium-brine deposits. Mining removes lithium from a mineral using a drill, while harvesting brine deposits extracts lithium that has dissolved in groundwater through evaporation. The brine technique takes approximately 18 months, which is slower than traditional mining.
Many companies that use lithium generally focus on lithium-ion batteries and devices. For example, electric vehicles rely on lithium as the basis for their green technology.
Many of the major car manufacturers have been announcing partnerships with lithium miners. So price fluctuations and changes in the lithium market can directly affect the stock prices of companies that use lithium as a raw material.
If you like the trend but are not sure how to get started, taking a basket approach might be a sound strategy.
Some exchange traded funds (ETFs) follow the full lithium cycle from mining through battery production, while others specialise in the battery industry. To date, there is only 1 ASX-listed pure-play lithium ETF:
While the world is already using a lot of lithium, demand is set to swell, with the lithium battery market alone growing by $92 billion by 2025. Investment in next-gen vehicles is set to exceed $500 billion by 2030.
If you're looking to follow the next investment trend, then lithium could be right up your alley. Lithium is set to become one of the major commodities needed for the modern world.
While lithium has been traditionally used in ceramic and glass production, it’s now more popularly used in rechargeable batteries for smartphones, laptops and electric cars.
Lithium also strengthens other metals. For example, lithium alloys, such as aluminium-lithium, are used in bicycle frames and aircraft. In the pharmaceutical industry, lithium is used to balance neurotransmitters in the brain to treat bipolar disorder.
The world is progressively more technology-driven, which increases our need for materials such as lithium.
Rechargeable lithium-ion (Li-ion) batteries have multiple applications – from consumer smartphones and laptops to military voice and data radios. Lithium plays an essential role across mobile technologies, with the demand for lithium-ion batteries poised to triple by 2025, according to an analysis by S&P Global.
A lot of this growth will come off the back of electric vehicles (EVs). The Australian Department of Industry, Science, Energy and Resources forecasts EV sales to grow from around 5 million units in 2021 to 30 million by 2030. Deloitte agrees, stating EV sales are set to reach 11.2 million in 2025 and then 31.1 million by 2030, which is 32% of the total market share.
The bottom line is that you have countries, governments and bodies pushing to make the world emission free by 2050, car makers are transitioning from fuel engines to EVs – with many making fuel engine cars obsolete.
Jessica Amir
Market Strategist, Moomoo
You'll need a brokerage account to buy lithium stocks or ETFs. Compare options in the table below.
Important: The standard brokerage fee displayed is the trade cost for new customers to purchase $1,000 of either Australian or US shares. Where a platform charges different fees for both US and Australian shares we show the lower of the two. Where both CHESS sponsored and custodian shares are offered, we display the cheapest option.
Although the demand for lithium is soaring, lithium stocks have been drowning in a surge of new lithium producers from Chile, Argentina and Australia. When supply grows faster than demand, it can trigger a sharp price drop and cause stocks to become undervalued.
Lithium-ion batteries also require cobalt. Unfortunately, two-thirds of the world’s cobalt is mined in the Democratic Republic of Congo, making its supply susceptible to political instability. And since global cobalt mine supplies are also at risk of disappearing, there may not be enough cobalt to manufacture these batteries.
And it doesn’t help that there’s no benchmark price for lithium. So investors in Australia can only base the value of the industry on a handful of companies. You’re flying blind without a full sense of the global market, leaving investors and banks struggling to manage risk.
We can find lithium products in our everyday lives. The increasing demand for lithium-ion batteries in mobile devices and electric vehicles keeps this stock on Australian investors’ radars.
But to invest in lithium, you’ll need a brokerage account. Weigh a few trading platforms to find a brokerage firm that best fits your investing needs.
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