- Global organizations and management companies are supporting the shift to clean energy technologies.
- Electric vehicles are the key to the transition, which means there will be more demand for lithium batteries.
- Lithium is a metal-based product that has seen its price increase by 323% over the past 12 months.
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Multinational companies and organizations like BlackRock and the World Economic Forum have supported the goal of achieving zero net greenhouse gas emissions by 2050. President Joe Biden signed an executive order in August to manufacture half of all new vehicles sold in 2030. zero emissions. The move was part of his Build Back Better initiative which includes clean energy jobs.
These are just a few examples of the global push towards clean energy sources that is driving demand for raw materials like lithium.
Specifically, the rise of battery-powered vehicles has made lithium an element that will be needed in the years to come. Electric vehicles and other transportation accounted for 41% of lithium consumption in 2019, and this share is expected to continue to rise, according to Bloomberg Intelligence.
Total lithium demand is expected to increase 143% between 2021 and 2025, according to a report by Bank of America Global Research. Electric vehicles are expected to fill the majority of this need.
Meanwhile, Benchmark Mineral Intelligence (BMI), a price information agency, predicts a lithium shortage from 2022 and beyond. Bank of America also anticipates “comfortable” supplies even if production increases next year. This is because lithium is expensive and difficult to extract, and government regulations can restrict production.
This supply-demand imbalance means that the price of lithium could continue to rise. While commodities made from popular metals like gold and silver have fallen by around 7% and 4% respectively in the past 12 months, the price of lithium carbonate has increased by 323% for the same. period, according to Trading Economics, a website that tracks indicators and prices.
Whether the increased demand for the commodity will be reflected in the growth of its related stocks will depend on the fundamentals of each company.
Trying to choose between individual stocks can be a daunting task, especially for an industry that might not be familiar. This is why an alternative is considering a large basket of stocks.
The Lithium & Battery Tech ETF is made up of companies that invest in the full cycle of lithium, from metal mining and refining to battery production. It is managed by Global X ETFs, a New York-based provider of global exchange-traded funds. Morningstar gives this investment vehicle a four star rating, and it has seen an increase of 130.27% in the past year.
As for individual stocks, five major companies control the global $ 4 billion lithium industry, according to Bloomberg Intelligence: Albemarle, SQM, Tianqi Lithium, Ganfeng and Livent. Below are details of their analyst ratings and potential price hikes based on Bloomberg data. Ganfeng’s note is not included in the list due to limited data available.