After the steep drop-off last year when investors turned away from riskier commodity plays, the lithium exchange traded fund has surged this year on higher demand as global economies reveal improvements in manufacturing and consumption.
Global X Lithium ETF (NYSEArca: LIT) is up 20.5% year-to-date, compared to the 23.4% drop over the last year. The fund recently crossed over its 200-day exponential moving average.
Lithium is an integral part in electronic parts. For instance, the future of electric cars depends on the lithium battery, and with higher gas prices, energy efficient cars, along with lithium, may see higher demand, according to Benzinga.
Additionally, Apple (NasdaqGS: AAPL) uses lithium in its iPhones, iPads and laptop products, but potential investors need to note that there has been speculation that the company could ween itself off lithium, especially if prices rise too high. [China Buoys Rare Earth Exports — Can ETF Reverse Course?]
Chile, home to a quarter of the world’s lithium reserves, is seeking to auction off contracts for the right to explore and produce lithium, reports Reuters.
“The right to exploit around 100,000 tonnes of lithium for 20 years will be auctioned,” mining subsecretary Pablo Wagner said on La Tercera’s web site. “We know that if we delay a lot in developing this project we’ll lose competitiveness and we could halve our market share.”
Sociedad Quimica y Minera (NYSE: SQM) is one of two lithium producers in Chile. The company makes up 18% of LIT’s holdings.
Global X Lithium ETF
For more information on lithium, visit our lithium category.
Max Chen contributed to this article.