Beaten down mostly by a supply gut and slow adoption for electric vehicles (EVs), supply disruptions globally have been re-charging interest in lithium again.
Making recent news, battery maker Contemporary Amperex Technology (CATL) suspended operations in China (the Yichun project). According to a CNBC report, the mine’s permit expired. However, CATL is working to renew the permit, and will continue production once approval is received. This was a major mover for lithium prices, as 4% of the forecasted global production of lithium in 2025 will stem from that particular mining project, based on estimates from Morgan Stanley. Likewise, China is major producer of EVs, so it also relies heavily on lithium production from this mine.
Offsetting the CATL mine suspension was the announcement of a deal between China’s Ganfeng Lithium Group and Lithium Argentina to collaborate on developing one of South America’s largest lithium projects. Given this, and that CATL is working to get its Yichun project permit renewed, it could mean a spike in lithium prices could be short-lived. Meanwhile, Ganfeng Lithium’s stock has been a beneficiary of the recent rise.
While not as impressive in the year-to-date chart, the recent hype in lithium is evident when looking at Albemarle in the last few months. The company is the largest producer of lithium here in the U.S., and it has risen over 30% on renewed interest. The company is coming off its Q2 earnings announcement, which saw net sales of $1.3 billion and net income of $23 million despite lithium prices still far from their 2022 peak prices.
“We delivered strong second quarter results and are maintaining our previous outlook considerations assuming current lithium market pricing persists,” said Kent Masters, chairman and CEO.
The strength in Ganfeng and the recent upside in Albemarle support the notion that lithium is a long-term play, as its demand will increase as the world becomes more reliant on electric vehicles and renewable energy storage.
Pure Play Lithium Exposure
Albemarle and Ganfeng Lithium Group are two of the top holdings in the Sprott Lithium Miners ETF (LITP), which can provide investors with pure-play exposure to rising lithium prices should they sustain themselves over the long-term horizon. The “pure play” tag is evident in its targeted focus on lithium mining operations.
“This aligns with its GICS subindustry data, which is the simplest breakdown of its peers,” said Roxanna Islam, head of sector & industry research at TMX VettaFi, when discussing lithium ETFs. “LITP holdings are about two-thirds in diversified metals and mining and one-third specialty and commodity chemicals with no exposure to automobile manufacturers.”
Per LITP’s fund description, it tracks the total return performance of the Nasdaq Sprott Lithium Miners Index. That index tracks the performance of a selection of global securities in the industry. It offers country diversification in Australia, Canada, China, Chile, the United States, and others. The index includes companies involved in lithium production, development, and exploration.
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Exchange Traded Funds (ETFs): SETM, LITP, URNM, URN, COPP, COPJ, NIKL, SGDM and SGDJ
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