Lithium Deals Could Provide Spark for LIT ETF | ETF Trends

Against the backdrop of the electric vehicle boom, the Global X Lithium & Battery Tech ETF (NYSEArca: LIT) is standing out, but there are other catalysts on the horizon for the lone lithium ETF.

LIT tracks the Solactive Global Lithium Index. The underlying index is designed to measure broad-based equity market performance of global companies involved in the lithium industry.

“The electric vehicle industry must pay more for lithium in order to spur investment and prevent future supply crunches of the battery metal, the chief executive of lithium producer Livent Corp said on Friday,” reports Reuters. “Demand for EVs is expected to surge in the coming years, spurred in part by government mandates, rising concern about climate change, and other factors.”

The increased demand for lithium-ion batteries, which will help generate more power compared to ordinary batteries, will be used as an alternative source of power for electric and hybrid vehicles

Looking Into LIT

As demand for electric vehicles and the batteries that power them continue to rise from more environmentally friendly consumers, something like the Global X Lithium & Battery Tech ETF may continue to capture the growth opportunity. LIT tracks the Solactive Global Lithium Index, which is designed to measure broad-based equity market performance of global companies involved in the full lithium cycle from mining and refining the metal, through battery production.

“But the coronavirus pandemic has paused that trend, causing a short-term oversupply of lithium, pushing down prices more than 10% this year and forcing producers of the white metal to halt expansion projects,” according to Reuters.

According to The Insight Partners’ High Voltage Battery Market Forecast to 2027 report, the high voltage battery market is expected to enjoy high growth over the years ahead, especially as batteries are used in electrical and hybrid vehicles.

“Historically, battery makers like Panasonic Corp have contracted with lithium producers, though automakers are mulling deals,” according to Reuters. “While lithium prices are low today, longer-term contracts should be signed at higher prices in order to incentivize the industry to build new mines.”

Due to the increased concerns over environmental issues, global governments are supporting the development of electric vehicles worldwide. Consequently, the high voltage battery market will continue to enjoy increased interest and investments as electric vehicles is expected to drive the growth.

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.