The transition to critical minerals reliance continues to provide opportunities in exchange-traded funds (ETFs), especially those that focus on miners. Lithium, in particular, could be a strong growth prospect. According to a report from Fortune Business Insights, the global lithium market could surpass $500 million in less than five years.
Of course, one of the prevailing trends that’s a prime catalyst for this growth is the ever-expanding electric vehicle (EV) market. As the world reduces its carbon footprint, more EVs on public roads will translate to higher demand for lithium, which is used to manufacture batteries.
“Electric vehicle companies and carmakers are changing their preferences depending on the cathode characteristics regarding safety, stability, life, cost, and energy density,” the report said. “EVs are promoted as a sustainable transportation choice on a life-cycle basis, as they emit less GHG than conventional vehicles.”
Furthermore, the technological advancements should also help increase the demand for lithium moving forward.
“For instance, Tesla is planning for next-generation EV batteries that would focus on introducing Li-iron phosphate batteries to the market. This will cut the vehicle costs, extend the vehicle range up to 400 miles or more, and enable the batteries to last as long as 1 million miles. Additionally, the company plans to implement a high-speed, heavily automated battery manufacturing process designed to increase mass production and reduce labor costs.”
Add Lithium Mining Exposure
The exponential growth over the next few years for lithium should also translate to increased demand for mining. As such, one way to get exposure to this growth prospect is via the Sprott Lithium Miners ETF (LITP).
The fund seeks to provide investment results corresponding to the total return performance of the Nasdaq Sprott Lithium Miners Index. That index is designed to track the performance of a selection of global securities in this mineral’s industry. That includes producers, developers, and explorers.
The fund also offers country diversification
As of September 29, about 44% of the fund focuses on mining companies in Australia, while another 33% focuses on the United States and Canada. This adds to the global diversification of its holdings to capture the worldwide growth potential of lithium mining.
In terms of market capitalization, LITP primarily focuses on midcap equities. This offers exposure to companies that can provide growth like small-cap companies. It can also provide the safety of large-cap companies with stronger fundamentals.
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