Although shares of Tesla Inc. (NASDAQ:TSLA), a company widely associated with the lithium boom, have tumbled more than 13% over the past week, the Global X Lithium ETF (NYSEArca: LIT) is higher by 1.7% over that period. Data suggest long-term trends for lithium demand are encouraging.
LIT, the only equity-based ETF on the market dedicated to lithium miners and producers, tracks a diversified group of companies involved in the “full lithium cycle,” from mining and refining the metal through battery production. Lithium is utilized in batteries for their high charge density, or longer lasting life.
“According to analysts at UBS, by 2025 the market will need 12 times the battery capacity currently available. At the same time, only 5% of lithium-ion batteries get recycled, versus more than 90% of those used in conventional vehicles,” reports Mining.com.
With the economy recovery maturing, the materials sector, which is closely tied to the prices of raw materials, have traditionally done well as inflation rises and late-cycle economic expansions help support demand.
With more lithium battery factories coming online, production of the metal could triple over the next five years.