The growing popularity of electric-powered vehicles is fueling demand for lithium batteries and supporting the miners-related ETF.
The Global X Lithium & Battery Tech ETF (NYSEArca: LIT), which tracks the full lithium cycle from mining and refining through batter production, surged 5.0% Monday on five times its average daily volume, according to Morningstar data. LIT has also been breaking new record highs, surging 40.8% year-to-date.
The world is shifting toward electric vehicles and the industry is standardizing on lithium ion batteries, which could mean that we are going to need a lot more lithium than is currently be supplied, writes Josh Brown, The Reformed Broker.
Over the past two years, fears of a lithium shortage has almost tripled prices for the metal to over $20,000 a ton due to a spike in the market for electric vehicles, and the demand for metals isn’t dissipating as electric car production is estimated to surge more than thirtyfold by 2030, Bloomberg reports.
While there is more thane enough lithium in the ground, the industry and infrastructure needed to extract the metal is still lacking. Battery makers will require more mines to support production and they will have ot build them much more quickly than previously thought.
According to BNEF, Tianqi Lithium, SQM, Albermarle and FMC, the producers that dominate the space, will need to extract enough lithium to supply the equivalent of 35 Tesla Gigafactories now being built in Nevada. Research Sanford C. Bernstein & Co. projects total investments to supply these new batters will range from $350 billion to $750 billion.
The Global X Lithium & Battery Tech ETF, tries to reflect the performance of the Solactive Global Lithium Index, which is comprised of a number of global lithium producing companies and lithium battery producers, like FMC 25.1%, Quimica Y Minera 17.1%, Samsung SDI Co. 6.6% and Tesla Motors 5.6%. Top country weights include U.S. 41.2%, Chile 13.8%, South Korea 13.6%, Japan 8.9% and Australia 6.8%.
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