A Big Holding in the Lithium ETF is Forecasting Robust Demand | ETF Trends

Chile’s Chemical and Mining Society (SQM), the world’s second-largest lithium producer and a major holding in the Global X Lithium & Battery Tech ETF (NYSEArca: LIT), an exchange traded fund dedicated to companies in the lithium supply cycle, is forecasting strong demand for the raw material.

LIT, which is nearly nine years old, tracks the Solactive Global Lithium Index. One of the oldest thematic ETFs, LIT is designed to provide exposure to “the full lithium cycle, from mining and refining the metal, through battery production,” according to Global X.

Chemical and Mining Society “expects demand for key component in the batteries that power electric vehicles and cell phones to grow at “double-digit rates” this year,” reports Mining.com.

Shares of SQM are LIT’s second-largest holding at a weight of 10.23%.

Strong Forecast for Lithium

Lithium-ion battery capacity is vital because one of the primary factors car buyers consider when evaluating electric vehicles is how long those vehicles can run on a single charge.

Bolstering the long-term case for LIT is that global automotive industry observers believe electric vehicles will reach comparable price points to traditional internal combustion engine vehicles sometime in the next several years, making it more compelling for drivers to make the switch to electric vehicles.

SQM “believes lithium consumption could grow about 17% in 2019 to at least 315,000 tonnes, compared to the less than 260,000 tonnes it totalled last year,” according to Mining.com.

Electric vehicles are in the early innings of development and there are signs that there is a lot of pent up demand among consumers whom want to embrace the technology. In 2017, electric vehicle sales represented 1.7% of all vehicle sales globally, exceeding 1 million for the first time and rising 51% year-over-year. The rate could continue to accelerate as a result of EVs becoming more economical than gas-powered cars and as a result of a pro-climate regulatory changes pushing to ban gas-powered cars.

“The company expects to produce 60,000 tonnes of lithium this year, with sales volumes reaching between 45,000 and 50,000 tonnes,” reports Mining.com. “By 2020, SQM predicts that sales volumes would jump 30% over 2019, reaching approximately 65,000 tonnes.”

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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.