The Global X Lithium & Battery Tech ETF (NYSEArca: LIT), an exchange traded fund dedicated to companies in the lithium supply cycle, is lower by nearly 13% this month and concerns about oversupply of lithium could be one of the reasons LIT is flailing.
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.
However, some experts believe fears of lithium market oversupply are being blown out of proportion.
“The possibility of an oversupply of lithium chemical is a myth, the president of California-based Global Lithium, Joe Lowry, said this week,” reports Valentina Ruiz for Mining.com. “Addressing the audience at the conference Paydirt 2019 Latin America Downunder, Lowry blamed the spread of such a ‘myth’ on ‘big bank’ analysts and the Chilean regulator CORFO. In Lowry’s view, there have been misunderstandings regarding CORFO’s reports related to its revised agreements allowing Albemarle and SQM to produce more material from the Atacama brine resource.”
Looking At Lithium
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.
“Overall, the industry faces a lack of financing and needs to inject more than $12 billion within five years to have a chance of meeting demand,” Lowry said, reports Mining.com. “This requirement is exacerbated further by known and emerging failures in lithium start-ups which have demonstrated a lack of necessary skillsets – high profile failures that have discouraged sector investment.”
The $503.72 million LIT holds 40 stocks.
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