How to Conveniently Participate in Lithium Price Growth in the Forefront of Global Clean Energy Effort?

Lithium, the world’s only soft metal (Atomic number 3) is a key element in powering the digital economy – mobile phones, notebooks, electric and hybrid vehicles. It has also been a major component of heat-resistant glass and ceramics, power handy tools and cameras. There are two principal demand drivers of lithium battery technology at present: its use in storing the energy produced by clean/renewable energy sources, and its use as the battery component in electric vehicles. A lithium-ion battery is generally lighter, more efficient, and more durable than alternative battery chemicals, making it a better choice for energy storage. The versatility of lithium and its compounds has made it one of the base metals used in many industries. Lithium has emerged as the best-performing commodity this year, with lithium carbonate prices up nearly 95% year-to-date.

The global size of the EV market in 2019 was estimated at 3.26 million units. By 2030, according to research by Marketsandmarkets, it will reach 26.9 million. The CAGR (compound annual growth rate) in 2021-2030 is expected to be over 21%. Batteries account for about 70% of global lithium consumption, according to a USGS report. The second and third places are taken by ceramics and glass. The size of the lithium-ion battery market is expected to reach $46 billion by 2026, up from $4 billion in 2020, with a CAGR of 13.7%.

As electric vehicle demand grows, analysts predict 75% of all mined lithium will be attributed to EVs by 2025 as many world governments are determined to reach their net zero carbon emissions targets by 2050. New U.S. legislation that would grant tax credits to accelerate solar energy manufacturing in the U.S. aims to make America competitive with China, in an industry China dominates globally. The industry could also create up to 60,000 new jobs in the next decade.

As we already mentioned, many countries are committed to improving their clean energy capacity and production. The Biden administration plans to invest $2 trillion in clean energy. This, as well as the plan to completely decarbonize the power sector by 2035, and also plans to rejoin the Paris Climate Accord will support lithium prices going forward. China – the world's biggest consumer of energy (since 2011, it has burned more coal than all of the other countries combined!) – also appears fully committed to the clean energy revolution. China plans to force regional grid firms to buy at least 40% of their power from non-fossil fuel sources by 2030. In 2019, only 11% of global energy usage came from renewable sources, so clean energy has a lot of ongoing upside.

Even during the worst days of Covid pandemic and a 4.4% decline in global growth in 2020, sales of EVs surged by more than 700,000, topping 3 million globally. That, according to the IEA, is three times higher than 2017. China with its drive to clean up its polluted cities has been in the vanguard. However, last year Europe took over the Celestial Empire as the biggest global market for EVs. The latest IMF World Economic Outlook predicts robust global growth of 5.5% in 2021, a far more supportive outlook for growing EV sales than in 2020.

Lithium batteries have a far higher density than traditional battery types (up to 150 watt-hours of energy per kilogram, compared to nickel-metal hydride batteries at 60-70WH/kg and lead acid ones (the type traditionally used in cars) at 25WH/kg), and their cost is coming down.

Lithium is mainly mined in hard rock or underground brine mines. The former are usually found in Australia, and the latter in the South American countries of Argentina and Chile. The leading countries with lithium reserves are Chile, Australia, Argentina and China. Portugal also has lithium reserves, but there are fewer of them. The total world reserves are estimated at 14 million tons. Earlier this year, Chile's second-largest lithium producer, Albemarle Corp., warned that global supplies of lithium were on course for a major shortfall in a few years' time if prices continued to fail to reflect the costs of funding massive expansions amid the EV boom.

Main lithium producers are Jiangxi Ganfeng Lithium Co., Albemarle (ALB), Livent (LTHM), Quantumscape (QS), Tianqi Lithium, Mineral Resources Limited (MALRF), SQM (SQM). However, the most convenient way to participate in lithium market growth is by buying a corresponding ETF. The Global X Lithium & Battery Tech ETF (LIT) shares were up 125% in 2020, flat in 2021, but up 7.5% over the past month and regaining momentum. It comprises companies that are different parts of a full-cycle lithium production from metal mining and processing to battery manufacturing.