Lithium is the commodity of the future. Lithium is indispensable in the batteries of cell phones and electric vehicles. This development offers great opportunities for investors. Find out how to invest in lithium and where to buy lithium here.
BUY LITHIUM – THE MOST IMPORTANT INFORMATION IN BRIEF
Lithium is primarily used in the manufacture of rechargeable batteries. Lithium-ion batteries can be found in smartphones, for example.
Investors can invest in the lithium market with stocks. For example, by investing in the largest lithium producers.
Important: Choose a form of investment that suits your risk tolerance. Investors who prefer to be on the safe side can, for example, invest in a lithium ETF.
INVEST IN LITHIUM – RECOMMENDATIONS & TIPS
With a CFD, you are not investing in a lithium share per se, but in the price development of an underlying asset. For more risk-taking investors, this could be an exciting investment opportunity.
Our recommendation: Lithium is subject to strong price fluctuations. Investors should always keep an eye on the market.
Tip: The London Metal Exchange launched a lithium futures contract in July 2021. This should lead to more transparency on the lithium market.
LITHIUM IS CONSIDERED AS THE WHITE GOLD
The light metal lithium is a sought-after raw material for some key technologies, such as electromobility. It is also called the white gold. In the coming years, analysts expect strong demand for lithium, as it is found in the batteries of electric cars and smartphones.
STRONG PRICE FLUCTUATIONS IN LITHIUM SHARES
Trading in lithium stocks is by no means trivial: Lithium is subject to strong price fluctuations, just like other commodities. If the demand rises sharply, then the price also rises. As a result, production capacities will be expanded. If, however, demand does not rise or fall as quickly as production capacities, then this will result in prices falling again due to overcapacity.
HAS A FUTURE INVESTMENT IN LITHIUM?
The light metal is primarily used for the production of rechargeable batteries. Lithium-ion batteries can be found in electronic devices such as smartphones, for example. Demand could get a big boost from the growing electromobility market. Lithium-ion batteries are integral components of e-cars, hybrid vehicles and e-bikes. They are also used in power storage systems for solar power systems in private households. The white gold is also used in medicine for the prevention and treatment of manic depression. In contrast to crude oil, a large proportion of it can be recycled and reused.
Long-term scenarios show that lithium demand will continue to grow strongly over the next ten years. The analysts of the information service Roskill forecast that demand in 2027 will exceed one million tons of LCE (lithium carbonate equivalent), with growth of more than 18 percent per annum by 2030.
However, lithium is not the only raw material that will be used for the energy storage technologies of the future. Fuel cell technology is a competitor that is also used for electromobility.
INVESTING IN LITHIUM: WHO IS EXPLORING THE RAW MATERIAL?
A large part of lithium is obtained by promoters from brine water from Salars, the salty lakes in the lithium triangle of Chile, Bolivia and Argentina. The largest reserves are located in the salt lakes Salar de Atacama, Salar de Uyuni and Salar de Hombre Muerto. Chile has the world’s largest lithium deposits with 8.6 million tons. Followed by Australia (2.8 million), Argentina (1.7 million) and China (1.0 million). According to the German Raw Materials Agency (DERA), 80 percent of global mining production comes from Chile and Australia
BUY LITHIUM TO THE BIGGEST PRODUCERS
Lithium is mined by various producers. If you want to buy lithium, you should know the largest providers and promoters of white gold – we will briefly introduce them:
The Albemarle Corporation (ISIN: US0126531013) is headquartered in Charlotte, North Carolina / USA and is a global specialty chemicals company. It employs around 5,400 people and has a leading position in lithium, bromine and refining catalysts. In Germany, Albemarle has locations in Frankfurt am Main and Langelsheim. According to its own information, Albemarle is the world’s largest producer of lithium and lithium compounds through the takeover of competitor Rockwood in 2015.
SOCIEDAD QUÍMICA Y MINERA
The Chilean chemical company Sociedad Química y Minera (ISIN: US8336351056) has around 5,500 employees and five main business areas: specialty plant foods, lithium and derivatives, iodine and derivatives, industrial chemicals and potassium.
Livent Corporation (ISIN: US53814L1089 / WKN: A2N464) produces and sells lithium chemicals for batteries, agrochemicals, aerospace alloys, greases, pharmaceuticals, polymers and various industrial applications. It is based in Philadelphia / USA and employs around 800 people. The company has manufacturing facilities in the United States, England, India, China and Argentina. In February 2021, Livent announced a multi-year contract with BMW for the supply of lithium hydroxide and carbonate. The company has already started supplying products for qualification. The first deliveries for commercial use are expected to start in 2022.
Orocobre Limited (ISIN: AU000000ORE0 / WKN: A0M61S) is based in Brisbane, Australia. It is a global supplier of lithium chemicals and an established producer of boron. Orocobre’s key assets are in the lithium triangle, including its stake in the Salar de Olaroz lithium-potassium brine project (66.5 percent) in the Argentine region Puna. We have worked closely with the Japanese car manufacturer Toyota since 2010. At the beginning of 2018, he acquired around 15 percent of the up-and-coming mining group. With an investment of 232 million US dollars, Toyota secured access to lithium for the batteries of future electric cars. A supply agreement was concluded in 2020 with the Toyota-Panasonic joint venture Prime Planet Energy Solutions.
INVEST IN LITHIUM BY BUYING LITHIUM SHARES
Unlike most commodities, lithium is not traded on futures exchanges. The London Metal Exchange is working to change that. However, as an investor, you can invest in lithium through companies involved in different parts of the metal’s production cycle. This includes lithium mining, refineries and battery producers. In addition to the companies already mentioned, this is also Tesla. Lithium-ion batteries are also produced in the electric car manufacturer’s Gigafactory. If you want to buy lithium, you can do so indirectly by buying Tesla shares (ISIN: US88160R1014 / WKN: A1CX3T).
You can invest in the Millennial Lithium share (ISIN: CA60040W105 / WKN: A2AMUE) or in the standard lithium share (ISIN: CA8536061010 / WKN: A2DJQP). The Neo Lithium share (ISIN: CA64047A1084 / WKN: A2AP37) could also be of interest to investors.
Tip: To be able to buy lithium stocks, you need a securities account. Read our guide to find out how to open a portfolio and what to look out for.
INVEST IN LITHIUM WITH ETF
However, this market is very risky for investors who prefer to invest their capital with low risk. For them, lithium ETFs with lithium stocks could be an exciting option.
GLOBAL X LITHIUM & BATTERY TECH ETF
The Global X Lithium & Battery Tech ETF (ISIN: US37954Y8553 / WKN: A143H3) invests in companies that are involved in every phase of the lithium cycle. It tracks the Solactive Global Lithium Index. As an investor, this strategy gives you access to various companies whose businesses are highly related to lithium. The ETF tracks the performance of the largest publicly traded companies that are looking for lithium, mining lithium in mining or manufacturing lithium batteries.
AMPLIFY ADVANCED BATTERY METALS AND MATERIALS ETF
The actively managed Amplify Advanced Battery Metals and Materials ETF is not only specialized in lithium. The index also covers companies that, in addition to lithium, also work with other battery metals such as cobalt, nickel, manganese and graphite.
INVEST IN LITHIUM WITH CFDS
Risk-minded investors can also trade lithium stocks with a CFD or option. In doing so, they speculate on making a profit from the difference between the entry and exit price. CFDs are among the financial derivatives that derive their value from an underlying asset. With a CFD you are not buying a lithium share per se, but investing in the price development of an underlying asset. With CFDs, you are also able to bet not only on rising, but also on falling prices. By using CFD you can also leverage your investment and move a multiple of the capital with the same amount of capital.
Tip: In a broker comparison, we can take a closer look at various providers.
TRADING LITHIUM FUTURES CONTRACT
The London Metal Exchange launched a new lithium futures contract in July 2021. This is, against the assessment of Fastmarkets for lithium hydroxide, billed in battery quality. More precisely, to at least 56.5 percent battery-compatible lithium hydroxide. According to the experts, the contract is intended to help meet a growing demand among original equipment manufacturers (OEMs) and improve risk management throughout the supply chain.
This contract should lead to more transparency in the market. Before that, prices were purely a matter of negotiation between producers and buyers. In many cases, the parties have agreed not to disclose price agreements for supply contracts. The prices quoted have varied by several thousand US dollars per ton over the past few years. The futures contract also enables buyers to hedge against future price fluctuations.
However, producers like Albermarle reject the contract in a statement. It says, among other things, “the lithium market just wouldn’t work that way”. The rejection is not surprising, however, since the scope for setting prices for supply contracts could be significantly limited by the reference price of the contract. The LME is planning a cash settlement for maturing futures contracts. The reason for this is that the chemical composition and the different degrees of purity make physical delivery impossible.
BUY LITHIUM – YOU SHOULD DO THIS
- Lithium is a sought-after raw material for some key technologies, for example electromobility. Anyone who wants to buy lithium can benefit from the development.
- Lithium is subject to strong price fluctuations. As an investor, you should therefore always keep an eye on the market.
- As an investor, you can buy lithium stocks and invest in the largest providers, for example.
- Those who prefer to invest with less risk can also choose a lithium ETF for their investment.
- Risk-minded investors can also put their capital in lithium CFDs or a lithium futures contract. It is advantageous if you have already been able to gain initial experience on the trading floor.