What are the top lithium stocks to watch?

What is the outlook for lithium?

While lithium has a wide range of uses (for example, it is used in pharmaceuticals to treat depression and in alloys to utilise its lightweight properties), the amount of demand from electric vehicles is expected to dwarf existing supply to traditional and established markets. This means the outlook for lithium will be largely dictated by the adoption of electric cars.

Read more: What metals are needed for electric vehicles and battery storage?

The sales of new electric vehicles (EVs) grew significantly leading up to 2019, when the market experienced a temporary slowdown to 2.1 million vehicles. In 2020, however, existing policies and targeted stimulus responses to the Covid-19 pandemic again spurred demand – EV sales increased by 40% to over 3 million vehicles. This figure represents an encouraging 4% market share of new car sales. By early 2021, estimates of passenger EVs on roads around the world exceeded the 10 million mark.

Additionally, forecasts for future growth are nothing short of astonishing. The International Energy Agency (IEA) predicts that by 2030 this number may be 125 million. If governments adopt more aggressive policies to fight climate change and greenhouse gas (GHG) emissions, the number of EVs could be around 220 million.

How to trade or invest in lithium stocks

With us, you can take a position on the best trading platform¹ and back whether you think lithium stocks will rise or fall in value. ‘Go long’ (buy) if you think they’ll increase in value, or ‘go short’ (sell) if you think they’ll decrease in value.

To take a position, follow these steps:

1. Create a trading account or log in to your existing account
2. Type the name or the ticker of the lithium stock you want in the search bar and select it
3. Choose your position size
4. Click on ‘buy’ or ‘sell’ in the deal ticket
5. Confirm the trade

When you invest in a stock, you own the shares outright and benefit from any share price appreciation as well as any dividends that are paid.

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The top lithium stocks

The lithium market used to be dominated by just three companies – Albemarle, Sociedad Quimica y Minera de Chile and FMC – which used to account for 85% of market share. However, this has changed dramatically over the last decade as the rise in demand for lithium has encouraged more companies to enter the market.

Chinese companies Tianqi Lithium and Ganfeng Lithium, both encouraged by China’s attempts to dominate the lithium market and electrify the country, have become significant players. China is one of the few countries to hold a significant amount of lithium reserves and it is one of the largest producers of electric vehicle batteries, competing with Japan and South Korea, according to McKinsey.

Plus, FMC’s decision to spin out and rename its lithium business Arcadium Lithium Plc in 2018 means FMC is now focused on agricultural products.

The top lithium producers

We’ve ordered the below list based on market capitalisation as of 23 August 2021.

Ganfeng Lithium

Chinese outfit Ganfeng Lithium (market cap $38.34 billion) is listed in Shenzen and Hong Kong, and offers the broadest exposure to the lithium supply chain. It mines lithium from four hard-rock projects, one named Ningdu Ganfeng in China and three in Australia called Mount Marion, Pilbara and Altura.

However, it has expanded into brine and even clay operations by investing in or partnering with other firms operating in Argentina, Mexico and Ireland. Ganfeng also has extensive midstream operations in China producing lithium carbonate and hydroxide.

It’s main unique selling point is that it also produces batteries and provides a recycling and recovery service, meaning it gives exposure to the value across the entire supply chain. It’s already a key partner to battery makers like BYD and electric car makers such as Tesla.

Tianqi Lithium

Tianqi Lithium (market cap $26.82 billion) is the other major Chinese company in the market, although it is only listed in China. The company has rapidly expanded by buying up and investing in lithium projects, with resources in Australia, Chile and China. This includes a 51% stake in the world’s largest lithium mine named Greenbushes in Australia, which it owns alongside Albemarle.

It is also developing the Kwinana lithium hydroxide plant in Australia that’ll be supplied by Greenbushes. It took a sizeable stake in SQM back in 2018, when it invested over $4 billion into the Chilean firm.

Albemarle

Albemarle (market cap $25.69 billion) has long been a world leading producer of lithium. The US company has a mixture of brine and hard-rock mining operations in Chile, Australia and the US, and makes both lithium carbonate and hydroxide. It also has one of the largest networks of processing plants.

It has plants capable of producing battery-grade lithium in Europe, Australia, China, Chile and the US. While the electric car market is the driving force behind the company’s growth, it makes over 100 different lithium-based products for various industries around the world.

Importantly, Albemarle does not solely produce lithium but also catalysts and bromines that are used by the pharmaceutical and a number of other industries. This diversification helps it offset any weakness in one market and its income is broadly spread between all three divisions.

However, lithium is at the heart of its ‘aggressive growth’ strategy and it is the fastest growing and highest margin segment of Albemarle’s business.

Sociedad Quimica y Minera de Chile (SQM)

Sociedad Quimica y Minera de Chile (market capitalisation $13.07 billion) is listed in the US but is rooted in Atacama Desert in Chile, where it has exclusive access to huge reserves of caliche and brine, which allows it to produce a wide array of commodities. SQM’s caliche bears the likes of iodine and nitrate, while its brines contain lithium and potassium.

The company says its brines ‘contain the highest concentrations of lithium and potassium’ in the world, and it also produces other commodities like sulphate and boron.

Lithium is one of the smallest parts of the business, but SQM is committed to rapid development in anticipation for a spike in demand as electric vehicles take off. It’s aiming to dramatically expand production to 120,000 tons in 2021, and is growing its ability to make both lithium carbonate and hydroxide.

This is reflected in its expansion into hard rock operations in Australia back in 2017 under a venture with Kidman Resources.

Pilbara Minerals

Australia-listed Pilbara Minerals (market cap $4.27 billion) wholly owns and operates the Pilgangoora project that is prospective for lithium and tantalum. Pilgangoora is a hard-rock project aiming to eventually produce up to 1.2 million tonnes of spodumene and one million pounds of tantalum per year.

The operation has two processing plants: the first produces spodumene and tantalite concentrates, while the second produces only a spodumene concentrate. The company acquired Altura Lithium in the first half of 2021, and currently enjoys strategic partnerships with several key industry players, including Jiangxi Ganfeng Lithium, General Lithium and the Great Wall Motor Company.

Livent Corp

Livent Corp (market cap $3.91 billion) became the largest publicly traded pure lithium play outside of China when it was spun-out of FMC Corp back in 2018. FMC separated its lithium business to leave it focused on agricultural products.

Livent’s primary project is a brine deposit in Salar del Hombre Muerto in Argentina, which has been up and running for over 20 years. This supplies lithium carbonate that’s sent on to numerous plants spread across the US, UK, China and India that turn it into lithium hydroxide for the electric vehicle market, butyllithium that is used in polymers and by pharmaceutical firms, and a range of specialty lithium compounds used to build things like aerospace parts.

Argentina may host its source of lithium, but Livent sells the majority of its product in Asia, which accounts for more than half of the company’s revenue. Livent has said that it expects ‘the shares of lithium hydroxide, energy storage and Asia as percentages of our total revenue by product, application and geography, respectively, to increase’ as the electric vehicle market gains momentum.

Other lithium stocks to watch

Below is a list of some of the smaller lithium producers to consider from around the world, including some still in the exploration or development stage.

• Lithium Americas: a Canadian-based company listed in Toronto and New York with two lithium projects under development. These are the Cauchari-Olaroz brine project in Argentina and the Thacker Pass hard-rock project in the US (which it claims to hold the largest lithium reserve in the US)
• Orocobre: an Australian company developing the Olaroz lithium project in Argentina that produces lithium carbonate, and it also has a 35% stake in Advantage Lithium, which it spun out in return for the sizeable stake back in 2016. Advantage Lithium’s primary project is a joint venture to develop the Cauchari lithium project, which lies south of Olaroz. Orocobre also produces borates from several projects in the country
• Galaxy Resources: an Australian company that is already producing lithium from its hard-rock operation named Mount Cattlin in Australia. It also has two other major projects in development, the Sal De Vida Catamarca brine project in Chile and the James Bay hard rock project in Canada
• Bacanora Lithium: leading the charge in London is UK-listed small cap Bacanora Lithium, which is developing the Sonora lithium project in Mexico and has an investment in Deutsche Lithium, which owns the Zinnwald project in Germany

Top lithium ETFs

Choosing a stock is one way of getting into the lithium market, but exchange-traded funds (ETFs) can allow investors to gain broader exposure at a lower risk. ETFs behave like stocks do, but they derive their value from investing in numerous companies operating in the same sector. This means you can invest in a slice of numerous lithium companies through an ETF, rather than putting all your eggs in one basket by picking an individual stock.

These ETFs, however, will be vulnerable to any market downturn that hits all lithium or battery stocks and won’t offer the same diversification or defensive properties that some of the largest lithium producers offer.

You can find more ETFs using IG's ETF Screener.

Global X Lithium & Battery Tech ETF

The Global X Lithium & Battery Tech ETF invests in a range of companies that produce lithium or make lithium-based batteries, therefore providing exposure to both the lithium and battery markets. Over 65% of its investments are in Asian companies, with most of the remaining holdings based in the US. Its top ten holdings, which account for 60.8% of its overall portfolio, as of 20 August 2021 were as follows:

ETFS Battery Tech and Lithium ACDC

The ETFS Battery Tech & Lithium ACDC invests in companies from around the world that are involved in creating batteries as well as the mining companies that produce the commodities needed to make them. Almost half of the stocks in its portfolio are based in Asia, with the rest equally split between the US and Europe. Its top ten holdings, which comprise 36.2% of its overall portfolio, as of 23 August 2021 were as follows:

What is lithium used for?

Lithium has long been used for industrial purposes, helping to create the likes of glass and ceramics, but today it is mostly used as a key component in batteries that power everything from smartphones and tablets to electric cars and scooters.

The United Nations Department of Economic and Social Affairs reports that demand for Lithium-ion (Li-ion) batteries grew from 19 gigawatt hours (GWh) in 2010 to 285 GWh in 2019. This figure is forecast to reach 2000 GWh in 2030 – which represents about 8% of global energy supply.

Passenger and commercial electric vehicles continue to be the main uses of Li-ion batteries in terms of capacities installed, followed by stationary (energy) storage.

Where is lithium found and how is it produced?

Lithium is predominantly produced from two different sources – by mining hard rock or extracting it from brine deposits. Brine deposits are essentially accumulations of groundwater that contain lithium, which is extracted as a salt. Hard rock mining is conducted in a more traditional manner by being taken from a lithium-bearing mineral called spodumene.

Read more: Lifecycle of a mine - a step-by-step guide to mining commodities

Most of the world’s lithium is concentrated in just a handful of countries. Chile is home to over half of the world’s lithium reserves, with other major producers including Australia, Argentina and China. Australia is by far the world’s leading producer of lithium. South America is more associated with brine deposits, while Australia is the leading producer of hard rock lithium.

As noted, expectations for batteries are rising as electric vehicles take off. Battery developers are constantly trying to make batteries lighter, last longer and charge quicker, and part of this comes down to the type of lithium that is used. Companies like Tesla have tinkered with the ratio of metals to try to improve the range its batteries can deliver, which include other key metals like nickel and cobalt.

There are many types of lithium and all of them are suited to different purposes. The two predominant types are lithium carbonate and lithium hydroxide. Lithium hydroxide is regarded as the premium product that is better for battery production (although there are carbonate batteries too).

Notably, the lithium mined from spodumene can be turned into either hydroxide or carbonate, but lithium extracted from brine must be turned into carbonate before it can be converted into hydroxide. This is one reason why there is a growing consensus that hard-rock lithium operations are more suitable for supplying the electric vehicle market.

¹ As awarded at the ADVFN International Financial Awards 2020 and Professional Trader Awards 2019.