Widely used in the batteries of smartphones, electric vehicles, and other products, lithium, known as “white gold,” has seen prices decline due to the growing supply from Africa and Australia. Additionally, a decrease in demand for electric vehicles in the U.S. and China might drive lithium prices even lower. Recent reports even mentioned that a solid-state electrolyte, N2116, capable of reducing lithium usage by up to 70%, has reached the prototype stage.
As a result, lithium stocks and lithium exchange-traded funds (ETFs) have been performing poorly lately. The Global X Lithium & Battery Technology ETF (LIT), with net assets of $2.1 billion, has fallen 10% year-to-date and 27.9% in the past year as of January 16.
However, looking ahead, as demand recovers and supply tightens, lithium stocks and ETFs are expected to rise.
| LITHIUM STOCK/ETF | YTD RETURN AS OF JAN. 16 | 3-MONTH RETURN AS OF JAN. 16 |
| Albemarle Corp. (ALB) | -12.8% | -24.7% |
| Mineral Resources Ltd. (OTC: MALRY) | -18.6% | 0.2% |
| Arcadium Lithium PLC (ALTM) | -69.8% | -70.3% |
| Lithium Americas Corp. (LAC) | -18.6% | -44.2% |
| Horizons Global Lithium Producers Index ETF (HLIT.TO) | -17.6% | -20.8% |
| Global X Lithium & Battery Tech ETF (LIT) | -9.8% | -12.8% |
Headquartered in Charlotte, North Carolina, Albemarle’s (NYSE:ALB) share price fell 12.8% in the first two weeks of January and 47.8% over the past year. Echoing the downturn in other battery stocks, the decline is due to decreased consumer demand leading electric vehicle manufacturers to cut production. However, the growth in electric vehicle sales is a long-term trend, so the current dip in battery demand is temporary. Albemarle has signed a significant contract with Ford Motor Company to supply 100,000 tons of lithium hydroxide starting in 2026, and similar negotiations are underway with construction equipment giant Caterpillar (NYSE:CAT). Industry positives include the U.S. Department of Transportation’s allocation of $626 million to boost America’s charging network, and the electric vehicle industry’s revenue is projected to reach $623 billion by 2024.
Based in Perth, Australia, Mineral Resources Ltd. (OTC: MALRY) has an attractive forward dividend yield of 3.1%, and 18 market analysts have given it an “overweight” rating with a target price of $70.41, well above the closing price of $40.04 on January 16. Mineral Resources excels at forming partnerships with leading industry companies, such as an investment agreement with Kali Metals (KM1.AX) acquiring a 10% stake, joint development of the Wodgina hard rock lithium project in Australia with a 50% ownership, and collaboration with China’s Ganfeng Lithium Group Co. Ltd. (OTC: GNENF) on the Mt. Marion spodumene project.
Arcadium Lithium plc (NYSE:ALTM) is a new company formed after the all-stock merger of Livent and Allkem, holding 7% of the lithium market share. Before the merger, Livent had supply agreements for lithium hydroxide with General Motors (NYSE:GM) and Ford Motor Company (NYSE:F), and partnered with Sakuu to manufacture 3D printed lithium-ion batteries. Industry analysts are optimistic about ALTM’s long-term prospects, with BMO Capital giving it a “market perform” rating, and an average target price of $71.40 for the year, considerably higher than the closing price of $5.43 on January 16.
Lithium Americas Corp. (TSX:LAC) (NYSE:LAC), headquartered in Vancouver, Canada, owns assets including one of the largest lithium resources in the U.S., the Thacker Pass lithium project, and has established a partnership with General Motors that has also invested in Thacker Pass. Valued at approximately $5.7 billion, with a 40-year mine life, the project is set to begin construction in June 2024 and is expected to commence production in 2026.
The Horizons Global Lithium Producers Index ETF (TSX:HLIT) holds Mineral Resources as its largest stock at 12.2%, followed by Pilbara Minerals Ltd. (OTC: PILBF), owner of the Pilgangoora lithium project at 11.4%, and Albemarle, Arcadium, and Sigma Lithium Corp (NASDAQ:SGML) at 9.2%, 8.8%, and 6.6% respectively. HILT has an expense ratio of 0.89% and as of January 16, offered an annual dividend rate of 3.1%, with net assets of $27 million.
Global X The Global X Lithium & Battery Technology ETF (LIT) is heavily invested in industry leaders, such as Albemarle (9.6%), Tesla (4%), and Mineral Resources (4.4%). LIT offers diversified assets, covering different parts of the lithium supply chain, thus mitigating the fluctuations in lithium prices. Additionally, this ETF invests in lithium mining, refining, and battery production companies, with a focus on China (making up approximately 37% of the fund) and the United States (21%), and has an expense ratio of 0.75%.
