- August 31, 2022
- Posted by: CoachShane
- Category: Trading Article
The lithium market is currently experiencing a boom and prices for the metal are rising. This makes now a good time to invest in lithium mining stocks. The reason for this is that electric vehicle sales are increasing, which is driving the demand for lithium.
Governments around the globe are putting tax breaks and tax dollars to work to increase the manufacturing and sales of EVs, and this is having a positive effect on the price of lithium. Governments seem to have a never-ending supply of cash to spread around and as traders, we get to take full advantage of the opportunity that creates.
Unlike other commodities like gold, traders are unable to trade the metal directly. This leaves the companies involved in lithium mining and the EV market in general, as the only avenue to profiting from these surges in the electric vehicle industry.
Lithium is a versatile metal that has several uses, including in electric vehicle batteries. Lithium batteries are popular because they are lightweight and have a high energy density, meaning that they can store more energy than other types of batteries.
From an environmental standpoint, they are not as toxic as other types of batteries. However, we can’t ignore the impacts the mining causes such as water loss, ground destabilization, biodiversity loss, increased river salinity, contaminated soil, and toxic waste.
Some think the trade-off such as a longer lifespan than other types of batteries and the reduction of emissions from gas-powered vehicles, is worth it. Many traders will shy away from opportunities they deem unethical so trading in the lithium market is not for everyone.
Higher Lithium Prices
As electric vehicles become more popular and perhaps more accessible to the average person, more lithium will be required to produce these batteries. This will, in theory, (supply and demand) drive the price up of not only lithium, but also the stock prices as the companies involved in the mining process, become more important.
While mining companies offer an opportunity, so does trading in the companies that make the actual battery. Lithium-ion battery stocks are also a viable approach to getting in on virtually the ground floor of the EV wave that is starting to happen.
Also, Volkswagen Group has said that starting in 2030, there will be large quantities of used batteries returned. This opens the door to investing in lithium recycling stocks. This may be a great chance for those who skipped the mining opportunity for ethical reasons.
All things considered, now is a good time to invest in lithium stocks or at least begin to research the opportunity. The market is expected to grow significantly in the coming years as electric vehicle sales increase. Investors who get in on the action now could see significant profits down the line.
However, it is important to remember that the lithium market is still relatively new and volatile. Because of the volatility, nimble traders can take advantage of the quick rises in price on a more intra-day or swing trading basis.
3 Best Lithium Stocks To Consider Trading
Looking for Lithium related stocks?
There are suggestions of what stocks to get involved in all over the internet. Before you even think of getting involved in one, you need to ensure you have a trading strategy in place. You need to do your due diligence on any trade you consider.
Here are two of the better-known stocks to trade as well as an ETF for traders who prefer those as trading vehicles.
Livent Corp. (NYSE: LTHM)
The company went IPO on 2018-10-11 and produces lithium compounds, including battery-grade lithium hydroxide for use in high-performance lithium-ion batteries.
LTHM shows strong growth in Earnings Per Share (EPS). Over the last year, the EPS has been growing by 7000.00%, which is an impressive gain. The EPS is expected to grow by 60.41% on average over the next 5 years. This is very strong growth.
From a technical standpoint, the long and short-term trends are positive. Currently, it is trading in the upper part of it’s 52-week range. While not in a great state for a setup due to the wide-ranging bars, it’s not a bad stock to have on the radar if it consolidates for a bit.
Albemarle is a global specialty chemicals company with leading positions in lithium, bromine, refining catalysts, and applied surface treatments. This company plans to build a lithium processing plant in the U.S. that they predict will produce as much of the EV battery metal as the entire company produces today. Huge growth potential.
EPS has been growing by 85.65% over the last year and is expected to grow by 35.7% over the next 5. Revenue over the last year has grown by 34%. For dividend investors, the yearly dividend is .53% (the industry average is 2.02), and is probably not a choice for those types of investors.
Much like LTHM, this stock is technically sound and the trends are positive. The stock made a new 52-week high and on this weekly chart, is consolidating. On a daily chart, the price is pulling back for traders that like to trade reversals out of the pullback. Breakout traders can see the clear resistance level that needs to break for further upside.
Global X Lithium & Battery Tech ETF (LIT)
If you prefer to not buy lithium stocks individually, consider being involved with an ETF that covers everything from lithium miners to battery producers (37 companies in total with this ETF). It includes the stock Albemarle and the popular EV manufacturer, Tesla in the basket of instruments it trades.
From a weekly chart perspective, the long-term trend is still positive but in the short term, it is looking fairly neutral. There is not a great technical setup at this point for either breakout traders or those that play reversals out of pullbacks but is certainly a watchlist candidate.
On The Horizon – Lithium Alternatives
While lithium is a big deal now, it may not be in the future. Remember, mining lithium is not as environmentally sound as people would like. We could be trading one issue for another. Think of cobalt which is also used in EV. It’s mined in the Congo and often uses child labor to do so.
Also, the IEA says the world could face lithium shortages by 2025. Considering the lack of supply but increased demand, it’s clear prices could skyrocket. Add to that, it’s estimated that it takes 2.2 million liters of water to produce one ton of lithium. The stage is set for alternatives.
From sodium-ion to dual carbon, there are a few challengers that don’t have the same issues as lithium. Look for those opportunities in the future.
Lithium is one of those rare commodities that’s in high demand and short supply, which is why prices have been on the rise. If you’re looking for a hot commodity to invest in, lithium might be a good choice. Go over our short list of lithium stocks to consider trading and see if any of them fit your investment strategy.
Keep in mind that these are volatile markets, so always do your research before investing and actively trading.
This is just an overview with a focus on lithium– there are many other opportunities in the mining and energy sectors waiting to be explored.
Are you thinking about trading lithium stocks? What are your thoughts?