Play These ETFs As Lithium Prices Soar

Lithium is proving to be a great beneficiary of the boom in the battery market. Global X Lithium & Battery Tech ETF (LIT) has gained 96% in the past year. The rally seems to be showing no signs of slowing down as surging demand has caused a crunch of the key battery material.

Demand for the materials used in electric cars and renewable-energy storage has surged lately, while miners are striving hard to boost supply. The market has now run into a deficit. Investments in the sector has worsened lately with the pandemic causing supply constraints.

The green energy transition and the fast acceptance of electric vehicles have boosted the global lithium consumption. The usage is expected to expand fivefold by end of this decade, according to BloombergNEF.

“As prices increase now, there will be unknown yet-to-be-announced projects and expansions that will help to increase supply to meet demand. That is almost a certainty. What is not certain is just how many unknown projects there are out there,” said Cameron Perks, a Melbourne-based analyst at BMI, as quoted on Bloomberg. “There’s also a possibility that not enough lithium can be mined, then it could risk a slower EV roll-out,” he added.

The industry is rife with mergers and acquisitions too. A host of acquisitions of lithium miners have been announced in recent months, including a proposed takeover of Millennial Lithium Corp. by the world’s largest battery maker. Lithium carbonate prices in China are at record highs after a nearly fivefold increase in the past year, BloombergNEF analysts said Wednesday in a note.

Two Chinese companies sparked a bidding war for Canada’s Millennial (MLNLF), which has lithium assets in Argentina, with Contemporary Amperex Technology Co. eventually outbidding Ganfeng Lithium Co., per Bloomberg.

Against this backdrop, below we highlight two ETFs that could be tapped at the current level.

LIT in Focus

The underlying Solactive Global Lithium Index tracks the performance of the largest and most liquid listed companies that are active in the exploration and/ or mining of Lithium or the production of Lithium batteries. Albemarle (14.22%), Yunnan Energy-A (7.11%), Ganfeng Lithium Co Ltd-A (6.16%) are the top three stocks of the fund. Materials (47.9%), Industrials (27.4%), Information Technology (12.2%) and Consumer Discretionary (11.9%) are the top three sectors of the fund. It charges 75 bps in fees.

Amplify Lithium & Battery Technology ETF (BATT)

The underlying EQM Lithium & Battery Technology Index seeks to provide exposure to global companies deriving material revenues associated with the development, production and use of lithium battery technology. Tesla (7.94%), Contemporary Amperex (6.92%) and BHP Group LTD (5.57%) are the top three stocks of the fund. China (29.46%), United States (20.51%) and Australia (12.10%) hold top three spots when it comes to geographical segmentation. The fund charges 59 bps in fees.

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