Bet on These 3 Stocks to Cash in on Soaring Lithium Prices
Prices of lithium have been rapidly rising of late. Per Trading Economics Website, prices of lithium carbonate — the main source for lithium — have jumped more than 400% year over year, having topped the all-time highs reached in 2017 and 2018.
Rising demand for lithium and scarce supply are driving the price of the silver-grey metal. Amid the trending electric vehicle (EV) revolution, the demand for green vehicles is increasing every passing day. Thus, lithium, being the elemental metal in the manufacturing of EV battery packs, has become a hot commodity these days.
The metal is used to manufacture lithium-ion batteries, the most common battery type used to power cutting-edge electric cars. The batteries flaunt a higher energy density than lead-acid or nickel-metal hydride batteries. Their compact size and lightweight make them highly coveted in the automotive industry.
Buoyant Prospects of Lithium Market
The US Geological Survey estimates that more than 70% of the lithium produced worldwide is now used in EV batteries. Thus, amid the rising popularity of EVs, the demand for lithium-ion batteries, which is currently the dominant technology for green vehicles, is burgeoning.
Per the International Energy Agency, exponential growth in the EV space is likely to lead to a lithium demand surge of more than 40 times by 2030. Per a report by Mordor Intelligence, an analytics firm, the lithium market size was 280 kilotons in 2020 and is expected to grow, witnessing a CAGR of more than 10% between 2021 and 2026.
Per Reuters, lithium demand is set to hit 1 million tons by 2025 and 3 million tons by 2030 from the 320,000 tons registered in 2020.
Meanwhile, the supply of this metal is failing to keep at par with the raging demand. Under the scenario, crucial battery material prices have been skyrocketing, and the upward trajectory is set to continue next year.
Per Fitch Solutions Country Risk and Industry Research, lithium carbonate prices will average $21,000 per ton in 2022, suggesting a 16.3% rise from this year’s average price.
3 Lithium Players to Keep an Eye on
High lithium price is a boon for lithium producers. With the prices set to soar further, the time is ripe for investors to power their portfolios with lithium stocks. Below we highlight three such stocks, namely Albemarle ALB, Lithium Americas LAC and Livent Corp LTHM, which investors can consider buying to cash in on the rallying lithium prices.
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Albemarle: The Charlotte-based company is one of the leading lithium producers for batteries that power electric vehicles. It produces both types of lithium, carbonate and hydroxide, as ALB sources lithium through its brine and rock mining operations in several countries. The company remains focused on investing in high-return projects to drive productivity. It is well-placed to gain from long-term growth in the battery-grade lithium market. Albemarle should also gain from synergies from the Rockwood acquisition and cost-cut actions.
ALB remains committed to maintaining adequate financial flexibility and ample liquidity. It has plenty of cash to fund new projects. The company generates consistent operating profit margins. Its investor-friendly moves are also encouraging. This Zacks Rank #1 (Strong Buy) stock has a market capitalization of $27.2 billion and an expected earnings growth rate of 49.75% for 2022. Over the past year, the stock has gained 58.9%.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Lithium Americas: The Canada-based company operates as a lithium resource firm. This emerging entrant in the lithium space is not producing any lithium right now. Nonetheless, construction activities at the company’s Caucharí-Olaroz lithium brine project in Argentina continue to advance with production in mid-2022 to eventually produce 40,000 tons per annum of lithium carbonate equivalent.
Moreover, as far as the company’s Thacker Pass project in Nevada is concerned, an integrated pilot plant to support enhanced scale and ongoing optimization work is expected to be operational in the first half of 2022.The projects make the company’s long-term prospects promising.
Further, this Zacks Rank #3 company’s recent deal to acquire Millennial Lithium, another lithium property developer, for $400 million is a rare opportunity to add a complementary lithium brine project. This will further leverage the company’s expertise in developing Caucharí-Olaroz as the largest new lithium carbonate operation to become operational in upcoming years.LAC has a market capitalization of $3.48 billion and an expected earnings growth rate of 92.33% for the next year. Shares of the company have rallied 135.7% in the past year.
Livent: The United States-based company is one of the largest lithium pure plays producing and distributing lithium chemicals. The company operates worldwide and offers lithium compounds for specific requirements, including EV batteries.
Livent’s lithium carbonate resource in Argentina provides the company with a unique competitive advantage. Then again, its lithium hydroxide conversion plants in the United States and China help it attract high-profile buyers. LTHM remains on track to deliver near-term capacity expansions. The 5,000-metric-ton hydroxide addition in Bessemer City and initial lithium carbonate expansion of 10,000 metric tons in Argentina are anticipated to start commercial production by the third quarter of 2022 and the first quarter of 2023, respectively.
This Zacks Rank #3 company has a market capitalization of roughly $4 billion and an expected earnings growth rate of 173.33% for 2022. Shares of LTHM have rallied 31.5% in the past year.
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