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Lithium ETF Could Be Turning Around

This article was originally published on ETFTrends.com.

A lithium ETF may power up ahead as a number of technology and industrial companies have locked in deals with lithium producers in the latest indication that big users are trying to secure supplies in the face of potential shortages.

The Global X Lithium & Battery Tech ETF (LIT) , which tracks the full lithium cycle from mining and refining through battery production, has increased 4.1% over the past month after falling off 10.2% year-to-date.

A number of companies like technology firms and car makers reliant on lithium have signed deals even if it means joining suppliers that haven't started production yet in an attempt to head off potential shortages in the follow years as electric vehicle uses rises, reports the Wall Street Journal.

For example, Tesla (TSLA) reached a three-year supply deal with lithium producer Kidman Resources, which will start when the Australian company begins producing battery-grade material. The producer is not expected to begin generating lithium compounds until 2021.

Furthermore, there are more than 100 smaller lithium miners, with many publicly traded in Canada and Australia, and some have already secured deals with big users.

“It just looks like we’re on the precipice of this wave,” Chris Berry, founder of House Mountain Partners LLC, told WSJ. “You’re going to need a lot of investment in a hurry to meet demand.”

Big Lithium Deals

Among the latest round of big investors in the lithium space, Japan's SoftBank Group, Chinese firm Tianqi Lithium and the trading arm of Toyota Group have already locked in deals with lithium producers.

“It’s certainly an indication the metals are becoming more mainstream,” Jon Hykawy, president of Stormcrow Capital Ltd., told the WSJ.

Looking ahead, analysts anticipate demand for materials used to power electric vehicles and smartphones to more than double by 2025, which may further support demand for more exotic metals like lithium. Additionally, on the supply side, lithium mines are located in regions that have historically been unstable, such as South Americas for lithium, which have further added to concerns over supply shortages.

For more information on the materials space, visit our basic materials category.

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