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Lithium ETFs Set to Surge on Rising EV Demand

·3 min read

Lithium has been a red-hot commodity thanks to the drive toward electric vehicles (“EV”), which use lithium-ion batteries. U.S. President Joe Biden has just signed a $740 billion climate change, healthcare and tax ‘Inflation Reduction Act’ (read: Inflation Reduction Act: Clean Energy & EV ETFs Winners).

The coming Democratic message will likely focus on the aspects of the bill that could improve Americans' lives immediately — including tax credits for electric vehicles and energy-efficient home improvements and key health care provisions.

Climate provisions in the Inflation Reduction Act put the United States back on track toward significant emissions reductions, potentially lowering greenhouse gas emission by 40% of 2005 levels. The Biden administration, for instance, looks to cut the sale of gas-powered vehicles to 50% of all new purchases by 2030.

But one miner cautioned that when it comes to the transportation sector, domestic resources for lithium, the most essential mineral used for electric vehicle production, may not be enough to meet some of the most striving targets set in the act, as quoted on a Yahoo Finance article.

EVs and battery storage have already displaced consumer electronics to become the largest consumer of lithium and are set to take over from stainless steel as the largest end user of nickel by 2040, per IEA.

Piedmont Lithium is looking to cash in on the demand, as one of only a handful of U.S.-based lithium miners, the mining company announced plans to open a lithium processing operation in Tennessee, with construction set to start in 2023. Once fully operational, the plant will process 30,000 metric tons of lithium per year.

Keith Phillips, CEO of Piedmont Lithium (PLL) said a slow permitting process has delayed approvals for new production sites. Meanwhile, China has continued to dominate the industry, refining more than half of all lithium supply while Australia and Chile remain the largest producers in the world.

The International Energy Agency expects the world to face lithium shortages by 2025, while Credit Suisse believes demand could triple between 2020 and 2025 (read: Lithium ETFs Set to Surge on Climate Bill).

ETFs In Focus

Against this backdrop, one can bet on lithium ETFs with a medium-term view.

Global X Lithium & Battery Tech ETF LIT

Global X Lithium & Battery Tech ETF invests in companies throughout the lithium cycle, including mining, refinement and battery production, cutting across the traditional sectors and geographic definitions by tracking the Solactive Global Lithium Index. It holds 39 securities in its basket, with the Chinese firms taking the largest share at 42%, followed by the United States (20.5%) and South Korea (11.7%).

Global X Lithium & Battery Tech ETF charges investors 75 bps in annual fees and has amassed $4.6 billion in AUM. It trades in an average daily volume of 584,000 shares.

Amplify Lithium & Battery Technology ETF BATT

Amplify Lithium & Battery Technology ETF offers exposure to a portfolio of companies generating significant revenues from the development, production and use of lithium battery technology, including battery storage solutions, battery metals & materials, and electric vehicles. It tracks the EQM Lithium & Battery Technology Index, holding 90 stocks in its basket.

Amplify Lithium & Battery Technology ETF has gathered $184.4 million in its asset base and trades in an average daily volume of 77,000 shares. It charges 59 bps in fees per year from investors. The fund yields 2.97% annually.



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Global X Lithium & Battery Tech ETF (LIT): ETF Research Reports
 
Amplify Lithium & Battery Technology ETF (BATT): ETF Research Reports
 
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