Years after lithium prices ballooned on supply concerns, the metal quickly fell out of favor, affecting lithium stocks.
Why? A massive increase in supply, the U.S.-China trade war and the novel coronavirus were factors. However, the world could soon run right back into a major shortfall all over again. This time, it is thanks to big demand for electric vehicles.
According to the Boston Consulting Group, for example, electric vehicles could make up about a third of all auto sales in the next five years. By 2030, EVs could control up to 51% of the auto market.
In addition, according to Pilbara Minerals, “The lithium market is expected to triple in the next five years as the world embraces electric vehicles.”
Plus, says Clean Technica contributor Tina Casey:
“As for the supply of lithium itself, miners have barely scratched the surface of the global lithium potential. The challenge is to match the mining timeline with the electric vehicle manufacturing timeline. It can take years to start up a new mining operation, and meantime automakers are already gearing up for an electric vehicle recovery after the COVID-19 downturn.”
In addition, Research and Markets says the lithium-ion battery market was worth $36.7 billion in 2019. By 2027, the market could be worth well over $129.3 billion.
With a potential lithium supply crunch, and a booming story, some of the top lithium stocks to consider include:
Lithium Stocks: Global X Lithium Battery Tech (LIT)
One of the best ways to diversify among major lithium stocks is to accumulate shares of the LIT ETF, which invests in the full lithium cycle from mining and refining to battery production.
After exploding from a low of $17.74 to $36.29, I believe the ETF could easily run to $45 from here, as the lithium and electric vehicle stories just begin to heat back up.
Plus, at about $36 a share, the LIT ETF offers investors in lithium stocks exposure to heavyweights like Albemarle and Tesla (NASDAQ:TSLA).
Lithium Americas Corp. (LAC)
Lithium Americas Corp. operates as a resource company in the United States, with interests in the Cauchari-Olaroz Project in Jujuy province of Argentina and owns a 100% interest in the Thacker Pass lithium project in northwestern Nevada.
After running from a March 2020 low of $1.92 to $5.71, I believe the LAC stock could run to at least $10 in the near term. While the company did see a slowdown thanks to the Covid-19 pandemic, demand should pick back up substantially as EV demand begins to recover.
Plus, according to InvestorPlace contributor Josh Enomoto,”LAC earned itself a healthy dose of street cred with its joint venture with Sociedad Quimica y Minera. Then Ganfeng Lithium bought out SQM in the agreement. Lithium Americas now owns 62.5% of that venture.”
Albemarle is another hot lithium stock to consider. One of the company’s top segments is lithium, which offers lithium carbonate, lithium hydroxide, lithium chloride and value-added lithium specialties, as well as reagents, such as butyllithium and lithium aluminum hydride for applications in lithium batteries for consumer electronics and electric vehicles.
Since bottoming out in March 2020 at $48.67, the stock has exploded to $87.50, and could run to $100 near term given the likelihood of higher demand.
Over the last few quarters, the company has delayed new projects because of falling lithium prices. However, as demand returns, lithium prices should push aggressively higher on low supply, and affecting lithium stocks.
In recent weeks, Albemarle also declared a quarterly dividend of 38.5 cents per share, payable to shareholders of record as of Sept. 18.
Ian Cooper, an InvestorPlace.com contributor, has been analyzing stocks and options for web-based advisories since 1999. As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.