Electric vehicles are powered by lithium-ion batteries and with demand for those vehicles increasing so is need for the mineral. Miners are getting in on the act. That includes Piedmont Lithium (NASDAQ:PLL), though PLL stock isn’t for the faint of heart.
Highlighting just how enthusiastic investors are about lithium names this year, the Global X Lithium & Battery Tech (NYSE:LIT) is up almost 80% as of Nov. 6. Underscoring, Piedmont’s potency, that stock is higher by 172%. That doesn’t mean this lithium name is a safe lithium name. Over just the past month, it’s lower by 46.40% and resides 58.60% below its 52-week high, confirming that small-cap miners giveth and taketh away.
In fact, Piedmont’s place in the EV conversation is interesting because, like so many aspiring vehicle manufacturers, the company isn’t yet producing the product driving the stock price. In its own words, Piedmont is an “emerging” lithium producer, though it’s hoping to shed that status in a region rich in he commodity in its home state of North Carolina.
“With resource updates, permit approvals, metallurgical testwork, and feasibility study scheduled for completion in 2019, our aim is to fast track the Piedmont Lithium Project towards production as a fully-integrated domestic source of battery-grade lithium and capitalize on the widely anticipated shortfall of lithium in global markets over the next decade,” according to the company.
PLL Stock: Promises, Promises
When it was clear Joe Biden was the Democratic presidential nominee, investors got acquainted with his positions on energy policy. With the primary takeaways from Wall Street being Biden, despite being born in Pennsylvania, would be bad for the coal industry and a boon for renewable energy.
Time will tell if that thesis proves accurate, but there’s no denying clean energy names became highly correlated to Biden’s polling data. For the 90 days ending Nov. 6, the S&P Global Clean Energy Index gained 34.57%, including a 9.66% gain during Election Week.
This is relevant to Piedmont because miners of minerals, including lithium, used in green products.
Whether electrical vehicles or solar panels, apparently they have a friend in Biden.
Prior to Election Day, mining executives were understandably skittish about the prospect of the former vice president in the Oval Office, but his campaign sought to allay those concerns, telling miners of materials for eco-friendly uses that Biden wants to up domestic production of those goods.
There is growing consensus in the lithium community that they’ve got an ally in Biden. For example, Albemarle (NYSE:ALB) Kent Masters told Bloomberg Biden would incentives electrification and EVs, which is good for lithium.
Still Hurdles to Clear
For now, it appears lithium stocks have a friend in Biden, but politicians often play lip service to specific industries without delivering tangible results. See President Trump and coal companies.
More importantly, recent price action in Piedmont suggest either that markets doubt the company’s ability to adequately ramp up its North Carolina facility, are leery about exactly how much Biden can do for the lithium industry or both.
There’s another consideration of investors mulling PLL stock: China. Eighty percent of lithium production is sourced through Asia, with China being the elephant in that particular room. This is relevant for Piedmont. The Trump Administration overtly said it wanted to increase domestic production of essential minerals. Then, took a heavy-handed approach to China.
Biden will almost certainly take a softer approach to relations with the world’s second-largest economy. It’s possible Beijing known EV appetite in the U.S. is rising, looks to leverage lithium. That could put Piedmont in a bind. At the very least, there are a lot variables with this name and recent price action highlights those risks.
On the date of publication, Todd Shriber did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Todd Shriber has been an InvestorPlace contributor since 2014.