The electric vehicle boom is only accelerating. Unfortunately, a shortage of battery metal lithium could put the brakes on it all. And that has big implications for battery metal stocks.
In the U.S. for example, a recently passed $1 trillion infrastructure package includes billions for electric vehicles. President Joe Biden even wants 50% of all new cars to be electrified.
According to Barron’s:
The bill allocates $5 billion to expand EV-charging stations along highways and an additional $2.5 billion for other charging alternatives such as hydrogen-fueling infrastructure. In a speech on Friday, President Joe Biden said the funding could help build more than 500,000 charging stations, and help make 50% of vehicles electric by 2030.
Even major automakers are creating electric fleets. General Motors (NYSE:GM) wants to invest $35 billion in EVs through 2025. Ford (NYSE:F) is investing $22 billion through 2025. BMW (OTCMKTS:BMWYY), Honda (NYSE:HMC), Mazda (OTCMKTS:MZDAY), Nissan (OTCMKTS:NSANY), Toyota (NYSE:TM), and Volkswagen (OTCMKTS:VWAGY) all are investing in EVs.
Unfortunately, one problem could put the brakes on it all. The world is running short of lithium supply, while demand explodes.
“There is the quadrupling of demand in just five years and probably a growth of six or seven times over 10 years. So, clearly the industry is not prepared today for that level of demand,” says iLi Markets partner Daniel Jimenez, as quoted by S&P Global Platts.
That’s not only beneficial for lithium prices. It’s incredibly beneficial for these mining stocks:
Battery Metal Stocks: Global X Lithium & Battery Tech ETF (LIT)
One of the best ways to gain exposure to the red-hot lithium market is with the Global X Lithium & Battery Tech ETF.
Not only does it offer broader diversification with top lithium stocks, it does so at less cost. For example, if I were to buy 100 shares of LIT, it would cost me a little more than $9,500 and would also offer me exposure to dozens of stocks, such as Albemarle, Tesla (NASDAQ:TSLA), BYD Co. (OTCMKTS:BYDDF), Lithium Americas, Livent Corp. (NYSE:LTHM), Orocobre Ltd. (OTCMTKS:OROCF), Standard Lithium (NYSE:SLI), and dozens more.
If I were to just buy 100 shares of ALB, it would cost me $27,640.
Even better, as the lithium story heats up, LIT could see higher highs. Since bottoming out around $18 in 2020, the ETF is now up to $95, and could push higher in the long term.
Albemarle (ALB)
Since bottoming out around $48, Albemarle, one of the world’s largest lithium producers, is now up to $276. And this may only be the start of a bigger move.
All as lithium demand outweighs supply. Better still, not only did the company just posted an adjusted profit that beat estimates, it raised its full-year EBITDA forecast. For Q3 2021, the company reported $830.6 million, or $1.05 per share in revenue, as compared to expectations for $770.4 million, or 77 cents per share. Also, the company forecast full-year net sales of $3.35 billion, and adjusted EBITDA of about $845 million.
Analysts seem to like the ALB stock, too. Oppenheimer, for example raised its price target to $307 from $296. Mizuho raised its target to $281 from $247, with Bank of America analysts raising its target from $211 to $220.
Battery Metal Stocks: Lithium Americas (LAC)
Lithium Americas is developing the Thacker Pass lithium mine in Nevada, where it’s expected to begin construction in early 2022.
With regards to that project, “In 2018, Lithium Americas completed a pre-feasibility study (PFS) on a two-phase project with a production capacity designed to reach 60,000 tpa of battery-quality lithium carbonate (Li2CO3) and 46-year mine life. A feasibility study (FS) for Phase 1 is expected by the end of 2021,” as noted on the company’s website.
In addition, its Caucharí-Olaroz mine is still on track to achieve first production by mid-2022 on the initial 40,000 metric tons per annum operation. We’re also watching for Lithium Americas’ potential acquisition of Argentina-based lithium company, Millennial Lithium. With Argentina forecast to produce as much lithium as Chile, this could be a nice, new addition for the company.
On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Ian Cooper, a contributor to InvestorPlace.com, has been analyzing stocks and options for web-based advisories since 1999.
