Last week, lithium stocks came into focus after Chilean President Gabriel Boric announced plans to nationalize the country’s lithium industry. Now, refining seems to be the lithium industry’s chokepoint today.
Tesla (NASDAQ:TSLA) CEO Elon Musk recently claimed on an earnings conference call that lithium itself is not rare, urging investors to invest instead in refining. Per the call:
“The choke point is much more on refining capacity than it is on mining. Lithium is actually is very common throughout the world, including in the US.”
As of this writing, shares of Sociedad Química y Minera de Chile (NYSE:SQM) stock are up more than 5%, recovering from a 19% fall on Friday, April 21. Meanwhile, Albemarle (NYSE:ALB) stock fell 10% on Friday and is now recovering by roughly 5%. Both Sociedad Química y Minera de Chile and Albemarle are some of the world’s largest lithium producers.
On Friday, however, shares in refiners who don’t use Chilean lithium — like Piedmont Lithium (NASDAQ:PLL) and Sigma Lithium (NASDAQ:SGML) — rose. Today, PLL stock is up more than 2% today while SGML is down roughly 1%.
Lithium Stocks: A Chile Reception
Lithium is the world’s lightest metal with the greatest electric energy density by weight. Lithium prices have been falling since November and are currently at CNY 172,500 per metric ton.
While Chile has some of the largest deposits of lithium, Australia is the largest producer of lithium in the world, followed by Chile, China and others.
Chilean President Gabriel Boric said his country now plans on having a state-owned company lead its mining effort, taking a majority stake in all new contracts. The government also hopes to take stakes in SQM and Albemarle operations. ALB stock fell on fears of expropriation. However, existing contracts still have years to run — and Boric said those contracts will remain in place until completion.
For this reason, the market’s response to the Chilean president’s announcement was muted, although the rhetorical reaction was fierce. Boric made nationalization part of his successful campaign last year.
In the United States, one of largest stores of lithium brine is near California’s Salton Sea. Lithium Americas (NYSE:LAC) is also developing a lithium mine in Nevada’s Thacker Pass. President Joe Biden and his administration are rolling out an incentive program to boost production as well.
Lithium prices are low now, but some expect demand to rise tenfold by 2030, mainly for electric vehicle (EV) batteries.
What Happens Next?
The lithium story has years to run and there is no short-term shortage. Any panic right now is overdone. However, the story will bear watching as demand rises. There are also efforts underway to build EV batteries from other materials, like sodium.
On the date of publication, Dana Blankenhorn did not hold (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.
