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5 Ways You Can Invest In Lithium, The New Oil For The EV Revolution

5 Ways You Can Invest In Lithium, The New Oil For The EV Revolution

lithium

A worker bends a Panasonic lithium-ion flexible battery during the annual CEATEC Japan advanced technologies show, Oct. 6, 2016. The battery measures 0.55 millimeters thick. (AP Photo/Koji Ueda)

The explosive demand for electric vehicles has helped lithium, a mineral used in rechargeable batteries, to become one of the most sought-after commodities.

Lithium-ion batteries have been around for decades and they are used to power billions of devices including laptops, cameras, Bluetooth earbuds, electric scooters and other mobile equipment that doesn’t have to be plugged into an electrical outlet at all times.

But the power these devices consume cannot be compared to the battery power used by 3,500-to-5000-pound electric vehicles.

UBS analysts estimate that the lithium market will grow eight times by 2030. For this reason, this and other battery minerals have become the new oil.

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Lithium might run out by 2025. Going by today’s prices, and as electric cars begin to take over, investing in lithium could turn out to be one of the best decisions.

Extensive use of lithium is not new, but the spotlight is now on the metal as demand rises globally. The concept for electric vehicles is so highly valued that it helped the creators of the lithium-ion battery earn the Nobel Prize in chemistry in 2019.

Elon Musk, the CEO of leading U.S. electric vehicle manufacturer Tesla, laid out plans to build huge amounts of Tesla-owned battery capacity during the company’s Battery Day on Sept. 22, 2020.

While investors cannot directly invest in lithium since it is not traded on any exchange and there are no accessible futures markets, there are other ways to invest in the rare earth element, which goes by the symbol Li and atomic number 3.

Here are five ways you can invest in Lithium.

Invest in lithium stocks and exchange-traded funds (ETFs)

The easiest way to invest in the growing demand for the element is to buy stocks in companies that deal in lithium or companies that engage in lithium mining or processing. But if you are afraid of the more concentrated risk involved in trading directly in stocks, then ETFs can offer a broad exposure and diversification.

Some of the publicly listed companies that deal in lithium include Albemarle Corp., the world’s No. 1 producer, based in Charlotte, North Carolina; Livent Corp.; Tianqi Lithium, the largest and lowest-cost producer of lithium materials in China; and Sociedad Quimica y Minera de Chile, based in Chile.

Look beyond electric vehicles

While electric vehicles are leading the charge when it comes to lithium-ion batteries, they do not account for all the demand and growth. Smartphones, tablets and wearable technology are also driving demand for these batteries. With the rise of the Internet of Things (IoT) and connected devices, the demand for these devices is expected to dramatically increase in coming years. Investing in battery suppliers to companies that produce these products would also be an opportunity for investors.

Go long on lithium battery market leaders

A number of companies are market leaders when it comes to lithium-ion batteries. Tesla, General Motors, Panasonic, LG Chem and Toshiba are responsible for advancing the technology to a point where batteries are a viable and cost-effective alternative to other energy sources such as oil and gasoline. They’ve invested in producing batteries that are more powerful, longer-lasting and less expensive. This will be critical in creating a world that runs on more efficient and environmentally friendly batteries.

Invest in infrastructure

Investing in the infrastructure that supports the electric vehicles, smartphones and wearable tech that run on lithium-ion batteries is another big opportunity. Infrastructure that supports the global electric vehicle network includes charging stations and repair shops.

Companies and startups that deal in this infrastructure include ChargePoint, a company that builds electric vehicle charging stations and went public in a SPAC IPO on Sept. 24, 2020. These are other companies that are positioned to grow and expand further as the adoption of batteries becomes more widespread.

Venture offshore beyond the U.S. market

Brine lakes in the salt flats of South America hold much of the world’s lithium. The world’s four top producing countries are Australia, Chile, China and Argentina, the U.S. Geological Survey reported in 2019.

Investors can look for opportunities in foreign markets such as Japan, China, South Korea, India and Germany. For example, the Japanese government offers subsidies that cover 66 percent of the cost of homes and businesses that install lithium-ion batteries.

Developing markets throughout Africa, South America and Asia are also expected to boost battery demand in products such as electric bicycles, as well as renewable sources of energy such as wind and solar power.

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