ASX Lithium Stocks: Top Lithium Shares to Watch in 2023
With the rise of electric vehicles, demand for lithium skyrocketed. Here are the 10 biggest ASX lithium stocks to take advantage of soaring lithium prices.
As traditional combustion engine cars are replaced by electric vehicles, the demand for lithium explodes worldwide. In 2022 alone, lithium soared over 124%, and with Australia holding the lion’s share of the metal’s production. While the commodity’s have dropped by over 60% since 2023, lithium demand is still expected to be high in the next few years. ASX lithium stocks might be worth considering if you’re looking to invest in the rise of the electric vehicle using lithium-ion batteries. Dive into the Australian stocks listed below.
Key highlights:
- Demand for lithium has more than doubled from 2016, and it’s expected to triple its current demand by 2025.
- The biggest growth drivers are due to the expected increase in usage of electric vehicles and e-bikes.
- Surging more than 124% in 2022 alone, lithium commodity might make miners be even more profitable as gross profit margins grow.
Discover the top 10 lithium stocks on the ASX
Market Capitalisation : 44.89b
Stock price (as of 14/04/2023): 120.94
Stake Platform Bought / Sold (1 Jan 2023. 31 March 2023): 56% / 44%
The second-biggest mining company in the world, RIO Tinto has lithium mining facilities both in California and Serbia, which is expected be able to produce over 63,000 tons of lithium every year. Despite lithium not being one of the company’s core products, RIO might be a good call for those who want to get some exposure to the metal, while also gaining exposure to other minerals.
Pilbara Minerals Limited ( PLS )
Market Capitalisation: 11.24b
Stock price (as of 14/04/2023): 3.75
Stake Platform Bought / Sold (1 Jan 2023. 31 March 2023): 66% / 34%
Australia’s biggest lithium miner, Pilbara Minerals owns the Pilgangoora Project in Western Australia, which has an estimated mine life of 26 years and a maximum production capacity of 580,000 tonnes per annum. Being a globally significant lithium producer, the rise of this commodity has sent the PLS share price upwards, soaring 30.6% in the last 12 months.
Best Lithium Stocks To Watch Today? 2 In Focus
Imagine the batteries in your smartphone or your friend’s electric scooter. They’re likely powered by lithium, a lightweight metal that’s crucial for making rechargeable lithium-ion batteries. These batteries are everywhere these days – in phones, laptops, electric cars, and even some renewable energy storage systems. So, the companies that mine lithium and process it into a form that can be used in batteries make up what we call the “lithium sector”.
Now, when we say “lithium stocks“, we’re talking about shares of these lithium mining and processing companies that you can buy on the stock market. These stocks are kind of like tiny ownership pieces of these companies. When you buy these stocks, you’re basically betting that the demand for lithium will keep growing. And thus the company’s profits will grow, and so will the price of your stocks.
But, just like anything else in life, there are risks. Lithium can fluctuate based on supply and demand. If a new technology comes out that doesn’t need lithium, or if there’s too much lithium produced causing to drop, the value of your lithium stocks might fall. That’s why, even though the lithium sector has lots of potential due to the growing demand for batteries, investing in lithium stocks requires careful thought and research.
Lithium Stocks To Buy [Or Avoid] Now
Leading off, Albemarle (ALB) is a global producer of lithium and lithium derivatives, known for its significant role in the lithium market. Its operations span across several countries, including the U.S., Australia, and Chile.
On Monday morning, Albemarle announced they struck a key deal with Ford Motor Company (NYSE: F). In detail, this five-year contract, set to commence in 2026 and run until 2030, outlines Albemarle’s commitment to supply over 100,000 metric tons of battery-grade lithium hydroxide. This amount of lithium hydroxide is expected to be used in approximately 3 million future electric vehicles (EVs) manufactured by Ford.
Following this news release, shares of ALB stock closed Monday’s trading session up 1.15%, trading at 206.50 a share.
Sociedad Quimica y Minera S.A. (SQM Stock)
Next, Sociedad Quimica y Minera S.A. (SQM) often referred to as SQM, this company is one of the world’s largest lithium producers, based in Chile. It operates in the Salar de Atacama, home to one of the planet’s richest lithium deposits.
Meanwhile, just today, Monday, Sociedad Quimica y Minera de Chile S.A., announced a strategic partnership with Ford Motor Company. This agreement aims to guarantee a consistent supply of high-quality lithium products, essential for the manufacture of electric vehicle batteries. In particular, SQM will be providing battery-grade lithium carbonate and lithium hydroxide to Ford, further enhancing the automaker’s capability to produce high-performance electric vehicles.
With this news release, shares of SQM stock closed Monday’s trading session slightly green on the day, trading at 71.15 a share.
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Extracting Lithium
There are two main ways of extracting lithium: mining and brine water.
Interestingly, about two-thirds of lithium is extracted via brine water. The highest concentrations of these lakes are found in Chile and Argentina.
Lithium is obtained via evaporation in the form of lithium carbonate, the raw material used in lithium-ion batteries. This process also leaves behind magnesium, calcium, sodium, and potassium.
While brine mining is a lengthy endeavor – usually taking eight months to 3 years – it is still usually more accessible and cheaper than hard rock mining.
The remaining amount of lithium is found in traditional mining operations.
The lithium concentration is more significant in hard rock mines, but the cost to operate these mines and the environmental and geological impact is much greater. Still, a hard rock mine in operation can be competitive with an upstart brine mine.
While there are 145 minerals containing lithium, just five are used in lithium extraction.
over, of these five, spodumene makes up the lion’s share (~90%) of mineral-derived lithium. The mineral is heated, cooled, and mixed with sulfuric acid to create lithium carbonate.
Finally, a minimal amount of lithium is being recycled from electronics. This method does not provide pure enough lithium to make new batteries, but it is suitable for other uses, such as glass and ceramics.
Supply
Total lithium production in 2021 amounted to 100,000 MT (metric tons), which we expect to continue growing, given the seemingly insatiable demand.
Here are the top lithium-producing countries in 2019:
Australia = 51,000 MT (60% of worldwide production)
As you can see, lithium production is highly concentrated, with substantially all of it being produced by just five countries and Australia being a majority on its own.
Indeed, Australia and Chile alone account for almost 80% of the production market. The US is a tiny player in this market, with a fraction of a percent of the market share.
Total worldwide lithium reserves are estimated to be 20 million metric tons.
Long-term mining activity will likely continue to be driven by Chile, China, Australia, and Argentina.
Demand
The demand for lithium currently has three main drivers: Continued mobile device adoption, energy storage for electric grids / renewable energy, and electric vehicles.
As noted above, short and intermediate-term demand for lithium will likely depend on the dynamics of the electric vehicle market.
Mobile device adoption will continue to be a driver, but electric vehicles require thousands of times as much lithium and hence have a much more significant influence.
Batteries for storage for renewable energy could be an essential driver down the line, but that is viewed as more of a long-term demand driver.
Global electric vehicle sales are expected to exceed 14 million by 2025 and will likely grow over the next several decades as electric battery costs become cheaper than internal combustion engines. In addition, laws against internal combustion engines have popped up in various developed countries in Europe and the US, meaning governments are driving consumers over the long term toward electric vehicles.
Additionally, while demand forecasts vary widely, it is primarily expected that electric vehicle production will test supply in the years and decades to come. We can see that electric vehicle registrations are mushrooming higher as manufacturers create more supply each year to satiate consumer demand.
Indeed, some believe that electric vehicle adoption will be stymied by the availability (or lack thereof) of crucial components like lithium, as the recent ramp-up in demand moves much faster than the ability to establish new mines, which often takes years.
However, despite tremendous expectations, it should be noted that while lithium is an essential part of electric vehicles, it is not necessarily a fundamental cost driver.
important cost drivers could include nickel and cobalt, making up ~73% and ~14% of a typical battery, compared to ~11% for lithium. Tesla’s Elon Musk calls lithium “the salt on the salad,” noting the relatively low expense of the material compared to the vehicle’s overall cost.
While ample lithium reserves are available, the demand has picked up tremendously, leading to supply-side constraints. As a result, pricing can be volatile. Battery-grade lithium prices, however, have stabilized somewhat in the past couple of years.
Investing In Lithium
There is a way to directly and broadly invest in the lithium industry: The Global X Lithium Battery Tech ETF (LIT).
The ETF “invests in the full lithium cycle, from mining and refining the metal, through battery production.” The fund aims to “provide investment results that correspond to the price and yield performance, before fees and expenses, of the Solactive Global Lithium Index.”
The “before fees” portion is essential, as management fees stand at 0.75% annually. over, the current dividend yield is negligible.
The fund was started on July 22nd, 2010. It has generated decent returns in the past five years, rising about 70% in total versus the SP 500’s rise of 55% in the same period.
While the ETF’s performance has been good over time, the ETF has vastly underperformed more recently. The SP 500 has fallen about 14% in the past year, while LIT’s decline is double that amount. In addition, in the past year, assets have fallen from about 6 billion to just under 4 billion, much of which was due to the poor performance of the ETF so far in 2022.
The fund holds 46 securities, but the top 10 positions make up 58% of the ETF’s total assets:
Albemarle (ALB): 15.1% of assets
Sociedad Quimica Y Minera De Chile SA ADR (SQM): 6.2%
We do not find this ETF attractive – the management fee and past record thus far have proven to be unimpressive – but it does offer an opportunity to discuss the major players in the industry.
The 6 Best Lithium Stocks Under 5 Dollars to Buy Now (July 2023)
Lithium stocks could be a Smart way to cash in on the EV boom. But what companies are worth a second look? Follow along for our picks for the best lithium stocks under 5 dollars to buy in July 2023.
Best Lithium Stocks Under 5
Global Battery Metals Ltd. (OTCMKTS: REZZF)
Global Battery Metals is a Canadian-based company that explores and develops several mineral properties.
Although it currently doesn’t have the most impressive market cap, its asset portfolio is extremely promising.
The business owns Lithium King property, an 8,000-acre placer claim that could potentially hold brine deposits for magnesium and lithium.
This is on top of having a 55% interest in a Peru property rich in copper molybdenum and a 90% stake in another lithium property in North West Leinster.
Global Battery Metals has also entered into an agreement to acquire up to 100% of Newfoundland’s lithium project in La Poile.
With its various lithium projects on the horizon, Global Battery Metals could become one of the most reliable metal suppliers. And this potential could make it one of the most promising lithium penny stocks on the list.
CBAK Energy Technology (NASDAQ: CBAT)
CBAK Energy Technology is an aggressive producer of lithium-ion batteries, and the fact that the company operates in China gives it a distinct advantage.
The country has a booming electric vehicle market. with sales for electric cars growing over 150% year-over-year as of early 2022, and it’s not showing signs of declining.
This strongly indicates that the demand for lithium-ion batteries will only increase in the coming years.
In addition, CBAK has acquired over 80% stake in Hitrans, a financially sound supplier of lithium batteries, to scale battery production and anticipate the influx of orders in the coming months.
As part of the joint venture between China and Japan, the enterprise has also entered into an agreement with AZAPA RD in China to produce customized batteries for control systems for electric vehicles.
Its foresight alone makes CBAK one of the most outstanding lithium stock picks.
Top Lithium Stocks Under 5
Romeo Power Inc. (NYSE: RMO)
Founded in 2016, the California company Romeo Power sets itself apart from other makers of lithium EV batteries by focusing on a small but lucrative niche market: commercial electric vehicles, like buses and trucks.
This business strategy positions the company as a possible leader in a market that could reach almost 255 billion by 2026, with an annual growth rate of nearly 30% from 2020.
Further, Romeo Power has already shipped some lithium products that may still be in the development stage, unlike its competitors.
It is also preparing to increase its production by building a spacious facility that will include a laboratory and testing area, making the manufacturing process more cost-efficient.
Financially, the company has a market capitalization of 174 million and increased its product revenues by 326% from 2021 to 2022.
With proof of its stability, RMO is a lithium penny stock that deserves consideration from investors.
Aqua Metals (NASDAQ: AQMS)
The multibillion-dollar electric vehicle market could deliver high revenues for lithium miners and companies involved in producing batteries.
However, lithium is also a finite resource that may have a negative environmental impact when disposed of improperly.
Aqua Metals has already foreseen this challenge and has built a business around recycling clean metals — a company whose market could grow by 5% from 2021 to 2030.
In particular, it has developed a patented hydrometallurgical technology that uses room-temperature water to recycle metals that lessen pollution.
This technology could pique the interest of a growing number of sustainable businesses.
However, the business is currently operating at a loss since it focuses significantly on research and development.
In the hopes of seeing steady growth, it has shipped its product and technology to facilities in Asia, where metals recycling is expected to flourish.
As Aqua Metals closes more deals and sells more units, this lithium penny stock could see significant growth in the stock market.
Lithium Battery Stocks Under 5
XL Fleet Corp. (NYSE: XL)
Boston-based XL Fleet Corp. is on its way to becoming one of the leaders in providing electrification solutions — particularly for commercial and government markets.
It sells hybrid and plug-in hybrid vehicles, including lithium-ion battery packs, that can enhance fuel economy from 20% to 35%.
So far, it seems to be doing well in focusing on these niches and products.
It generated 8 million in revenues in 2021, ended the fourth quarter of the year with total cash and cash equivalents of over 350 million, and managed to raise the market cap to 241 million.
The company has also closed huge deals, such as with the Department of Defense and Apex Clean Energy, which employs XL Fleet Corp. to deploy charging stations in many states.
Focusing on its strengths could help XL Fleet dominate the commercial electric vehicle sector, posing a good proposition for investors who want to buy this lithium penny stock.
Polar Power (NASDAQ: POLA)
Polar Power doesn’t have the best market cap at only 40 million, but it remains a popular choice in the stock market.
First, the over-40-year-old company is slowly transitioning to providing clean energy alternatives and solutions, including designing and selling a lithium-battery system.
Second, it has a diverse range of products, such as DC generators, a market segment that could be worth over 25 billion by 2029.
Third, its financials are solid, declaring a 65% year-over-year increase in net sales for the third quarter of 2021 and a 136% increase in gross profit within the same period.
It claimed a backlog of orders worth 11.4 million during the third quarter of 2021, probably due to supply chain issues.
However, as the global economy recovers, the company might finally realize revenues from these this year.
Its years of industry experience, strong financials, and mixed portfolio are great reasons to consider investing in this stock.
Should You Buy Lithium Stocks?
Lithium Stocks Under 5 Dollars: Final Thoughts
Lithium penny stocks have risen due to the growing demand for lithium-ion batteries, battery-powered devices, and electric vehicles.
With companies spearheading innovation daily, this industry could see significant advancements in the coming years.
Although the market is growing, risks are involved with any investment.
For investors willing to do their research, these stocks could offer a chance to profit from the dynamic and rapidly growing lithium market.
Lithium Penny Stocks FAQs
What’s the Cheapest Lithium Stock?
The cheapest lithium stocks are penny stocks — stocks whose price is 5 and below. These include CBAK Energy Technology, Polar Power, and XL Fleet Corp.
Are Lithium Stocks a Good Buy?
Lithium stocks are on the rise — and for a good reason. This alkali metal is becoming a prime raw material for many industries, including EV manufacturing and energy storage. In addition, more companies are entering the market, offering a variety of lithium stocks to choose from.
What Are Good Lithium Stocks?
Two good lithium stocks include Romeo Power and Polar Power. Although some are in the early stages of developing lithium products or solutions, they have shown Rapid growth due to increased production and innovation.
What Is the Best Lithium Penny Stock?
One of the best lithium stocks below 5 is Global Battery Metals, which is involved in exploring and developing lithium and other metals.
Is There a Lithium ETF?
Yes, there is a lithium ETF. One of these is the Global X Lithium Battery Tech ETF (LIT).
Jenna Gleespen is a published author and copywriter specializing in personal and investment finance. Her expertise is in financial product reviews and stock market education.