Electromobility has been one of the hottest topics on the stock market for years. Which electric car stocks should investors invest in for the best returns? Rather newcomers like Tesla, established car manufacturers such as Volkswagen or Chinese e-car stocks like BYD? The choice is difficult – but they all have one thing in common: nothing works without lithium! So maybe lithium stocks are the best option?
In this context, let’s try to answer the question of where well-known lithium stocks like the Albemarle-Action (WKN: 890167), Liventstock (NASDAQ:TSO) and others might be five years from now.
Lithium stocks are benefiting from the boom in demand
All current electric car batteries rely on lithium as a charge carrier. But while automakers are outbidding each other on their electric car growth targets, the market for the white light metal is much more sluggish.
Geologically speaking, there is more than enough lithium to electrify the entire global economy. But the expansion of funding is currently not lagging behind. The development of a new project can take ten years. The chemically challenging processing of the raw material into lithium specialty chemicals adds another level. Since too little has been invested in recent years, a bottleneck is now emerging.
As a result, the research firm’s lithium price index has Benchmark Mineral Intelligence almost ninefold in the last two years. Even higher prices are not excluded. At the same time, car manufacturers are increasingly vying for the scarce capacities and are investing in young lithium stocks such as the German one Vulcan Energy Resources (WKN: A2PV3A) a.
High prices, fat profit margins, strong market growth: That sounds like an Eldorado for lithium stocks. Tesla boss Elon Musk recently said that the lithium business – especially the processing of the raw material – is “a license to print money” for interested entrepreneurs.
Lithium: what are the risks?
One risk for commodity stocks that shouldn’t be underestimated is a recession — and the same is true for lithium stocks. Because in an economic downturn, commodity prices fall due to falling demand. We may be headed for a recession right now.
But lithium stocks might get away with a black eye right now. Because the war in Ukraine is currently increasing the desire of many countries to become less dependent on oil and gas. Calls for more independence from China – a country that is big in lithium processing – are also being voiced more and more frequently. That might be another opportunity for American or European lithium stocks. Either way, the long-term trends that suggest increasing demand for lithium aren’t easily erased by a recession.
Lithium-free battery technologies such as the Iron-salt batteries from ESS Inc. or the sodium batteries from CATL are, in my view, an overestimated risk for lithium stocks. The strengths of these cheap batteries are more in the stationary energy storage. Since we need every gigawatt hour we can get to go green in the global economy, it is very likely that all technologies will grow at the same time.
A real, very long-term risk for lithium stocks might be increased recycling. Because with the recovery rates of well over 90% that can already be achieved, the recovery of battery raw materials from discarded batteries or production rejects should definitely be economical. However, at present the recyclable amounts are still very small and will only be large enough to satisfy the car manufacturers’ hunger for batteries in the distant future.
What lithium stocks are there?
At the beginning I already mentioned Albemarle and Livent as “classic lithium stocks” from the western hemisphere. the SQM-Aktien (WKN: 895007) from Chile is another option, which, however, carries the risk of nationalization.
In addition, there are many projects still in development that should be exciting for more risk-averse investors. Piedmont Lithium (WKN: A2DWL3), Lithium Americas (WKN: A2H65X) or Standard Lithium (NASDAQ:AAPL) are examples of such lithium stocks. At the same time, however, one should not run into every lithium stock hype as if stung by the tarantula.
The bottom line is that there are many reasons that lithium companies will make money in the years to come. Will the increases in sales and profits also be reflected in the share prices? There’s not much to be said once morest it.
The item Where Will Lithium Stocks Be in 5 Years? appeared first on The Motley Fool Deutschland.
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Christoph Gössel owns shares in Standard Lithium, Tesla and Vulcan Energy Resources. The Motley Fool owns shares of and recommends BYD, Tesla, and Volkswagen AG.
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