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According to Musk, the market is short of lithium. How can we get involved in this sector?

Claude Malouxe
30. 4. 2023
4 min read

According to Elon Musk, there is a shortage of lithium on the market for battery production. So could this mean there is a new investment opportunity? And how can investors who are not familiar with the sector benefit from it?

Lithium-ion batteries are becoming increasingly important within the modern technology industry. Their high energy density and fast charging have made them a key feature in smartphones and tablets, and now the technology is becoming a key enabler in the automotive industry. Estimates predict that EVs will account for a quarter to a third of all new vehicle sales by 2030.

The lithium-ion battery industry is a complex network of basic materials suppliers, manufacturers and component designers. It also includes manufacturers of batteries and battery components such as chemicals, electrolytes, anodes and cathodes. Investing in lithium and battery technology ETFs allows investors to diversify and focus on companies involved in the lithium battery technology industry.

What are lithium ETFs?

Lithium and battery technology ETFs are investment vehicles that allow investors to gain exposure to this area of the industry. These funds focus on companies involved in the production and mining of lithium, battery development and other related technologies. ETFs provide diversification of risk and allow investors to gain access to different aspects of the industry.

Global X Lithium & Battery Tech ETF $LIT+1.0%

LIT
$44.29 $0.44 +1.00%

This fund was created in 2010, and focuses solely on the lithium battery market. It manages $4.6 billion in investor assets. Predominantly, we find lithium miners, which are virtually half represented here. In terms of the geographical distribution of battery producers, China and South Korea dominate. Furthermore, consumer goods producers are the least represented.

The largest ETF holdings

This ETF contains 41 stocks and its largest holdings make up nearly 50% of the portfolio. The largest holdings include Albemarle Corporation (8.17%), PANASONIC HOLDINGS CORP. (6.58%) and SAMSUNG SDI CO LTD (6.46%). This ETF has an expense ratio of 0.75% per year and has averaged a return of 15% per year over the past 5 years.

Amplify Lithium & Battery Technology ETF $BATT+1.6%

BATT
$9.48 $0.15 +1.61%

Amplify Lithium & Battery Technology ETF, which is the second pure-play lithium battery ETF available in the U.S. Compared to Global X, it offers lower expenses and focuses more on smaller companies. Its holdings include Livent Corporation, a lithium products company, and Galaxy Resources Limited, which specializes in lithium mining.

The ETF contains 106 stocks and its largest holdings make up nearly 55% of the portfolio. Some of the largest holdings include BHP Group (7.04%), Tesla Inc (7.02%) and CONTEMPORARY AMPER (6.9%). This ETF has an expense ratio of 0.59% per year and has returned 20.17% per year over the past 5 years.

Risks

It is important to note, however, that investing in these ETFs involves risks associated with the volatility of the lithium battery market and the evolution of the electric vehicle market. For example, the high dependence on lithium, which is necessary for the production of these batteries, can lead to price fluctuations in the market. Another risk may be technological developments that may significantly affect the demand for these batteries.

However, for investors who are willing to take risks and are looking for growth potential in a sector that is likely to expand in the coming years, lithium and battery technology ETFs may be a good choice. These funds provide portfolio diversification and allow investors to get involved in different aspects of the lithium-ion battery industry.

Conclusion

In conclusion, lithium battery technology is a very promising industry that has the potential to grow in the coming years. Electric vehicles are becoming increasingly popular and the demand for high capacity, fast-charging batteries will continue to grow. This may lead to more investor interest in companies that manufacture these batteries and related technologies.

ETFs available in this space include the Global X Lithium & Battery Tech ETF and the Amplify Lithium & Battery Technology ETF. Both of these funds have advantages and disadvantages and it depends on the preferences and investment goals of individual investors which fund they choose. However, before investing in these funds, it is important to carefully consider all the risks associated with the sector and evaluate whether these investments are suitable for your portfolio.

Overall, lithium and battery technology ETFs can be an interesting option for investors seeking exposure to this area of the industry. With the growing demand for electric vehicles, this sector is expected to continue to grow and offer investment opportunities for the future.

DISCLAIMER: I am not a financial advisor, and this material does not serve as a financial or investment recommendation. The content of this material is purely informational.


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