Lithium: The Investment Opportunity That's Transforming Markets

Lithium is no longer just another metal. It has become the most critical material for the global energy transition, and understanding how to invest in lithium in Colombia and other emerging markets is key for any investor looking to capitalize on this trend.

Why Lithium Is The Gold Of The 21st Century

The reason is simple: electric vehicles need lithium to operate. Companies like Tesla, BYD, Toyota, Honda, and increasingly traditional manufacturers depend entirely on lithium-ion batteries to produce their EVs.

Global regulations also support this growth. The European Union, China, and the United States have enacted laws banning the sale of gasoline vehicles starting in 2035. This means that legally, only electric vehicles will be sold in major global markets during the next decade.

The result is inevitable: demand for lithium will significantly outpace available supply in the coming years, which will dramatically drive up the price of this metal and multiply the profits of producing companies.

How Lithium Prices Have Evolved

In the last five years, lithium has undergone a spectacular transformation in markets. It went from trading around $24 per ton to nearly $70 per ton, mainly due to exponential growth in electric vehicle demand.

Analysts project this bullish trend will continue strongly. Most forecasts suggest lithium prices could surpass $100 per ton in the medium term, especially considering that global lithium production is not growing at the same rate as demand.

Main Ways To Invest In Lithium

There are five clear paths for an investor to participate in the lithium boom:

1. Lithium as a commodity or raw material

Some brokers offer the possibility to invest directly in lithium as a financial asset. Returns here depend solely on the appreciation of the metal’s price. However, while growth is expected, profits tend to be more modest compared to investing in sector companies’ stocks.

2. Lithium mining and production companies

These companies have secured their future for the next ten years. Their business model is straightforward: extract more lithium, earn more money. They do not depend on consumer preferences or sophisticated technology.

The three key companies in the sector are:

• SQM (Sociedad Química y Minera): The Chilean mining company leads global lithium production from its operations in the Atacama Desert. Its shares have shown extraordinary performance since 2020, although geographic concentration in Chile presents some vulnerability.

• Albemarle: This US company is the second-largest lithium producer worldwide. It operates two large strategically located mines: one in the Salar de Atacama (Chile) and another in Nevada (United States). Its stock value has multiplied fivefold since 2020.

• Tianqi Lithium: While SQM and Albemarle dominate the West, Tianqi controls the Eastern market from its headquarters in Sichuan, China. It is the main supplier to the explosive Chinese EV market, which aims to be the largest in the world.

3. Lithium-ion battery manufacturers

Companies that turn lithium into batteries can be profitable investments, though careful analysis is required:

• Tesla: Although primarily known as an EV manufacturer, Tesla is vertically integrating battery production in its gigafactories. It also produces batteries for residential storage (Powerwalls) and large-scale solar and wind installations. Its shares can offer significant rebounds.

• CATL: Based in Ningde, China, CATL is one of the largest battery manufacturers in Asia. It serves both the EV market and energy storage systems. Its stock performance has been solid, trading above $400 after recovering from previous corrections.

• Panasonic: The main battery supplier for Tesla. Although it has massive production capacity, its diversification into electronics limits the full reflection of battery profits in its stock price.

• Solid Power: This US company is exclusively dedicated to EV battery manufacturing but is very new. Its technology has not yet been tested at commercial scale, making it a high-risk investment but with potential for extraordinary returns if successful.

4. Electric vehicle manufacturers

EVs are the ultimate destination for lithium. Investing in EV producers is one of the safest options, although competition is fierce:

• Tesla: Continues to lead the global EV market in the US and Europe, ranking third in China. Its technological advantage and vertical manufacturing position it for a solid future.

• Toyota: One of the first major traditional automakers to strategically adapt to the electric era. It is now the second-largest EV market share in the West, reflected in a notable rise in its shares.

• BYD: Dominates the Chinese EV market decisively and vertically integrates lithium battery production. This autonomy in key components allows it to reduce costs and avoid reliance on external suppliers. Important note: do not confuse BYD (BYDDY) with Boyd Gaming Corporation, which uses the ticker BYD but is a casino company unrelated to lithium.

5. Specialized ETFs (ETFs)

For investors who prefer to delegate management, there are established options:

• Global X Lithium and Battery Tech ETF (LIT): Probably the most well-known and longest-standing lithium ETF. It has shown a consistent upward momentum since 2020 with a slight moderation in 2022. It offers a 9.41% return in 2023 so far and promises higher returns over the next decade.

• Amplify Lithium and Battery Technology ETF (BATT): Although it has less history than LIT, it has a well-selected portfolio of mining, processing, and EV manufacturing companies. It has nearly doubled investors’ capital between 2020 and 2023.

• WisdomTree Battery Solutions UCITS ETF (CHRG): A very recent creation fund, so its long-term performance is uncertain. It can be useful for tactical diversification but is not recommended as a main investment.

Short and Medium-Term Outlook

In the next 10 years (next 10 years), investing in lithium presents an extraordinarily favorable outlook. The displacement of gasoline vehicles by electric ones is guaranteed by law in major markets, and all require lithium batteries.

Demand for the metal is expected to grow above available supply, multiplying profits for producers like SQM, Albemarle, and Tianqi. With no serious technological competition in sight during this decade, the path is clear for lithium to solidify its position.

In the longer term (more than fifteen years), alternative materials like sodium may gradually displace lithium. However, this technology is still far from industrial viability, leaving ample room for lithium to dominate the next decade.

Advantages and Risks of Investing in Lithium

The advantages are massive:

• Essential material for an EV industry with no real competitors today
• Legally guaranteed market by major governments
• Potential for demand to outpace supply in upcoming years
• Spectacular stock performance since 2020
• Opportunity to participate in rapidly growing “unicorn” companies

Risks exist but are limited:

• Alternatives to lithium are being explored long-term
• Not all sector companies are equally profitable
• Some companies are currently overvalued in the stock market
• Geopolitical factors can affect extraction in certain regions

Is Lithium An Investment For You?

Investing in lithium in 2024 is comparable to investing in oil in 1880. It is the fundamental material for an automotive industry destined to completely replace gasoline vehicles.

Geopolitical tensions and pollution caused by fossil fuels accelerate this transition. Those who maintain investments in oil industries will face diminishing returns, while those betting on lithium and EVs will position their portfolios in the industry of the 21st century.

Whether you are an investor in lithium mining companies, battery manufacturers, or electric vehicle producers, your investment has significant potential to generate substantial returns over the next decade. The key is to shift capital from fossil fuels to companies involved in the electric transition as soon as possible.