Lithium. Essential to EV Life.

Lithium. Essential to EV Life.
 
About 80% of the lithium market is used for electric vehicle batteries, and electric vehicles are one of the fastest growing industries in the world today. So, which companies and which countries are the top providers, and should you invest now?
 
Below are the things we’ll cover in this blog. You can watch my videoconference on this topic at YouTube.com/NataliePace.
 
EV Sales
Lithium Supply, Demand and Prices
Lithium Companies
Top Countries with Lithium Reserves
Chile
Battery Recycling and Materials Recovery
Indonesia & Nickel
Macro Concerns and Dollar-Cost Averaging
 
And here is more information on each point.
 
EV Sales
Electric vehicle sales are on fire. They are expected to make up 18% of the global car market this year, rising from almost nothing in 2016. Within just a few short years, EVs will easily be at a third of the auto market. That means that the demand for lithium will continue to be quite strong.
 

Lithium Supply, Demand and Prices
Demand is expected to outpace supply by at least 3% this year. Therefore, although prices have dropped by half since November 2022 from $84.60/kg to $42.93/kg, they are expected to recover and increase about 44% this year, to $61.52/kg. The tight demand problem is expected to remain in play until 2027. By 2028, prices are expected to drop again below where they are today, sinking back to $36.22/kg.
 
The high prices of 2022 could impact earnings growth of the lithium companies this year.
 
Lithium Companies
Albermarle (symbol: ALB) had year-over-year sales growth of 129%. Albermarle was far and away the rock star performer on the Lithium Stock Report card. Livent (symbol: LTHM) came in with an impressive 77% annual revenue growth rate, while Sociedad de Chimica y Minera (symbol: SQM) crawled forward with just 12.08% growth. SQM’s Chief Executive Officer, Ricardo Ramos, explained the slowdown in the quarterly earnings press release, writing “Advanced purchases in the previous quarter, the change in subsidies in China and the high level of stock across the battery supply chain led to a weaker demand, predominantly in China, in the beginning of the year.” Ramos expects demand to recover and reach at least 20% growth in the coming quarters.
 
Based on the high lithium prices in 2022 and the year-over-year comparables, Albermarle adjusted their guidance for 2023. In the 1st quarter earnings press release, Albemarle CEO Kent Masters wrote, “We see strong sales volume growth for the rest of the year but have modified our guidance to reflect softening lithium market pricing.” The company is now expecting sales growth on an annualized basis to be a solid 35-55% (but cooling off significantly from the 1st quarter’s 129% growth). Albemarle also has a great price earnings ratio at 8. (If you’d like a copy of our Lithium Stock Report Card, email [email protected].)
 
Top Countries with Lithium Reserves
​The countries with the most lithium reserves are Chile, Australia, Argentina, China, and the U.S.

SQM, the 2nd largest lithium producer in the world, which is based out of Chile, has operations in Chile, Australia and China. Albermarle, the largest lithium company, has locations around the globe, including Chile, Australia, China and the U.S. Lithium Americas (symbol: LAC) is developing operations in Argentina and the U.S., and will restructure and split their company into two, based upon their agreement with General Motors. Lithium Americas is not yet producing battery-grade lithium.
 
Chile
Chile has been moving towards nationalization of their resources – not in full, but in public/private partnership, as part of their National Lithium Strategy. SQM’s current contract with the government ends in 2030. Albermarle’s ends in 2043. A spokesperson for the Chilean government has promised to respect the current contract with Albermarle. SQM has begun negotiations to extend their land lease.
 
The announcement of the new lithium strategy by Chile’s government sparked selling of SQM stock. The current P/E of SQM is just 6, with a yield of a whopping 9%. The stock is trading close to a 52-week low. Of course, with the nationalization plan, Chile’s expected recession and the current negotiations, there is more risk with SQM than ALB.
 
Battery Recycling and Materials Recovery
Redwood Materials
There has also been a rapid rise of battery recycling. According to a spokesperson for Redwood Materials, the company is recovering 95-98% of the elements, including nickel, cobalt, lithium, and copper. According to the usgs.gov, there are currently 44 lithium battery recycling plants in the United States and Canada, and 47 in Europe. Incidentally, JB Straubel, the CEO of Redwood Materials, is also the cofounder of Tesla.
 
Indonesia & Nickel
Nickel is another component needed for EVs. Prices are expected to hold steady where they are around $22,000-$22,500/ton. This has to do with a nickel surplus. (In early 2022, nickel prices soared to $43,000/ton.) The top country producer of nickel is Indonesia, with Australia and Indonesia, tied for the most reserves.
 

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ETFs
I encourage you to read my blog on electric vehicles from June 25, 2023, where I talk about Tesla versus the Chinese automakers. The top-selling electric vehicle in China is BYD. That company is not publicly traded in the U.S. However, iShares has an electric vehicle and self-driving ETF, symbol IDRV, that offers the opportunity to focus on this industry, while also being diversified. The fund includes many Chinese EV makers, including BYD, Xpeng and Li Auto, as well as Tesla, Porsche and VW.

When selecting an ETF, I strongly suggest that we know the credit worthiness of the fund company itself, rather than just searching for a lithium or nickel fund. You might end up with a scam, or a fund company that might be undercapitalized or fairly new to the market. Another way to have an ETF in this area would be to consider investing in the countries that are providing lithium, nickel and copper – all necessary materials for electrification. Ishares has an Indonesia, Australia and Peru ETF. Both Australia and Peru also offer a yield of about 5%. (Peru is the 2nd largest exporter of copper in the world.)
 
Macro Concerns and Dollar-Cost Averaging
When investing these days, it’s important to consider the macro environment, in addition to hot companies, countries and industries. A rising tide can lift all ships (such as happened this week). A sinking tide can cause shipwrecks. There are plenty of economic storms on the horizon (and in the wake of the bank failures of March and May). We’re overweighting 20% in our sample nest egg pie charts. (Email [email protected] if you’d like the free sample investing web app, where you can personalize your own pie chart.)
 
If you are adding EVs, lithium and/or country ETFs to your plan, consider dollar-cost averaging in. This is something we discuss at our online Financial Freedom Retreat. The next one is Oct. 7-9, 2023. Join us!
 
Bottom Line 
EVs, lithium and the countries that are providing the materials for this cleaner transportation trend could be worthy of being a hot slice in our wealth plan. It’s important, however, to have a strategy that protects our wealth (perhaps with an ETF and dollar-cost averaging).  
 
FYI: I want to point out that while EVs are more sustainable than ICE*, they have many factors that are not green. EVs, lithium, nickel, copper, etc. are part of the solution if we still want everyone to have a car. However, having every person in their own single-occupancy vehicle is madness in the city. (Cue the traffic jams, gridlock and road rage.) My favorite way to get around is walking, biking or metro, usually with a backpack to pick up essentials. If you’d like to immerse yourself in a sustainability adventure, consider joining as at our Restormel Royal Manor House Retreat in Cornwall, England March 8-15, 2024.
 
 
*Internal Combustion Engines
 

Join us for our October 7-9, 2023 online Financial Empowerment Retreat. Register by July 31, 2023 to receive the best price. If you’re interested in private coaching or an unbiased 2nd opinion before then, reach out now. September is often the worst performing month of the year, so it’s a good idea to be ahead of the headlines. Again, feel free to email [email protected] or call 310-430-2397.

Our unbiased 2nd opinion details exactly what you own, with color codes to show you what’s toxic in your portfolio, what’s great, and what should be better diversified. You will have a blueprint of how to get safe, protected, hot and diversified. Why is it unbiased? We don’t sell financial products. We have no incentive to sell you something that might lose money or that you don’t need. Our business model is financial education, providing the news, information, and education that Main Street investors need to thrive and live a richer life.

Join us for our Online Financial Freedom Retreat. Oct. 7-9, 2023. Email [email protected] or call 310-430-2397 to learn more. Register by July 31, 2023 to receive the best price. Click for testimonials, pricing, hours & details.

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Natalie Wynne Pace is an Advocate for Sustainability, Financial Literacy & Women's Empowerment. Natalie is the bestselling author of The Power of 8 Billion: It's Up to Us and is the co-creator of the Earth Gratitude Project. She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). Her book The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical), with over 120,000 downloads and a mean 5-star ranking. The 5th edition of The ABCs of Money was released on September 17, 2021. 
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Natalie Pace's easy as a pie chart nest egg strategies earned gains in the last two recessions and have outperformed the bull markets in between. That is why her Investor Educational Retreats, books and private coaching are enthusiastically recommended by Nobel Prize winning economist Gary S. Becker, TD AMERITRADE chairman Joe Moglia, Kay Koplovitz and many Main Street investors who have transformed their lives using her Thrive Budget and investing strategies. Click to view a video testimonial from Nilo Bolden.

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Important Disclaimers
Please note: Natalie Pace does not act or operate like a broker. She reports on financial news, and is one of the most trusted sources of financial literacy, education and forensic analysis in the world. Natalie Pace educates and informs individual investors to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned by Natalie Pace are not intended to be buy or sell recommendations.

ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.  

Information has been obtained from sources believed to be reliable. However, NataliePace.com does not warrant its completeness or accuracy. Opinions constitute our judgment as of the date of this publication and are subject to change without notice. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Securities, financial instruments or strategies mentioned herein may not be suitable for all investors.