The worldwide cry for clean energy and carbon-emission reduction has made lithium a hot commodity. Demand for lithium is only likely to grow, perhaps eventually making it more valuable than the precious metals.
On Aug 12, the U.S. House of Representatives passed the Inflation Reduction Act, which is a climate change act in disguise. This ought to drive demand for lithium as an all-electric-vehicle future is almost inevitable. The situation calls for investing in lithium stocks like Livent Corporation LTHM, Lithium Americas Corp. LAC, Albemarle Corp. ALB and Piedmont Lithium Inc. PLL.
Global Warming Leads to Widespread Move Toward Clean Energy
Energy costs are skyrocketing, and fossil fuels are slow-poisoning the global climate. The COVID-19 pandemic pulled the brake on this, with fewer vehicles on roads and a decline in not only carbon emission but also fuel consumption. But this was temporary, and demand for fuel is once again on the rise. Also, geopolitical tensions have created a supply crisis, causing a sudden spike in fuel prices.
Amid all these, the biggest concern is global warming, which has led most economies and superpowers to make an aggressive shift toward clean energy. As a result, there has been a noticeable switch toward electrical vehicles, ethanol blends on crude oil, and solar and wind power. Lithium, here, becomes a major player.
Lithium to Charge Up As EV Prospects Rise
Electric vehicles (EVs) play a major role in reducing global warming by cutting down on carbon-emission levels. Over the past decade, the push toward an all-electric vehicle future has seen a rapid rise in sales of EVs.
In 2011, total global EV sales were recorded at 55,000 units, which skyrocketed to 7 million in 2021. According to Fortune Business Insights, the global EV market is projected to grow from $287.36 billion in 2021 to $1,318.22 billion by 2028.
The biggest beneficiary of this shift toward EVs would be lithium producers. EVs run on batteries, with lithium being the key component. Besides, lithium batteries have an advantage in terms of weight. Lithium batteries are both more durable and lighter.
As more electric vehicles take to the road in the coming days, demand for batteries will only increase, spurring demand for lithium. According to ResearchAndMarkets.com, the global lithium-ion battery market is projected to reach $113.89 billion in 2030.
The supply chain will be impacted by growing EV penetration, making lithium more alluring than ever. According to Reuters, demand for lithium, which was 320,000 tons in 2020, will jump to 1 million tons by 2025 and 3 million tons by 2030.
In the United States, Tesla, Inc. TSLA started the EV revolution. Since then, the company has become the leading electric vehicle seller in the United States. Over the years, other carmakers like General Motors Co. GM, Ford Motor Company F and Toyota Motor Corp. TM have also joined the race.
Till 2014, the United States was the biggest market for EVs. However, China has taken over and saw electric vehicle sales more than double in the first half of 2022. In mainland China, EV sales made up 57% of the total global sales in the same period. It is also the fastest-growing market, according to Canalys, with 118% yearly growth.
Inflation Reduction Acts As a Boon
The $430 billion Inflation Reduction Act should play a major role in a cleaner climate. The law would allocate $369 billion over the next decade for tax credits on renewable energy and electric vehicles, making clean energy the most affordable choice for Americans.
Also available to consumers are $7,500 tax credits for brand-new EV purchases and $4,000 rebates for used EV purchases. The Biden administration believes this will encourage people to buy EVs, leading to at least a 40% reduction in carbon emissions by 2030. This would also be a major catalyst in lithium sales.
Stocks to Watch
Given the bright future of EVS, the time is just right to invest in lithium. We have narrowed our search to four lithium stocks, which are expected to gain in the near term. Each of our picks carries either a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
Livent produces and distributes lithium chemicals. LTHM offers lithium chemicals for applications in batteries, agrochemicals, aerospace alloys, greases, pharmaceuticals, polymers and various industrial applications. Livent is a seller to EV original equipment manufacturers and battery makers worldwide. LTHM has been extracting Lithium Brine at Salar del Hombre Muerto in Argentina for more than 20 years.
Livent is one of the lowest-cost resources for lithium carbonate, providing the company with a competitive edge. Livent has a current production capacity of around 20,000 metric tons of lithium carbonate, which is expected to double by the fourth quarter of 2023.
Livent’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 12.2% over the past 60 days. LTHM has a Zacks Rank #1.
Lithium Americas owns Lithium Nevada and RheoMinerals Inc., a supplier of rheology modifiers for oil-based drilling fluids, coatings and specialty chemicals. LAC is not producing any lithium right now. Nonetheless, construction activities at LAC’s Caucharí-Olaroz lithium brine project in Argentina continue to advance.
Lithium Americas’ expected earnings growth rate for the current year is 20%. Shares of LAC have gained 51.3% in the past 30 days. Lithium Americas has a Zacks Rank #3.
Albemarle is one of the leading producers of lithium, with battery-grade lithium-producing plants in Europe, Australia, China, Chile and the United States. While ALB is not a lithium pure play, it boasts solid lithium assets and is benefiting from higher volumes in the lithium business. Albemarle’s lithium unit accounts for the highest percentage of overall revenues and profits. Albemarle, thus, remains laser-focused on the expansion of its lithium footprint.
In 2021, Albemarle acquired China’s lithium company Guangxi Tianyuan New Energy Materials. The acquired assets include a lithium conversion plant. ALB is investing in high-return projects to drive productivity and is well placed to gain from long-term growth of the battery-grade lithium market.
Albemarle’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 10.2% in the past 7 days. ALB has a Zacks Rank #1.
Piedmont Lithium has not generated revenues yet but is gaining massive investor attention of late due to its prospects. PLL is set to benefit from hard rock lithium assets in three strategic locations, including North Carolina, Quebec and Ghana. Piedmont Lithium is focused on the development of the Carolina Lithium Project, located in North Carolina — one of the top-notch regions in the world for lithium exploration.
Piedmont Lithium’s expected earnings growth rate for next year is more than 100%. Shares of PLL have gained more than 100% in the past 30 days. Piedmont Lithium has a Zacks Rank #2.
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Ford Motor Company (F) : Free Stock Analysis Report
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Piedmont Lithium Inc. (PLL) : Free Stock Analysis Report
General Motors Company (GM) : Free Stock Analysis Report
Albemarle Corporation (ALB) : Free Stock Analysis Report
Tesla, Inc. (TSLA) : Free Stock Analysis Report
Lithium Americas Corp. (LAC) : Free Stock Analysis Report
Livent Corporation (LTHM) : Free Stock Analysis Report
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