Dubbed “white gold,” lithium has quickly become one of the most sought-after non-food and organic items in the world. Statistics indicate that the global market size of lithium in 2023 was $8.20 billion, with a 12.8% compound annual growth rate (CAGR) from 2024 to 2030. Evidently, lithium is a mineral investors have to watch out for.
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Ever since the conversation about climate change started, the world has been in pursuit of a low-carbon economy. One solution that emerged was lithium, a naturally occurring metal.
Dubbed “white gold,” lithium has quickly become one of the most sought-after non-food and organic items in the world. Statistics indicate that the global market size of lithium in 2023 was $8.20 billion, with a 12.8% compound annual growth rate (CAGR) from 2024 to 2030. Evidently, lithium is a mineral investors have to watch out for.
History of Lithium
In 1817, Johan August Arfwedson, a Swedish chemist, discovered and named lithium. While lithium has had several uses, like in psychiatry and aircraft engines in WWII, its significance has grown recently due to its various uses in manufacturing.
Nonetheless, the use of lithium in manufacturing isn’t a new concept. In the 1970s, Stanley Whittingham began research on rechargeable batteries that could produce carbon-free energy. He designed the first lithium-ion battery for an electric vehicle in 1972, but its production was eventually discontinued over safety issues.
While research again resumed in the 1980s, it wasn’t until 1991 that safe commercial lithium-ion batteries finally entered the market.
Uses of Lithium
Our economy today runs on electronic devices. Think smartphones, laptops, cameras, smartwatches, tablets, video game controllers, electric cars, and more. All these devices rely on rechargeable batteries made from lithium.
Other uses of lithium include the following:
- Non-rechargeable batteries in items like toys, pacemakers, and clocks
- Drugs that treat manic depression
- Aluminum and magnesium alloys
- Lubricants
- Air conditioning
- Glass and ceramics
The Future of Lithium
The demand for lithium worldwide in 2021 reached 508,000 metric tons. This figure is expected to hit 3.8 million tons in 2035.
However, forecasts indicate that there could be a mismatch in lithium’s demand and supply in the future. Due to lithium's limited availability, supply will not be able to keep up with the growing demand.
Electric Cars
Electric cars are the future. Due to recent gasoline shortages and advocacy for clean energy, interest in electric cars has grown.
Since 2020, electric car sales have grown globally and in the U.S. In 2023, electric car sales increased by 60% in the U.S. to over 1.6 million vehicles, up from 1 million in the previous year. Globally, electric car sales hit a record 10 million in 2022.
According to demand forecasts for electric vehicles, sales in the U.S. will grow by 20% in 2024 and could make up to 50% of all car sales globally in 2025. As of 2023, the biggest use of lithium globally was for batteries at 80%. Therefore, the increased interest in electric cars is set to drive the demand for lithium even higher.
Additionally, more and more countries, including the U.S., have started giving out electric vehicle incentives, with more expected to follow in a bid to control carbon emissions. These incentives include giving tax breaks to individuals who purchase electric vehicles. As the demand for electric vehicles increases, so does the demand for lithium.
Lithium as an Alternative Investment
You might have come across this article and thought, “I’m an investor. Why should I be interested in lithium? This sounds like chemistry and engineering stuff, which isn’t exactly my area of expertise.”
However, as an investor, it’s about time you took notice of lithium as an alternative investment. “White gold," "the new oil," and "the El Dorado of the twenty-first century” — these are the names given to lithium, illustrating just how important this mineral is in today's economy.
From powering most of our electric gadgets to leading the move toward a low-carbon economy, lithium is quickly becoming an indispensable commodity. These reasons are exactly why investing in lithium should be on your radar.
How to Invest in Lithium
Investing in lithium can be a great way to diversify your portfolio. There are several ways you can do so:
Venture Capital (VC)
Through VC, you can target startups that deal with lithium, either by mining, battery manufacturing, or energy storage solutions. With demands for lithium expected to grow in the next decade, VC investing in these startups can generate high returns once they grow into highly profitable companies.
Moreover, VC investing in lithium-backed startups allows you to be at the forefront of innovation in this industry. However, as with venture capital investing, the risks involved are high, so you should do your due diligence before investing.
Pre-IPO Investing
This alternative investment option involves buying shares of a company before it goes public. Participating in pre-IPO rounds allows you to acquire a company’s shares at a much lower rate. Once it goes public, you can earn considerably higher returns for a small investment.
However, pre-IPO investing involves a long-term horizon since it might take years before a company eventually goes public and you start earning from your shares. There’s also a high risk of losing your investment should the company fail to go public.
Purchasing the Physical Commodity
Another way you can invest in lithium is by buying the lithium itself, much like how you’d buy gold or silver. Lithium is typically available and sold globally in two chemical forms: lithium hydroxide and lithium carbonate.
While this investment option exposes you to lithium prices, it usually involves additional costs such as transportation and storage. Moreover, lithium prices may be extremely volatile due to external factors like global events, weather, and politics.
Exchange-Traded Funds (ETFs)
You can also invest in ETFs focused on lithium and battery technology to diversify your portfolio. These funds typically hold shares of multiple companies involved in lithium mining, battery manufacturing, and related industries. You, therefore, have a convenient way to invest in the sector without the risks associated with individual stock selection.
It’s worth noting, though, that you will have limited influence over the selection and weighting of individual stocks within the fund. This lack of control means that your investment may be exposed to companies with varying levels of performance, financial health, and strategic direction, which could impact the overall returns of the ETF.
Explore Lithium Investing with TSG
Need to diversify your investment portfolio? Lithium can be an excellent alternative investment. But remember, as with any investment, lithium has its pros and cons. Therefore, it’s best to work with an alternative fund management firm like The Spaventa Group.
Our firm specializes in alternative investments, giving you access to high-demand private companies set to disrupt the future, like those dealing with lithium.
SOURCES:
- Lithium Market Size, Share & Trends Analysis Report By Product (Carbonate, Hydroxide), By Application (Automotive, Consumer Goods, Grid Storage), By Region (APAC, EU, North America), And Segment Forecasts, 2024 - 2030. (2024, January 16). https://www.grandviewresearch.com/industry-analysis/lithium-market
- Global lithium demand 2020-2035. (2024, April 24). Statista. https://www.statista.com/statistics/452025/projected-total-demand-for-lithium-globally/
- Straughan, D. (2024, April 30). Electric Vehicle Statistics 2024. https://www.marketwatch.com/guides/insurance-services/electric-vehicle-statistics-2024
- Trends in electric cars – Global EV Outlook 2024 – Analysis - IEA. (n.d.). IEA. https://www.iea.org/reports/global-ev-outlook-2024/trends-in-electric-cars
- The future of four wheels is all electric. (2024, February 16). Goldman Sachs. https://www.goldmansachs.com/intelligence/pages/the-future-of-four-wheels-is-all-electric.html
- Canada, N. R. (2024, February 29). Lithium facts. https://natural-resources.canada.ca/our-natural-resources/minerals-mining/mining-data-statistics-and-analysis/minerals-metals-facts/lithium-facts/24009
- Credits for new clean vehicles purchased in 2023 or after | Internal Revenue Service. (n.d.). https://www.irs.gov/credits-deductions/credits-for-new-clean-vehicles-purchased-in-2023-or-after
