Top 4 Lithium Stocks To Ride the Lithium Price Opportunity in 2024!

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Top 4 Lithium Stocks To Ride the Lithium Price Opportunity in 2024!

Lithium is a key element for making batteries that power electric vehicles (EVs), smartphones, laptops and other devices. As the demand for these products grows, so does the demand for lithium. However, the supply of lithium is not keeping up with the demand, creating a supply-demand imbalance that is driving up the prices of lithium and lithium stocks.

According to McKinsey, the global demand for lithium-ion batteries is expected to grow by over 30% annually from 2022 to 2030, reaching a market size of 4.7 TWh¹. The main driver of this growth is the electrification of mobility, as EVs are expected to account for 40% of new car sales by 2030². Other factors that are boosting the demand for lithium include the adoption of renewable energy sources, such as solar and wind, and the development of energy storage systems, such as grid-scale batteries and home batteries.

However, the supply of lithium is not growing as fast as the demand, due to various challenges and uncertainties. The production of lithium involves extracting and processing lithium from brine or hard-rock deposits, which are concentrated in a few countries, such as Australia, Chile, China and Argentina. The production process is complex, costly, time-consuming and environmentally sensitive, requiring large amounts of water, energy and chemicals. The production capacity is also limited by the availability and quality of the lithium resources, the regulatory and political environment, the infrastructure and logistics, and the competition and pricing strategies of the lithium producers.

As a result, the lithium market is facing a supply deficit, which is expected to widen in the coming years. According to Fastmarkets, the lithium market was in a deficit of 15,000 metric tons of lithium carbonate equivalent (LCE) in 2022, and this deficit is projected to increase to 100,000 metric tons of LCE by 2025³. This supply-demand gap is putting upward pressure on the prices of lithium and lithium stocks, which have surged in the past year. For instance, the price of lithium carbonate, a common form of lithium used in batteries, has increased by more than 150% since January 2022, reaching over $20,000 per metric ton in January 2024⁴.

However, the prices of lithium and lithium stocks have also experienced some volatility and correction in the recent months, due to various factors, such as the Covid-19 pandemic, the oversupply of low-quality lithium, the technological innovations and regulations in the battery industry, and the macroeconomic and geopolitical conditions. For instance, the price of lithium carbonate dropped by 13% in December 2023, due to the emergence of the Omicron variant, which caused some uncertainty and disruption in the global economy and the EV market⁵.

This price correction, however, may present an opportunity for investors who are looking for a long-term exposure to the lithium industry. The fundamentals of the lithium market remain strong and positive, as the demand for lithium is expected to outstrip the supply for the foreseeable future, creating a favorable environment for the lithium producers and investors. Moreover, the lithium industry is undergoing a transformation and innovation, as the lithium producers are investing in expanding their production capacity, improving their product quality and mix, enhancing their operational efficiency and environmental performance, and securing their long-term supply agreements with their customers. These initiatives will help the lithium producers to increase their market share, profitability and sustainability, and to deliver superior value to their shareholders.

Therefore, we believe that lithium stocks are a good idea right now, as they offer a high-growth and high-return investment opportunity in the specialty chemicals industry. However, not all lithium stocks are created equal, and investors should be selective and careful when choosing the best lithium stocks to buy. To help you with that, we have compiled a list of the top 10 lithium stocks to watch in 2024, based on their market cap, earnings growth rate, and P/E ratio. These are:

#1: Albemarle Corporation (NYSE: ALB):

Albemarle is the world's largest lithium producer, with a market cap of $15 billion and a P/E ratio of 29. Albemarle produces lithium from brine operations in Chile and spodumene operations in Australia, and has a diversified product portfolio, including lithium carbonate, lithium hydroxide, butyllithium and lithium metal. Albemarle plans to increase its lithium production capacity from 85,000 metric tons in 2023 to 265,000 metric tons by 2025, and to 500,000 metric tons by 2030. Albemarle also invests in innovation and technology, such as the XCELTIS™ process for lithium extraction, the GALAXY™ process for lithium hydroxide production, and the LITHOVATE™ platform for battery-grade lithium products. Albemarle has secured long-term supply agreements with some of the leading battery and EV manufacturers, such as Tesla, BMW and LG Chem. Albemarle's earnings are expected to grow by 25% in 2024 and by 29% in 2025.

#2: Sociedad Quimica y Minera de Chile (NYSE: SQM):

SQM is the world's second-largest lithium producer, with a market cap of $15 billion and a P/E ratio of 39. SQM produces lithium from brine operations in Chile's Atacama desert, which have low production costs, high lithium concentrations and long reserve lives. SQM produces lithium carbonate and lithium hydroxide, and sells its products to various industries, such as batteries, ceramics, lubricants, pharmaceuticals and glass. SQM plans to expand its lithium production capacity from 70,000 metric tons in 2020 to 180,000 metric tons by 2023. SQM also invests in sustainability and social responsibility, such as reducing its water consumption, carbon footprint and environmental impact, and supporting the local communities and stakeholders. SQM's earnings are expected to grow by 22% in 2024 and by 23% in 2025.

#3: Livent Corporation (NYSE: LTHM)

Livent is a U.S.-based lithium company, with a market cap of $3 billion and a P/E ratio of 35. Livent produces lithium from brine operations in Argentina, and has a diversified product portfolio, including lithium carbonate, lithium hydroxide, butyllithium and lithium metal. Livent plans to increase its lithium production capacity from 30,000 metric tons in 2023 to 55,000 metric tons by 2025, and to 75,000 metric tons by 2027. Livent also invests in innovation and technology, such as the development of advanced lithium products and solutions for the battery and EV markets. Livent has established long-term relationships with its customers, such as Panasonic, Umicore, Binova, Samsung SDI and Corning. Livent's earnings are expected to grow by 48% in 2024 and by 41% in 2025.

#4: Lithium Americas Corp. (NYSE: LAC) 

Lithium Americas is a Canadian lithium company, with a market cap of $1 billion and a negative P/E ratio. Lithium Americas has two lithium projects under development: the Cauchari-Olaroz project in Argentina, which is a joint venture with Ganfeng Lithium, and the Thacker Pass project in Nevada, which is the largest lithium deposit in the U.S. Lithium Americas plans to start production at the Cauchari-Olaroz project in 2024, with an initial capacity of 40,000 metric tons of lithium carbonate per year, and to expand it to 80,000 metric tons by 2026. Lithium Americas also plans to start production at the Thacker Pass project in 2026, with an initial capacity of 30,000 metric tons of lithium carbonate per year, and to expand it to 60,000 metric tons by 2028. Lithium Americas also invests in sustainability and environmental stewardship, such as using renewable energy, recycling water and minimizing waste. Lithium Americas' earnings are expected to turn positive in 2025 and to grow by 72% in 2026.

Conclusion

These are the top 4 lithium stocks to watch in 2024, according to our analysis. We believe that these stocks offer a great opportunity for investors who are looking for exposure to the lithium industry, which is poised for strong growth and high returns in the long run.

However, investors should also be aware of the risks and uncertainties that could affect the lithium market and the lithium stocks, such as the lithium price volatility, the regulatory and environmental issues, the operational and execution challenges, and the competition and market dynamics. Therefore, investors should do their own research, diversify their portfolio, and invest with a long-term horizon.

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Sean