Nice potential incremental demand for our shares....
Why Lithium ETF May Add To 2017's Superb Gains
From high-efficiency AA batteries to the powerplants of electric cars, lithium has emerged as a critical mineral and source of energy — a trend that has given Global X Lithium & Battery Tech (
LIT) big gains in 2017.
The exchange traded fund does not track the price of lithium, but rather the main players in the industry, from producers of the mineral to large users such as electric-car maker Tesla (
TSLA) and No. 1 smartphone maker Samsung.
In a portfolio of 35 companies, the largest holdings are Albemarle (
ALB) and FMC Corp.(
FMC), two U.S.-based lithium producers. Albemarle accounts for 18% of the portfolio and FMC 17%. Both stocks have performed well, rising sharply from
buy areasin February and March.
Other holdings account for much smaller portions of the fund, including a 7% stake in Chile-based Sociedad Quimica y Minera (
SQM), the world's biggest producer of lithium. Chile holds more than half of the world's known reserves of lithium, according to Bloomberg, and Albemarle has operations in that country too.
The ETF — up more than 60% this year — is forming a chart pattern that could result in further gains. It is forming a
flat base with a potential buy point at 40.89.
The fund's success may explain why investor interest has risen in 2017: Average daily volume is about 665,000 shares, up from about 46,000 at the beginning 2017. Assets have increased to more than $1 billion, a respectable sum for a specialty ETF.
Emerging technologies can make for volatile investments, and Tesla's up-and-down 2017 illustrates that. Overall, analysts expect continued expansion for lithium power. Demand for lithium started rising with the growth of portable electronics. That part of the market is expected to level off. But as
a report from Global X notes, "the new x-factor for lithium demand growth is electric vehicles, and to a lesser extent, utility scale energy storage for renewables like wind and solar."
In China, battery electric vehicle sales soared 96% in October from the year-ago period, and for the first 10 months of the year Chinese electric vehicle sales were tracking 45% ahead of the year-ago period, according to a research note from Nomura Instinet on Nov. 21. "We believe continued adoption of EVs within China will benefit Buy-rated lithium producers ALB (Albemarle) and FMC," wrote analyst Matthew Skowronski
