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550% increase: The metal investors love right now

·4-min read
A lithium mining operation and a hand holding a piece of lepidolite which lithium is extracted from
Lithium has seen a massive price increase in the last 12 months. Find out why (Source: Getty)

One of Australia's largest miners, Pilbara Minerals (ASX: PLS) just sold over 8,000 tonnes of Lithium for $3,036 per tonne - a 550 per cent increase from last year.

This massive price increase demonstrates the fast growing interest in the metal for use in many everyday items.

Australia is home to some of the world’s largest lithium miners, notably Orocobre, Pilbara Minerals and Mineral Resources.

Orocobre is up 119 per cent this year, Pilabara has soared 160 per cent and Mineral Resources is up 38.5 per cent.

Here’s what you need to know about lithium and how to invest in it.

What is lithium?

Lithium is an extremely lightweight and soft metal that has a silvery appearance.

It is an alkali metal which means it is highly reactive and flammable, and must be stored in vacuum, inert atmosphere or inert liquid such as purified kerosene or mineral oil.

It also corrodes in air very quickly, which is why it needs to be stored in such specific ways.

And it is hard to come by. Lithium doesn’t actually occur naturally but needs to be extracted from other minerals like lepidolite.

So, why is this highly flammable, and difficult to store metal in such high demand? Well, we use it in a lot of technology.

Lithium mining
Lithium in it's metal form and lepidolite which it is extracted from (Source: Getty)

What is lithium used for?

Lithium is mostly used for batteries. It’s used in rechargeable batteries like phones, laptops and electric vehicles.

It is also used in the treatment of some mental illnesses, like bipolar, but the massive price rise seen recently is more due to its necessity in batteries.

This is because lithium batteries are lightweight and have a much higher charge density. So, the charge will last longer and doesn’t add a lot of weight to the products it powers.

This has put lithium in high demand, and when coupled with its rarity lays the groundwork for the massive price increase we have seen.

3D illustration of lithium battery pack, close up on the text
Lithium is used to create lightweight batteries (Source: Getty)

Why are lithium prices rising now?

In 2018 we went through a “battery boom”, according to trading platform IG, which coincided with a stratospheric increase in the share prices of a number of ASX-listed lithium stocks.

“That boom – as with many others in the history of financial markets, was met with a bust in 2019 – as oversupply issues saw lithium prices collapse, instilling doubts in a market that rested its hopes on an electric vehicle revolution that has yet to truly arrive,” Shane Walton from IG said.

Despite taking a hit in 2019, with the increase in accessibility of electric vehicles and the proliferation of smartphones, watches, tablets and all other rechargeable products we use, lithium looks like it’s got a long road ahead of it.

How to invest in lithium?

There are a number of lithium-exposed stocks listed on the ASX that you can buy shares in. The top 10, according to IG are:

  1. Mineral Resources (ASX: MIN)

  2. Pilbara Minerals (ASX: PLS)

  3. Orocobre Limited (ASX: ORE)

  4. Wesfarmers (ASX: WES)

  5. Piedmont Lithium (ASX: PLL)

  6. Vulcan Energy (ASX: VUL)

  7. Liontown Resources (ASX: LTR)

  8. Ioneer (ASX: INR)

  9. AVZ Minerals (ASX: AVZ)

  10. Core Lithium (ASX: CXO)

But, if you would prefer to get a more diverse approach you might want to look into lithium-exposed exchange-traded funds (ETFs).

The ETFS Battery Tech and Lithium ETF (ASX: ACDC) was the best performing Aussie ETF this year as at 1 July.

It is up around 14 per cent since January this year, only slightly down from its peak of 16.4 per cent in August.

The Global X Lithium & Battery Tech ETF (NYSE: LIT) is listed on the New York Stock Exchange, but can be accessed by Aussie investors through any number on online trading platforms.

It is currently soaring, up 37.8 per cent this year, also down only slightly from its 40 per cent rise in August.

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