Lithium: the most promising investment opportunity of the decade

When we talk about the material that will fuel the global energy transition, there is an increasingly strong consensus: lithium is not just a raw material, it is the heart of the revolution transforming the automotive industry. And for those looking to invest in lithium, whether in Mexico or anywhere in the world, market signals are extraordinarily favorable.

Why now is the time to invest in lithium

The regulatory landscape has changed radically. The European Union, China, and the United States have enacted legislation banning the sale of gasoline vehicles starting in 2035. This is not a suggestion or a trend: it is a legal obligation that manufacturers must comply with.

The consequences are clear:

• Demand guaranteed by legislative decree: Electric vehicles are not a passing fad, but the only legal option that will exist in the main global markets in just over a decade.

• Lithium has no close rival: Although alternatives like sodium or zinc batteries are being researched, these technologies are at least a decade away from commercial viability. Meanwhile, lithium will reign unchallenged.

• Scarcity is inevitable: It is projected that lithium demand will significantly surpass supply over the next ten years. This gap between supply and demand is precisely the scenario that drives price increases and massive profits for producers.

Price evolution: from $24 a $70 dollars per ton

Over the past five years, lithium prices have undergone a remarkable transformation. They went from around $24 per ton to approximately $70 per ton. This near 200% increase reflects only the beginning of a much larger movement.

Analysts warn that this trend will continue to intensify. Many project that lithium prices could easily surpass $100 per ton in the coming years, especially considering that electric vehicle production continues to accelerate globally.

How to invest in lithium: five main strategies

Strategy 1: Lithium as a commodity or raw material

It is possible to access lithium directly as a commodity on various investment platforms. With this approach, your gains fluctuate directly with the spot price of lithium in international markets. However, the profit potential is significantly higher if you channel your capital into specific companies that capture additional value across the entire supply chain.

Strategy 2: Producing and extracting companies

Lithium extraction companies have decades of growth virtually assured. Their equation is simple: more production equals more revenue.

SQM (Sociedad Química y Minera) is the undisputed giant. This Chilean company extracts and processes lithium in the Atacama Desert and Antofagasta, positioning itself as the world’s leading producer. Its shares have been on a sustained upward trend since 2020. The downside: its dependence on operations solely in Chile limits geographic diversification.

Albemarle, the US corporation, ranks second globally in production. It operates two strategic mines: one in the Salar de Atacama in Chile and another in Nevada. Its stock value has multiplied approximately five times since 2020.

Tianqi Lithium, based in Sichuan, dominates the Eastern Hemisphere. While SQM and Albemarle control the West, Tianqi supplies the explosive Chinese electric vehicle market, which is shaping up to be the most important on the planet in the coming years. Its performance since 2021 has been exceptional.

Strategy 3: Battery manufacturers

Companies that buy lithium to manufacture batteries offer exposure to a different phase of the value chain, though with specific considerations.

Tesla leads as an electric vehicle manufacturer but also vertically integrates battery production in its gigafactories. It seeks to reduce dependence on external suppliers. Additionally, it manufactures energy storage systems (Powerwalls) and manages large-scale storage facilities like those operated in Australia via Megapacks.

Panasonic, Tesla’s main lithium-ion battery supplier, is a widely diversified Japanese corporation. Although it holds a high market share in batteries, its stock performance does not directly reflect success in this segment.

CATL, based in Ningde, is one of the leading Asian manufacturers. It covers both electric vehicles and residential and industrial storage systems. It is a key player in Asia’s electric transition and traded above $400 its 2021 all-time high###.

Solid Power represents the other extreme: a company exclusively specialized in batteries, but very recently founded. Its stock trajectory is too short for reliable projections. The risk is high, but so is the potential to become the next “unicorn” in technology.

( Strategy 4: Electric vehicle manufacturers

The final destination of lithium is in automobiles. Investing directly in EV producers is one of the most robust options, although competition is fierce and consumer preferences can change.

Tesla continues to lead the US and European markets, ranking third in China. Its technological advantage and vertical manufacturing model position it for long-term growth.

Toyota was one of the first major traditional automakers to recognize the need for electric adaptation. It now holds the second market share of EVs in the West, reflected in a notable stock growth.

BYD dominates the Chinese electric vehicle market with a considerable advantage. It emulates Tesla’s model by integrating the production of critical components, including its own lithium-ion batteries. This reduces dependence on third parties and allows for more competitive prices.

Important note: Do not confuse BYD )BYDDY(, the Chinese automaker, with Boyd Gaming Corporation )BYD###, which operates casinos and is unrelated to vehicles.

( Strategy 5: Specialized ETFs )ETFs(

Lithium ETFs enable automatic diversification without managing individual positions.

Global X Lithium and Battery Tech ETF )LIT( is probably the most established ETF in this niche, with a consistent track record since 2020. Although its return in the last year was modest )0.98%(, in 2023 so far it has generated a 9.41% return, with bullish projections for the coming years.

Amplify Lithium and Battery Technology ETF )BATT( is less established than LIT but offers comparable exposure to lithium producers, processors, and EV manufacturers. It has nearly doubled the invested capital between 2020 and 2023.

WisdomTree Battery Solutions UCITS ETF )CHRG### is newly created, with only a few months of operation. Its long-term performance remains uncertain, but it can be a complementary option to diversify portfolios focused on lithium.

Investing in lithium in Mexico: regional context

Although Mexico is not currently a major lithium producer globally, the Latin American region—particularly Chile, Argentina, and Bolivia—controls approximately 58% of known global reserves. For Mexican investors, this presents an indirect opportunity through shares of regional producers like SQM and Albemarle, which operate in the neighboring South American Lithium Triangle.

Likewise, investing in lithium from Mexico via ETFs or shares of multinational companies provides access equivalent to investors from any geography, removing territorial barriers.

Short, medium, and long-term outlooks

( Short and medium term )1-10 years###

The transition from fossil fuels to electric vehicles is inexorable. Companies like Tesla, Toyota, BYD, Honda, and dozens of smaller manufacturers will need lithium for each battery. Demand will grow much faster than production, pushing prices upward.

Producers like SQM, Albemarle, and Tianqi are positioned to capture extraordinary gains. Margins expand as prices rise.

( Long term )more than 15 years(

Emerging technologies—particularly sodium or sodium-ion batteries—could eventually displace lithium in specific applications. However, this horizon is distant enough not to invalidate current investment opportunities.

Advantages and limitations of investing in lithium

Advantages:

✓ Essential element with no viable competitors on the near horizon

✓ EV market guaranteed by legislation in major economies

✓ Projected demand exceeds estimated supply for the next decade

✓ Strong stock returns since 2020

✓ Opportunity to access high-growth emerging companies

Limitations:

✖ Technological alternatives are being researched )sodium, zinc, silica

✖ Not all lithium companies generate equal profitability

✖ Some companies trade at inflated valuations

✖ Regulatory or geopolitical risks in producing regions

Should I invest in lithium now?

The historical analogy is compelling: investing in lithium in 2024 is roughly equivalent to investing in oil in 1880. It is the key raw material for an industry destined to completely replace its predecessor.

Roads and cities will remain, but the vehicles that traverse them will change radically. Pollution problems and geopolitical tensions related to fossil fuels have limited futures.

Sectors with interests in oil generate negative narratives about lithium and EVs. Ignoring them is prudent. No industry lasts forever, and lithium inherits the baton in the 21st century.

Whether you choose lithium producers, battery manufacturers, or electric vehicle companies, your capital has a considerable chance of generating significant returns over the next decade. Shifting funds from fossil energy sectors to electric vehicle ecosystems is probably the smartest allocation decision currently available.

Frequently Asked Questions

What is the difference between lithium-ion batteries and lithium polymer batteries?

Lithium-ion batteries use liquid electrolyte; lithium polymer batteries employ solid electrolyte. Lithium-ion offers greater durability and cost-effectiveness, though they are bulkier and flammable.

What will replace lithium?

Sodium, silica, and zinc are being explored for higher capacities, but commercial viability is years away.

Are lithium batteries dangerous?

Accidents, defects, or improper maintenance can cause fires. Gasoline tanks are also flammable. Lithium enables emission-free vehicles.

Environmental damages from lithium?

Mining causes impacts similar to oil extraction. The difference: vehicles with lithium batteries do not emit operational pollutants.