Why Should You Consider Lithium Stocks for Long-Term Investment?

Summary

• Shares related to lithium-ion battery manufacturers and other companies that are, directly or indirectly, involved in the process can be one of the promising bets for future
• According to a World Economic Forum report, the demand for rechargeable batteries is likely to grow by 25 per cent p.a. to 2,600 gigawatt hours by 2030
• In 2020 itself, two British startups -- Britishvolt and AMTE Power -- have announced to invest £4 billion to build the UK’s first large-scale lithium-ion battery factory

With the presence of varied sectors, industries, asset classes and competitors operating in an industry, there are a lot of investment opportunities for individuals, as well as institutional investors. The stock or company which has been performing quite well for the last five-seven years doesn’t imply a positive growth in the share price in the future as well. This is one of the reasons because of which investors remain in a continuous lookout for newer investment opportunities, new sectors, developing companies, enterprises in their nascent stages, and industries that promise a better business in the years to come.

Lithium stocks, the shares related to lithium-ion battery manufacturers and other companies that are, directly or indirectly, involved in the process, can be one of the promising bets, as far as the present business dynamics are concerned. Lithium-ion industry and the company’s manufacturing rechargeable batteries are not new to the market, but these are likely to stay in focus in the long-term with the growing business on the back of battery usage across the products.

Lithium in Limelight

The conventional applications of lithium in metallurgy, ceramics and glass industry, lubricating greases didn’t bring the metal in the limelight. It was the advent of rechargeable batteries following which the elements utilised for manufacturing the battery were replaced by lithium, as the latter has a high power-to-weight ratio as compared to lead-acid or zinc-carbon combinations, thereby, storing more power in compact sizes.

With such properties of lithium, it is the most-widely used element in batteries attached with mobile phones, electric vehicles, other portable gadgets & devices, advanced mechanical tools and light vehicles etc. The investors who are looking forward to a long-term investment can consider evaluating various possibilities in the lithium industry.

Why lithium possesses strong potential in near future

• With the growing number of electrically-operated vehicles, mobile phones, portable devices, toys, gadgets such as keyboards, bluetooth speakers, lamps, wall clocks, digital watches, portable grinders, mixers, other kitchen utensils, mechanical tools including drilling machines, screwdrivers and weighing machines, the requirement of lithium-ion powered batteries will certainly rise.

• The depleting levels of fossil fuels, the large amount of carbon emissions and the dearly-priced per unit volume of hydrogen fuel are some of the major reasons why automakers are incorporating lithium-ion powered vehicles until the time they devise a proper model to garner, store and utilise the renewable resources of energy including wind and solar energy.

• According to independent market researcher and data aggregator Statista, the demand for lithium-ion powered rechargeable batteries is expected to grow to 343,981 metric tonnes globally, up 166 per cent from the present requirement of approximately 129,271 metric tonnes.
• An approximate cumulative investment of $440 billion along with the value chain will be required over the next decade for the production of estimated quantum of rechargeable batteries, while the annual battery production revenues will rise to $300 billion in 2030, WEF report suggested.
• Recently this year, two British startups namely -- the Coventry-headquartered Britishvolt and the Thurso-based AMTE Power -- have collectively announced their plans to invest a whopping sum of £4 billion to build the UK’s first large-scale factory to produce lithium-ion batteries.

WEF foresee a 25% rise in rechargeable batteries demand

According to a World Economic Forum (WEF) report, the demand for rechargeable batteries is likely to grow by 25 per cent per annum to 2,600 gigawatt hours (GWh) by 2030 globally as lithium-ion powered rechargeable batteries have been playing an increasingly important role in decarbonising transportation systems through electrification.

Further, rechargeable batteries have also enabled the shift from the conventional usage of fossil fuels to a renewable form of power generation that can be incorporated in electrically-powered vehicles, the report said, adding, that the batteries are also assisting in providing electricity access to off-the-grid communities where regular supply of fossil fuels can’t be established.

As per WEF’s findings, the demand for rechargeable batteries rose by 30 per cent annually to reach a volume of 180GWh between a nearly decade-long period from 2010-18, following which, the base case suggests an annual growth rate of 25 per cent till 2030.

By the year 2030, the passenger cars segment will account for approximately 60 per cent of the global battery demand followed by the commercial vehicle space with a requirement of 23 per cent, the report added. 

To sum up, the automobile industry is the most significant sector, in which an unusually-high deployment of lithium-ion-powered rechargeable batteries and other related reusable forms of compact cells can be seen in order to reduce the dependability on fossil fuels and to promote the fuel efficient vehicles. Other than this, the extensive usage of compact forms of lithium-ion batteries in mobile phones, cameras, other portable gadgets and devices will give rise to the demand for rechargeable batteries.

The bigger companies and the now small-scale enterprises involved in manufacturing lithium-ion batteries and other forms of rechargeable cells with the help of lithium are highly likely to benefit from the growing demand for the product in the coming years. The auto-ancillaries and other equipment makers who are providing essential parts and supplies for the battery production are also set to gain from the upscale demand for lithium-ion batteries.