Introduction
Lithium metal is widely used in electric vehicle batteries. Due to oversupply, lithium prices have fallen sharply (about 80%) since 2022. Many lithium stocks have also fallen in the past two years.
Considering the widespread adoption of electric vehicles and energy storage products in the future, the long-term demand for lithium will grow. If we can buy lithium stocks when they are undervalued, we may get long-term investment returns from them.
If you are interested in investing in lithium stocks, but don’t know which one is worth buying. Then this article will be a must-read guide before you invest. I will help you identify lithium stocks worth investing in based on my rich experience in stock analysis.
Should I invest in lithium stocks?
Lithium prices have fallen sharply due to oversupply. By the end of 2024, lithium prices have dropped by over 80% from their peak in 2022.
The impact of lithium prices in the past two years has also dealt a heavy blow to the prices of many lithium stocks, leading to many lithium stocks becoming excessively cheap. I think now we can start considering investing in some undervalued stocks with high growth potential. My judgment is based on two reasons.
Firstly, in the past two years, lithium suppliers have taken various actions, including reducing lithium supply and adopting more economically efficient mining methods, to cope with the decline in lithium prices leading to a decrease in profits. These actions can help lithium producers reduce the short-term impact of lithium price declines.
Secondly, in the long run, driven by the demand for electric vehicles (EVs) and energy storage products, the demand for lithium is expected to continue to rise.
Consulting firm Adamas Intelligence predicts that global lithium demand will increase by 26% and lithium carbonate equivalent (LCE) will grow to 1.46 million tons by 2025. The International Energy Agency (IEA) also optimistically predicts that in a net zero scenario, global demand for lithium will increase eight times by 2040.
So I believe that if you value long-term investment returns and want to invest in the environmental protection industry, lithium stocks will be a good choice.
Way to pick lithium stocks
Based on my experience, I suggest you choose lithium stocks based on the following principles.
- Prioritizes stocks of companies with mid-cap or large-cap market capitalizations
- Prioritize stocks that receive "buy" ratings from multiple analysts
- Prioritizes stocks of companies with strong growth potential
4 best Lithium Stocks to buy in 2025
Company Name | Ticker | Market Cap | Number of "Buy" Ratings | Growth Potential |
Albemarle Corp. | $11.46 Billion | 9 | Having long-term mining rights for a large lithium mine in Chile | |
Rio Tinto Group | $76.55 Billion | 4 | Acquisition of Arcadium Lithium | |
Sociedad Química y Minera de Chile SA | $5.74 Billion | 2 | Establishing a new company to explore the global lithium business | |
Lithium Americas | $762.44 Million | 5 | Mining large lithium mines in the U.S. |
1. Albemarle (ALB)
Albemarle is one of the world's largest lithium producers. The company's energy storage department produces a range of lithium compounds, including lithium carbonate and lithium hydroxide.
Reason for selection
- Intellectia's data shows that in the past 12 months, 19 analysts have updated their ratings for Albemarle. There are 9 "buy" ratings and 8 "hold" ratings.
- As one of the world's largest lithium producers, Albemarle has the advantage of low-cost production. Albemarle holds the mining rights to the Atacama Salt Lake, one of the world's largest lithium mines. Compared to expensive lithium mining, extracting lithium from salt lakes is a more cost-effective method.
- Albemarle is not a pure lithium producer. It also sells bromine and various catalysts, which diversifies its sources of income.
Risk
- Lithium price fluctuations: Albemarle's long-term prospects depend on the rebound of lithium prices.
- Reported loss: Affected by the decline in lithium prices, Albemarle reported a net loss of $1.1 billion for the third quarter of 2024. Albemarle has stated that it plans to reduce capital expenditures by 50% in the fiscal year 2025, which may improve its mid-term financial situation.
2. Rio Tinto Group (RIO)
Rio Tinto Group is a global mining giant that produces iron, copper, aluminum, lithium, and other minerals.
Reason for selection
- According to Intellectia data, four analysts have updated their ratings on Rio Tinto in the past 12 months, including four 'buy' ratings. In addition, both Standard & Poor's and Fitch gave Rio Tinto an 'A' rating and a stable outlook, highlighting its strong liquidity and operational resilience.
- In October 2024, Rio Tinto Group announced that it would acquire Arcadium Lithium, the world's fifth-largest lithium producer. The transaction is expected to close in July 2025. Once the acquisition is completed, Rio Tinto's lithium mining and lithium chemical production capacity will be greatly enhanced, and it is expected to become the world's top lithium producer.
Risk
- Until the acquisition of Arcadium Lithium is completed, Rio still faces the risk of relying too heavily on its iron ore mining business, which currently accounts for about two-thirds of its revenue.
- While Rio Tinto has a strong balance sheet, its $6.7 billion all-cash acquisition of Arcadium Lithium has raised concerns about its financial pressures.
3. Sociedad Química y Minera de Chile SA (SQM)
Sociedad Química y Minera de Chile SA (SQM) is the top basic materials company in South America and one of the world's largest lithium producers.
Reasons for selection
- Intellectia's analysis shows that 5 analysts have updated their ratings on SQM in the past 12 months. There are 2 "buy" ratings and 2 "hold" ratings.
- SQM has established long-term partnerships with multiple partners, which helps to consolidate its market position. For example, SQM has reached a long-term agreement with Chilean state-owned enterprise Codelco to jointly develop the Atacama Salt Flats until 2060. SQM also cooperates with Ford Motor to provide it with battery-grade lithium carbonate and lithium hydroxide.
- SQM is seeking geographical diversification of its lithium business. In its 2024 interim earning report, SQM announced the establishment of SQM International Lithium. The new company will focus on developing lithium projects worldwide and drive SQM's LCE production to increase by at least 100,000 metric tons per year by 2030.
Risks
- SQM's current business is overly concentrated in Asia (about 70%), especially China. Any policy changes in the region regarding lithium products may have an impact on SQM.
- The Chilean government is seeking greater control over domestic lithium resources. This may bring risks to SQM's cooperation with state-owned Codelco.
4. Lithium Americas (LAC)
Lithium Americas is a Canadian mining company primarily focused on the development of lithium resources in North America. Lithium Americas is currently focused on the Thacker Pass project located in northern Nevada.
Reason for selection
- Thacker Pass has the largest known measured and indicated (M&I) lithium resource in the United States, with reserves of 16.1 million tons of LCE. The project is expected to start production in 2027 and can produce 40,000 tons of battery-grade lithium carbonate annually.
- The project has a lifespan of 45 years and can be expanded in multiple stages, which will enable Lithium Americas to maintain sustained growth and scalability in the lithium market.
- Lithium Americas has received a $2.26 billion loan from the US Department of Energy and a $650 million investment from General Motors, and external funding support will reduce the risk of the Thacker Pass project's progress.
- Intellectia's data shows that in the past 12 months, a total of 9 analysts have updated their ratings for Lithium Americas. There are 5 "buy" ratings and 4 "hold" ratings.
Risks
- The Thacker Pass project heavily relies on external funding. If there are problems in obtaining these funds, it will hinder the progress of the project.
- Due to higher labor costs in the United States, Lithium Americas' lithium production business in the country may face higher costs, thereby reducing its competitiveness.
Conclusion
Overall, all four stocks have long-term growth potential. If you are looking for a solid investment, consider Albemarle and Rio Tinto. Lithium Americas may be a good choice if you can tolerate higher risk. You can also explore more international investment opportunities through SQM.
But before buying these stocks, you still need to conduct a comprehensive analysis of them and find a suitable price to buy. For beginners, I recommend that you use a powerful AI tool, such as Intellectia, to analyze stocks. Intellectia will also give you short-term and long-term investment recommendations to help you make wise decisions.
Frequently Asked Questions
Who is the largest lithium battery supplier in the world?
Chinese company CATL is the world's leading electric vehicle battery manufacturer. As of June 2024, CATL's market share is close to 38%. China's BYD ranks second with a market share of 15.8%, followed by South Korea's LG Energy Solution with a market share of 13.6%.
Who is the biggest supplier of lithium to Tesla?
China's Ganfeng Lithium is Tesla's largest lithium supplier. Tesla has also signed lithium supply agreements with other companies, such as Piedmont Lithium.
Does Elon Musk invest in lithium?
Musk has called lithium the "New Oil." His electric car company, Tesla, is building a lithium refinery off the Texas coast that is expected to start production in 2025.
