Lithium mining shares exploded higher in Monday trading. At noon EDT, shares of Lithium Americas (NYSE: LAC) are up 9.9%, Livent (NYSE: LTHM) the stock gained 13.5%, and Lithium from Piedmont (NASDAQ: PLL) doing its best – a staggering 19.3% increase.
But there is only one very good reason for a of these stocks on the rise, and this is not Piedmont.
During the weekend, Barron ‘s published an article on the growing demand for lithium for the manufacture of electric car batteries. The publication used last week’s supply agreement between Tesla (NASDAQ: TSLA) and Piedmont Lithium as a starting point, explaining that a lack of lithium is the “only thing in between Tesla and world domination. ”
You might think this would logically lead to Barron’s approving the Piedmont Lithium stock, as the is the company that has just signed the agreement with the manufacturer of electric vehicles (EV). But Piedmont had already gained a lot – 236% on the day the pact was announced. Instead of chasing that stock higher, Barron’s turned his attention to other miners such as Albemarle, Chilean Chemicals and Mining Company and Livent, encouraging investors to turn to these more established lithium suppliers.
Of these three stocks, by the way, Barron’s concluded that “Livent seems to be the best bet” – and certainly not Lithium Americas or Piedmont, which do not yet produce lithium on a commercial scale.
Barron’s noted that global lithium production produces “around 400,000 tonnes of lithium per year” at the moment, theoretically “enough to power 2-3 million electric vehicles” (but in fact only a third of that production is available for electric vehicles, as laptops, cell phones and other rechargeable devices also need lithium). To meet Elon Musk’s goal of producing 30 million Teslas by the end of this decade, the magazine warns, lithium production “may need to increase tenfold.”
Pricing remains a risk. The publication notes that after peaking at around $ 25,000 per tonne in 2018, lithium prices have fallen to around $ 7,000 per tonne in the past year. But even at this rate, such demand creates an opportunity for new players – so once they are up and running, start-ups Piedmont and Lithium Americas could are still becoming players in this industry. In the meantime, however, Barron’s urges investors to focus their research on companies that are already operational and profitable.
I think that’s good advice – for lithium stocks, and for all stocks.