Lithium 2024: From Theory to Practice—Complete Guide to Maximize Your Portfolio

For years, lithium has been talked about as the engine of the next industrial revolution, and this statement is not exaggerated. Unlike fossil fuels, which dominated the 20th century, lithium is emerging as the strategic resource of the 21st century. Although technically not a fuel, it forms the basis of batteries that power vehicles manufactured by companies like Tesla, Toyota, Honda, and BYD—essentially all major players in the global automotive sector.

Why Lithium Is Today a Unique Opportunity

The Fundamental Reasons for the Lithium Boom

Investment in lithium is not speculation but a bet supported by concrete legislative changes. The European Union, China, and the United States have set clear deadlines: from 2035 onward, only electric vehicles will be sold. This internal combustion engine vehicle ban guarantees demand by law.

Key factors driving the sector:

Electric vehicles require high-performance batteries to operate without external infrastructure. Today, lithium is the only material that meets this requirement viably at an industrial scale. With no close technological alternatives in the market, lithium maintains a de facto monopoly. It is estimated that global consumption will surpass available supply in the coming years, creating upward pressure on prices. Solutions based on sodium, silica, or zinc are in experimental phases and will not reach the market before 2035.

Price Evolution: A Clear Indicator

In five years, lithium went from trading around $24 per ton to about $70 per ton. This 192% increase reflects growing industrial demand, but analysts project that pressure will continue upward. If supply cannot keep pace with demand growth—something likely given the time needed to build new mines—lithium could easily surpass $100 per ton in the next five years.

Investment Strategies: Five Paths to the Same Destination

1. Lithium as Raw Material

Some specialized brokers allow trading lithium as a commodity. This approach is straightforward: your gains are proportional to price increases. However, profitability is linear and limited compared to investing in companies that amplify these prices through operational margins.

2. Mining Producers: The Most Direct Bet

Mining companies are in the best position. The more lithium they produce, the more revenue they generate. They do not depend on consumer preferences or disruptive technological innovation.

SQM (Sociedad Química y Minera) is the world’s leading producer. This Chilean company extracts lithium from the Atacama Desert and processes it in Antofagasta. Its shares have multiplied since 2020, although its geographic concentration in Chile presents regulatory and concentration risks.

Albemarle operates from the United States and is the second-largest global producer. It diversifies geographically with operations in the Salar de Atacama (Chile) and Nevada (USA). Its product portfolio also includes bromine and catalysts, reducing dependence on a single commodity. Since 2020, its share value has quintupled.

Tianqi Lithium dominates the Eastern Hemisphere, especially China. Based in Sichuan, it fuels the explosive demand for electric vehicles in Asia. The company is positioned to benefit from market growth where it already leads China in EV sales. Its performance since 2021 has been exceptional.

3. Battery Manufacturers: Intermediate Players

These companies buy lithium to produce batteries. Their profitability depends on operational margins and sales volume.

Tesla surprises in this category because, although primarily an electric vehicle manufacturer, it has vertically integrated battery production in its gigafactories. It also makes “Powerwalls” for homes and energy storage systems for solar and wind plants. Diversification of applications reduces risk. After recent corrections, shares may experience significant rebounds.

Panasonic is Tesla’s main battery supplier. Although capable of mass production, it is not solely specialized in batteries, so the segment’s performance is not fully reflected in its stock price.

CATL, based in Ningde (China), is one of China’s largest battery manufacturers, covering both electric vehicles and residential and industrial storage systems. It reached all-time highs in 2021, corrected afterward, and now trades again above $400 with growth potential in the coming years.

Solid Power is a different case: a very young company dedicated exclusively to EV batteries. It could become a “unicorn” if its technology succeeds, but also carries the risk of technological obsolescence. Its stock history is insufficient for reliable projections.

4. Vehicle Manufacturers: The Bet on the Final Destination

Investing in EVs is one of the safest options because lithium is essential for their operation. Competition is fierce, and preferences may change, but growth is virtually inevitable.

Tesla leads globally, especially in the US and Europe. It is the third brand in China behind local competitors. Its technological advantage and vertical manufacturing system position it as an industry benchmark.

Toyota was one of the first traditional manufacturers to adapt to the electric future. Today, it is the second in EV market share in the West, reflected in the bullish performance of its shares.

BYD is a clear leader in China and follows a vertically integrated model similar to Tesla: it produces its own lithium batteries. This self-sufficiency reduces costs and external dependence. Important note: BYD (BYDDY) should not be confused with Boyd Gaming Corporation (BYD), which is a casino unrelated to the automotive sector.

5. Lithium ETFs: Instant Diversification

For investors who prefer to delegate management, several thematic ETFs exist.

Global X Lithium and Battery Tech ETF (LIT) is the most well-known and has the longest track record. It offers balanced exposure to companies like Tianqi, SQM, and BYD. Although it recorded only 0.98% return in the last year, it has accumulated 9.41% so far in 2023, with projections of improvement based on sector momentum.

Amplify Lithium and Battery Technology ETF (BATT) has less history than LIT but has nearly doubled investors’ capital between 2020 and 2023. Its composition includes mining companies and EV manufacturers.

WisdomTree Battery Solutions UCITS ETF (CHRG) is recently created, so its predictive validity for future performance is limited. It is useful for diversifying portfolios focused on lithium but not as a primary option.

Lithium Geography: Opportunities Beyond Chile

Traditionally, lithium investment discussions have focused on Chilean and US producers. However, Latin America—especially countries like Colombia—is emerging as a relevant player. The region has significant deposits and governments interested in developing value chains. How to invest in lithium in Colombia represents a less explored but potentially lucrative frontier, with lower valuations than established producers but higher regulatory risks.

Risk vs. Opportunity Assessment

Clear Advantages

Lithium is essential for the EV industry with no visible competitors. The market is guaranteed by legislation. Projected demand exceeds supply. The sector has delivered exceptional returns since 2020. There are speculative opportunities in emerging companies.

Disadvantages to Consider

Technological alternatives are being explored. Not all companies are equally profitable. Some producers are currently overvalued in the stock market. The construction times for new mines create cycles of scarcity and abundance.

Long-Term Perspective

In the short and medium term (next 10 years), lithium is probably the most defensive investment available. Electric vehicles will gradually replace internal combustion engines, driving demand structurally.

In the longer term (more than 15 years), new materials are likely to displace lithium. Sodium batteries are advancing technologically, but years are still needed for industrial implementation. This leaves a clear window of opportunity for the next decade.

Should You Invest in Lithium Now?

Investing in lithium today is comparable to investing in oil in 1880. It is the essential material for an industry predestined to replace the previous one. Geopolitical and environmental tensions accelerate this transition.

Those with interests in the oil industry generate negative narratives about lithium and EVs. But roads will not disappear; only the vehicles traveling on them will change.

If you invest in mining producers, battery manufacturers, or EV companies—or simply in diversified ETFs—your investment has a significant chance of multiplying in the coming years. The sooner you shift capital from fossil fuels to the electric economy, the greater your potential returns in the medium and long term.

Frequently Asked Questions

What is the difference between lithium-ion batteries and lithium polymer batteries?
The first use liquid electrolyte; the second, solid. Lithium-ion batteries are more durable and economical, although larger and more flammable.

What will eventually replace lithium?
Sodium, silica, and zinc are being researched as higher-capacity alternatives, but years of development are still needed before mass commercialization.

Are lithium batteries flammable?
Yes, under accident or defect conditions. Similarly, gasoline or diesel tanks are also flammable. The difference is that EVs avoid CO2 emissions.

Environmental damages from lithium mining?
Extraction causes impacts on ecosystems, similar to oil mining. However, electric vehicles allow eliminating emissions during their operational life cycle.