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Lithium ETFs Set to Surge on Climate Bill

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Lithium has been a red-hot commodity thanks to the drive toward electric vehicles (“EV”), which use lithium-ion batteries. Additionally, the passage of the historic climate bill by the Senate is expected to bolster demand for EVs, thereby pushing up demand for lithium.

Investors seeking to tap the opportune moment could easily bet on lithium ETFs like Global X Lithium & Battery Tech ETF (LIT - Free Report) and Amplify Lithium & Battery Technology ETF (BATT - Free Report) .

Solid Outlook

After a record-breaking year, sales of EVs continued to be strong and are set to more than triple by 2025. EV sales could reach 33% globally by 2028 and 54% by 2035, per AlixPartners. The push to green energy has increased the demand for fuel-efficient vehicles.

The Senate last weekend passed the climate change bill, which allocates $369 billion in reducing carbon emissions over the decade and includes $4,000 in tax credits for purchasing a new electric vehicle along with a $7,500 tax credit for buying a used one. This is the single largest investment in reducing emissions in U.S. history (read: Clean Energy Stocks & ETFs Surge on Climate Spending Deal).

To hit net zero goals, a higher number of renewable energy installations coupled with the higher adoption of electric vehicles is required. In fact, “about 2 billion EVs need to be on the road by 2050 for the world to hit net zero”, the International Energy Agency says. Notably, electric vehicle battery systems provide fewer emissions at lower costs than heavier or larger engines.

Rising petrol and diesel prices have also shifted consumer demand toward electric vehicles. Additionally, rapidly emerging automation and technological advancement, and growing demand for consumer electronics products such as laptops, mobile phones, and the Internet of Things devices will continue to fuel demand for lithium-ion batteries. Further, the increasing adoption of lithium-ion batteries in energy storage systems should drive growth. According to Research and Markets, the lithium-ion battery metals market is expected to witness a CAGR of 34% to reach $286,085.77 million by 2031 from $14,539.70 million in 2021.  

The International Energy Agency expects the world to face lithium shortages by 2025, while Credit Suisse believes demand could treble between 2020 and 2025.

Global X Lithium & Battery Tech ETF (LIT - Free Report)

Global X Lithium & Battery Tech ETF invests in companies throughout the lithium cycle, including mining, refinement and battery production, cutting across the traditional sectors and geographic definitions by tracking the Solactive Global Lithium Index. It holds 39 securities in its basket, with the Chinese firms taking the largest share at 42%, followed by the United States (20.5%) and South Korea (11.7%).

Global X Lithium & Battery Tech ETF charges investors 75 bps in annual fees and has amassed $4.6 billion in AUM. It trades in an average daily volume of 584,000 shares (read: 4 Sector ETFs That Survived Market Turmoil in June).

Amplify Lithium & Battery Technology ETF (BATT - Free Report)

Amplify Lithium & Battery Technology ETF offers exposure to a portfolio of companies generating significant revenues from the development, production and use of lithium battery technology, including battery storage solutions, battery metals & materials, and electric vehicles. It tracks the EQM Lithium & Battery Technology Index, holding 90 stocks in its basket.

Amplify Lithium & Battery Technology ETF has gathered $196.2 million in its asset base and trades in an average daily volume of 77,000 shares. It charges 59 bps in fees per year from investors.


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