In this article, we will discuss the 10 most profitable lithium stocks to buy. If you want to see more companies in this selection, go to the 5 Most Profitable Lithium Stocks Now.
According to the United States Geological Survey (USGS), batteries account for 80% of the global end-use markets for lithium. This is followed by ceramics and glass, accounting for 7%, and lubricating greases representing 4% of the market. There has been a significant surge in demand for lithium as lithium-powered batteries have become a mainstay in the field of electric cars (EVs), mobile phones, laptops, and renewable energy storage.
Lithium Demand
According to Irvine, California-based automotive research entity Kelley Blue Book, the overall sales for new vehicles declined by 8% in 2022, but the demand for EVs increased astronomically by 65% YoY. Meanwhile, a leading global management consulting firm, McKinsey, believes that the demand for lithium will increase at an average rate of 25% to 26% every year until the end of this decade. At the end of 2022, the consumption of lithium was estimated to be around 134,000 tons. This reflects a year-over-year (YoY) rise of 41% from 95,000 tons in 2021.
The global lithium supply chain is primarily dependent on six mining operations located in Australia. Overall, the country was responsible for producing 61,000 tons of lithium, nearly equivalent to 47% of the total estimated global production in 2022. The country is estimated to have the second-highest lithium reserves of 6.2 million tons in the world. Meanwhile, the second biggest producer of lithium in 2022 was Chile, with an annual production of 39,000 tons through its two brine operations. The country has the biggest deposit of lithium in the world, with an estimated reserve of 9.3 million tons. Overall, 26 million tons of lithium is available for exploration globally, with experts believing that the global reserve of lithium stands at around 98 million tons.
A Surge in Battery-Grade Lithium Carbonate Prices
The USGS observed that the per metric price for battery-grade lithium carbonate surged to $37,000 in 2022 as opposed to only $12,600 in 2021. This reflects a three-time increase in price despite an increase in lithium production from 107,000 tons in 2021 to 130,000 tons in 2022. The total production does not include US production, which stands at around 900 tons as of 2021. Overall, the US consumed 3,000 tons of lithium in 2022. The US fulfilled its demand for lithium primarily through Argentina and Chile, as they made up for 91% of the imports during the 2018 to 2021 period.
The US government is also taking lithium production as a serious priority as it allocated $1.6 billion in the 2022 US Bipartisan Infrastructure Law to aid the extraction and processing of lithium for batteries by shortlisting and funding 12 lithium-based projects. Governments and corporations around the world have made lithium supply security one of the top priorities on their agenda. To read about the strategies of some of the major players in the lithium industry, you can check out the 10 High-Growth Lithium Stocks to Buy.
Tesla's Strategy to Secure Lithium-Ion Battery Supply Chain
Lithium stocks came into the limelight after the news that the biggest EV maker in the world, Tesla, Inc. (NASDAQ:TSLA), is interested in acquiring Vancouver, Canada-based Sigma Lithium Corporation (NASDAQ:SGML). Following this development, the stock price of Sigma Lithium jumped 24% in after-hours trading on February 17. The Austin, Texas-based company is interested in vertically integrating its operations to secure its supply chain of lithium-ion batteries and has been looking for a company that could aid it in exploring and refining lithium. In January 2023, Tesla, Inc. (NASDAQ:TSLA) also entered into a deal with Piedmont Lithium Inc (NASDAQ:PLL) to secure the supply of spodumene, which is a lithium aluminum silicate mineral.
Sigma Lithium Corporation (NASDAQ:SGML) is expected to complete construction and make its lithium mine in Brazil operational by April this year. The project would bring hydroelectric power into use to reduce its overall carbon footprint, which also falls in line with the net-zero emission agenda of leading corporations. The market capitalization of Sigma Lithium Corporation (NASDAQ:SGML) has tripled in the last year. However, the company did not make it to our list as it accumulated a trailing twelve months (ttm) net loss of $42.2 million (C$56.9 million).
Stocks such as Sociedad Química y Minera de Chile S.A. (NYSE:SQM), Albemarle Corporation (NYSE:ALB), and Tianqi Lithium Corporation (002466.SZ) are amongst some of the most profitable lithium stocks right now.
To shortlist the 10 most profitable lithium stocks, we considered the companies' financial health, industry trends, regulatory changes, and other factors that could impact the profitability of lithium stocks. We used the trailing twelve months (TTM) net income as the primary metric to gauge profitability for a range of leading lithium companies and then sorted the stocks in ascending order of their TTM net income figures. Some companies in this list have pivoted towards the exploration and production of lithium by either leveraging their current asset base or acquiring new ones, while others have been in the business for decades. It's worth noting that the profitability of these companies was steady and not attributable to isolated transactions.
Most Profitable Lithium Stocks Now
10. Allkem Limited (AKE.TO)
TTM Net Income: $473.1 million
Allkem Limited (AKE.TO) is an Argentina-based vertically integrated lithium-producing company with diverse operations that range from brine operations in Argentina to hard-rock lithium-producing facilities in Australia. The company also has a conversion facility in Japan that produces lithium hydroxide.
The nature of operations allows the company to fulfill the needs of various end markets. Allkem Limited (AKE.TO) is in the process of developing new projects globally to expand its operations and diversify its product portfolio. Allkem Limited (AKE.TO) is on a mission to increase its production by three times by 2026. Furthermore, over the next 10 years, Allkem Limited (AKE.TO) wants to maintain control over 10% of global lithium production.
9. Mineral Resources Limited (MIN.AX)
TTM Net Income: $484.6 million (A$718.6 million)
Mineral Resources Limited (MIN.AX) is a Western Australia-based diversified mining company with a significant presence in lithium mining. The company entered the lithium market around 10 years ago.
Mineral Resources Limited (MIN.AX) owns the two biggest hard rock lithium mines in the form of Mt Marion in the Goldfields region of Western Australia and Wodgina in the Pilbara region. The Mt Marion facility has an annual production capacity of 450,000 tons to 600,000 tons of mixed-grade spodumene concentrate that is expected to increase to 900,000 tons this year following upgrades. Meanwhile, Wodgina has a production capability of 750,000 tons per annum. Mineral Resources Limited (MIN.AX) also partially owns Kemerton Lithium Hydroxide Plant, which is a 50,000-ton per annum facility.
8. Sichuan Yahua Industrial Group Co., Ltd. (002497.SZ)
TTM Net Income: $560.7 million (¥3.85 billion)
Sichuan Yahua Industrial Group Co., Ltd. (002497.SZ) is a Chengdu, Sichuan-based company involved in the production and sales of lithium carbonate, lithium hydroxide, and other lithium salts for the local and international markets.
The company came into the limelight when it agreed to supply battery-grade lithium to EV maker Tesla, Inc. (NASDAQ:TSLA) for five years starting in December 2020. At the time of the agreement, Sichuan Yahua Industrial Group Co., Ltd. (002497.SZ) placed the value of the deal at around $630 million to $880 million. At the prices prevalent at that time, this translated into an average annual procurement of 12,600 tons to 17,600 tons of lithium. At the current market price of battery-grade lithium, the value of the deal has increased from $2.33 billion to $3.26 billion.
7. IGO Limited (IGO.AX)
TTM Net Income: $572.8 million (A$831.2 million)
IGO Limited (IGO.AX) is a South Perth, Australia-based company focused on creating clean energy products through its upstream mining and downstream processing assets.
In 2021, IGO Limited (IGO.AX) entered into a joint venture (JV) with Tianqi Lithium Corporation (002466.SZ) with a 49% stake. The JV is focused on developing lithium assets in the Western Australian region, including a 51% share in the Greenbushes Lithium Mine. Furthermore, the joint venture completely owns the Kwinana Lithium Hydroxide Refinery. Kwinana is among the pioneer battery-grade lithium hydroxide facilities in the world and the sole lithium hydroxide plant built in Australia. The plant is designed to be fully automated and will consist of two independent production units with a combined capacity of 48ktpa, producing high-quality battery-grade lithium hydroxide. Tianqi, a leader in the lithium industry, and IGO Limited (IGO.AX) will utilize the JV as their exclusive platform for any future investments in the lithium sector outside of China.
6. Yongxing Special Materials Technology Co., Ltd (002756.SZ)
TTM Net Income: $671.1 million (¥4.61 billion)
Yongxing Special Materials Technology Co., Ltd (002756.SZ) is a Huzhou, China-based company that is involved in the development and production of stainless steel tubes. The company has been one of the top three players in the industry for the last half a decade.
Yongxing Special Materials Technology Co., Ltd (002756.SZ) conducts its lithium processing business through a subsidiary known as Yongxing Special Steel New Energy Technology. The subsidiary was founded in 2017 and has a lithium carbonate processing plant in the eastern Jiangxi province. The plant is situated in Yichun City, which is considered the lithium capital of Asia. During the first nine months of 2022, the processing plant produced 13,770 tons of lithium carbonate and contributed 90% to the bottom line of the corporation.
In addition to Yongxing Special Materials Technology Co., Ltd (002756.SZ), stocks such as Sociedad Química y Minera de Chile S.A. (NYSE:SQM), Albemarle Corporation (NYSE:ALB), and Tianqi Lithium Corporation (002466.SZ) are also some of the most profitable lithium stocks in the market currently.
