NYSE-listed lithium exchange-traded fund Global X Lithium and Battery Tech ETF (the only lithium ETF) has delivered a return over 60 per cent this calendar year. The fund invests in the complete lithium cycle, from mining/refining to lithium-ion battery manufacturing.
FMC has 23.65 per cent weight in this ETF, which also has 18.5 per cent exposure to Chilean company SQM. NYSE-listed SQM has also seen its share price double to $59.30 in the past year. SQM got 29 per cent of its revenue from the lithium segment against 11 per cent for FMC in the first half of 2017.
“Understandably, there is a surge in prices of lithium stocks as the onslaught of electric vehicles is set to fire up demand. While companies have been lining up to extract lithium from regions such as the Lithium Triangle (Argentina, Bolivia and Chile) that have more brine-based deposits and are easier to extract, the rapid increase in demand has made companies look at more difficult/expensive methods to extract deposits in rocks (example in Australia) to make up for the shortfall in supplies due to some restrictions in the Lithium Triangle,” said Ashim Sharma, partner and group head (auto, engineering and logistics) at Nomura Research Institute India.
Morgan Stanley projects production of electric cars at 2.9 per cent of 99 million new cars in 2020 and to 9.4 per cent of 102 million new units in 2025. It is estimated at about one per cent of 86.5 million cars this year.
Japanese automobile major Suzuki (which owns the country’s biggest carmaker, Maruti) is investing Rs 1,151 crore in setting up India’s first lithium-ion battery making unit, in alliance with Toshiba and Denso. Products from the unit would be available from 2020. Suzuki did not answer specific questions related to sourcing of lithium and the quantities this unit would consume every year.
A recent report from Goldman Sachs said investment of up to $32 billion could go into creating battery capacity in India and private players would play an active role. It said the falling price of lithium-ion battery would spur investment.
“Lithium is not available beyond three or four countries in a big way. People are already calling it white gold. What happened with oil several years ago could happen with lithium now,” said Saurabh Kumar, managing director at EESL, the company purchasing 10,000 electric cars from Mahindra & Mahindra and Tata Motors for leasing to government ministries and departments.
The Indian electric vehicle market is at a nascent stage and every year only about 2,000 electric vehicles are sold in a market of three million units. But, the government has stated its intent to have an all-electric vehicle fleet in the country by 2030, nudging carmakers to start manufacturing these. Two home-grown firms — M&M and Tata Motors — have started making electric cars and a number of start-ups are venturing into electric two-wheelers.