10 Most Profitable Lithium Stocks Now

In this article, we will discuss the 10 most profitable lithium stocks to buy.

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.

Photo by Mika Baumeister on Unsplash

Our Methodology

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.

5. Pilbara Minerals Limited (PLS.AX)

TTM Net Income: $1.14 billion (A$1.69 billion)

Pilbara Minerals Limited (PLS.AX) is a West Perth, Australia-based pure-play lithium company that has the distinction of owning the biggest independent hard-rock lithium operation in the world in Western Australia.  The resource is only 120km away from Port Hedland and is responsible for producing concentrates of spodumene and tantalite.

The Pilgangoora Project is considered one of the most vital lithium deposits in the global lithium supply chain. Earlier in February 2023, the company revealed that it has 200,000 tons of spodumene to sell. Pilbara Minerals Limited (PLS.AX) has reached an agreement with a chemical converter that will buy 15,000 tons of spodumene from the company during the first three months of 2023.

4. Ganfeng Lithium Group Co., Ltd. (002460.SZ)

TTM Net Income: $2.55 billion (¥17.55 billion)

Ganfeng Lithium Group Co., Ltd. (002460.SZ) is the largest producer of lithium compounds in China and the third largest in the world.

Ganfeng Lithium Group Co., Ltd. (002460.SZ) intends to reach an annual production capacity of 300,000 tons by 2025 and has applied for 365 national patents. The company has a global headcount of over 10,000 employees. The increase in lithium prices during 2022 has resulted in mining companies posting record profits. Lithium prices have jumped as much as 15 times from their lows in 2020, driven by the global push toward the adoption of EVs. In January 2023, Ganfeng Lithium Group Co., Ltd. (002460.SZ) announced that it intends to invest nearly $2.2 billion (¥15 billion) in two new battery factories to expand operations.

3. Tianqi Lithium Corporation (002466.SZ)

TTM Net Income: $2.55 billion (¥17.53 billion)

Tianqi Lithium Corporation (002466.SZ) is a Chengdu, Sichuan-based vertically integrated lithium company that is involved in the extraction of lithium concentrate along with the production of lithium specialty compounds.

Tianqi Lithium Corporation (002466.SZ) has a presence in the Australian, Chilean, and Chinese lithium markets. The company has a workforce of 1,907 employees and has 167 patents under its belt. Tianqi Lithium Corporation (002466.SZ) is present in the Greenbushes mine in Western Australia through its collaboration with IGO Limited. Furthermore, the company has three chemical plants across China for further processing of lithium that produces industrial-grade lithium carbonate, battery, and industrial-grade lithium hydroxide.

2. Albemarle Corporation (NYSE:ALB)

TTM Net Income: $2.69 billion

Albemarle Corporation (NYSE:ALB) is a Charlotte, North Carolina-based specialty chemicals company. The Energy Storage segment of the business is involved in maintaining its industry leadership in the field of lithium and lithium derivatives.

Albemarle Corporation (NYSE:ALB) has production and storage facilities in North and South America, Europe, and through a joint venture in Australia as well. In a research note issued on February 17, Joel Jackson at BMO Capital increased the price target on Albemarle Corporation (NYSE:ALB) from $315 to $325 and maintained an Outperform rating on the stock. The analyst noted that despite the price of lithium normalizing, Albemarle Corporation (NYSE:ALB) stock still offers a significant upside as it is in a strong position to benefit from the positive demand outlook for lithium.

Here’s what Carillon Tower Advisers said about Albemarle Corporation (NYSE:ALB) in its Q4 2022 investor letter:

“Albemarle Corporation (NYSE:ALB) is a global specialty chemicals company with leading positions in lithium, bromine, and refining catalysts. The stock gave back some of its recent gains amid investor concerns about how the future price of lithium could be affected by a potential decelerating rate of growth in overall electric vehicle (EV) production and demand, primarily in China. Despite these potential near-term headwinds, longer-term the global lithium market remains tight, and Albemarle plays a critical role in the battery value chain and remains well-positioned for the overall continued global adoption of EVs.”

1. Sociedad Química y Minera de Chile S.A. (NYSE:SQM)

TTM Net Income: $3.08 billion

Sociedad Química y Minera de Chile S.A. (NYSE:SQM) is a Santiago, Chile-based chemicals company that has the distinction of being the biggest lithium producer in the world. The company has a presence in 110 countries around the world.

Sociedad Química y Minera de Chile S.A. (NYSE:SQM) intends to have a carbon-neutral lithium production process by 2030. Meanwhile, the company currently uses 97.4% solar energy for the production of lithium. Sociedad Química y Minera de Chile S.A. (NYSE:SQM) is considered the backbone of the Chilean economy and intends to invest $1.3 billion by 2024 to boost the supply of lithium.

In a note issued to investors on January 10, Corinne Blanchard at Deutsche Bank gave Sociedad Química y Minera de Chile S.A. (NYSE:SQM) stock a target price of $95 along with a Buy rating. The analyst sees short-term volatility in the lithium market but has a confident outlook for the second half of the year. You can read the company’s Q4 2022 earnings call transcript here.

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Disclosure: None. 10 Most Profitable Lithium Stocks Now is originally published on Insider Monkey.