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ETF Buyers Pile Into Lithium as China Telegraphs Intent to Shift to Electric Vehicles

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The third-best performing ETF tracking material producers got a jolt from China after the country said it will set a deadline for automakers to end sales of fossil-fueled vehicles.

Global X Lithium & Battery Tech ETF climbed 5 percent Monday, poised for the highest close in more than six years, as its biggest holdings FMC Corp., Soc. Quimica & Minera de Chile SA, Samsung SDI Co. and Tesla Inc. advanced.

On Saturday, Xin Guobin, China’s vice minister of industry and information technology, said the government is working with regulators on a timetable to end production and sales of internal-combustion vehicles. The shift to electric vehicles is spurring a surge in demand for lithium batteries and the companies that supply the raw materials.

Last week, investors poured $41 million into Global X Lithium, which trades under the ticker LIT, putting it on course for a sixth straight monthly inflow. The exchange traded fund, which delivered a 41 percent return this year, more than tripled its assets to $441 million, according to data compiled by Bloomberg.

“The growth of the electric-vehicle market has just completely changed the entire equation for lithium,” Jay Jacobs, the New York-based director of research at Global X Funds, said in a telephone interview. “If China is going electric and other automobile manufacturers and countries are following suit, this is just going to be an electric-vehicle world going forward.”

Supply of lithium will remain tight this year through early 2018, Citigroup Inc. analysts said last month, as they raised their price estimate on lithium carbonate equivalent for next year by 24 percent $14,000 a ton.

In July, the U.K. said it will ban sales of diesel- and gasoline-fueled cars by 2040, two weeks after France announced a similar plan to reduce air pollution. Norway and the Netherlands are considering a more aggressive way to put an end to fossil-fuel cars years earlier than its European peers.

China’s decision to set a deadline for the shift away from fossil-fueled vehicles will add more pressure on long-term lithium supply, Simon Moores, managing director of industry consultant Benchmark Mineral Intelligence, said in an email.

The Asian nation can effectively produce 90,000 tons of lithium chemicals from spodumene concentrate supplied from Australia, enough for just over 2 million vehicles based on a 50 kilowatt per hour average battery pack, he said. China has 300 million registered vehicle users, Moores said.

“The ensuing boost in demand” for electric vehicles would benefit FMC and Albemarle Corp., the world’s largest supplier of lithium for electric batteries, Mike Harrison, a senior analyst at Seaport Global Securities LLC, said in a note Monday. Albemarle is Global X Lithium’s sixth-largest holding, according to the latest filing compiled by Bloomberg.


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