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How To Play The Surge In Lithium Demand?

After the market closed yesterday, EV maker Rivian (RIVN) released earnings that seemed to confuse the market more than anything. The stock dropped, then jumped, then dropped again as traders digested the news. The company is struggling with supply issues, as are so many companies right now but, when all is said and done, what is important is that Rivian has massive orders for both passenger and commercial vehicles. That, and the continuing push towards EVs from mainstream auto manufacturers, and continued sales growth by Tesla (TSLA), means that demand for lithium, which has already been growing, will surge even further.

That doesn’t mean, however, that every company involved with the commodity is a buy. As Rivian themselves have found out over the last couple of quarters, demand is one thing, but fulfilling orders is something else entirely. For lithium suppliers, access to reserves and a proven ability to extract at a good clip are the keys to long-term potential, which narrows the field to a few established, already profitable names.

Stocks like Lithium America (LAC) are popular with some, but the fact that they haven’t had a profitable quarter since 2019, during which time lithium demand has grown exponentially, puts me off, as does the fact that they still have negative cash flow.

A slightly better choice may be a stock that I have used as a proxy for the industry in the past, Livent Corporation (LTHM). They have been profitable for over a year now,…

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Martin Tillier

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