By Tayo Olayinka
Lithium is a key element in the clean energy transition, mainly because it is used in electric vehicle (EV) batteries. And talking about electric vehicles will not make any difference because almost everyone now wants to own an electric vehicle. So, why not something more precious related to electric cars?
And you will be wondering, what is that? Well, an investment in lithium batteries that drive the EVs on roads. However, many Canadians wonder: Is lithium a good investment? Absolutely. This is because lithium in Canada has government support and abundant lithium resources. With Quebec positioning itself as a major player in the lithium supply chain, including mining and battery production, the long-term outlook for lithium remains strong.
The ongoing demand for EVs and energy storage solutions supports long-term growth. At the same time, companies such as Lithium Americas Corp. (TSX:LAC), Sigma Lithium Corp. (TSXV:SGML) and Standard Lithium Ltd. (TSXV:SLI) are key players in the Canadian market. However, you should consider price volatility and the risks that could affect lithium prices. Let’s discuss more on whether lithium is a worthwhile investment.
The demand of lithium
The markets are always about supply and demand, no matter the nature of the market. If there’s no demand, no one ever cares about the supply. Fortunately, the demand for lithium is enormous, and the icing on the cake is that Canada is also blessed with natural lithium resources. So, is lithium a safe investment? Well, it certainly is. Let’s discuss that in the global scenario.
Global demand for lithium
Global lithium demand has skyrocketed in recent years because of the rise of electric vehicles (EVs) and renewable energy storage solutions. By 2030, lithium consumption is projected to exceed 3 million tonnes, a significant jump from the 500,000 tonnes consumed in 2021. This surge is driven by the increasing need for lithium-ion batteries, especially in the EV market, which could account for up to 90 per cent of passenger car sales in certain regions by the decade’s end.
Major uses of lithium
Lithium is pivotal in multiple industries, with approximately 60 per cent of its current supply used for battery production. By 2030, this number is expected to reach 95 per cent as demand for lithium-ion batteries expands for electric vehicles, smartphones and other electronics. In addition to batteries, lithium is also important for the aerospace and medical sectors, where it’s used in ceramic glass and medical devices.
Why invest in lithium?
Lithium is a critical element of greener technologies, especially as the demand for electric vehicles grows. As a Canadian investor, the time is ripe to capitalize on the global shift towards clean energy. Before discussing if lithium is a good investment in Canada, let’s discuss why you should invest in lithium in the first place.
Growing demand and Canada
The demand for electric vehicles continues to accelerate globally, driving the need for lithium-ion batteries. According to the International Energy Agency (IEA), almost 14 million new EVs were registered globally in 2023. Additionally, Canada is targeting 100 per cent zero-emission vehicle (ZEV) sales by 2035, emphasizing lithium’s critical role in the near future.
Moreover, lithium demand is projected to quadruple by 2030 as it is also used in energy storage solutions beyond EVs. Renewable energy sources, such as solar and wind, require efficient storage systems for surplus power, and lithium-ion batteries are essential for this purpose.
Canada in the lithium market
Canada is rich in lithium resources and is also investing in lithium extraction technology. Quebec’s Nemaska Lithium and Vancouver-based Sigma Lithium are key companies developing lithium mining projects. Nemaska Lithium plans to build a battery-grade lithium refinery in Quebec to grow a homegrown lithium battery industry. Likewise, Vale Canada is developing its nickel supply capacity for the EV sector.
In addition to traditional mining, Canada is leading the way in innovative lithium extraction technologies. Alberta-based E3 Lithium (TSXV:ETL) recently launched its direct lithium extraction (DLE) facility. The Canadian government also invested $27 million in E3 Lithium to advance its EV battery production.
Potential long-term benefits
The long-term benefits of lithium investments are tied to the rapid expansion of the electric vehicle market, particularly in North America and Europe. Because of constrained supply and high demand, lithium prices are projected to remain high, and investors should expect strong returns.
This is an excellent opportunity to tap into a growing market, especially with Canada’s rich lithium reserves and commitment to green technologies. However, some risks are associated with lithium investments as well. The development of alternative battery technologies, such as solid-state batteries that require less lithium, could reduce future demand.
Future outlook for lithium investment in Canada
The future outlook for investment in lithium appears promising because of the increasing demand for electric vehicles and the country’s rich lithium resources. Many Canadian lithium producers are actively expanding their operations, with companies such as E3 Lithium advancing innovative extraction technologies like DLE from brines in Alberta.
In 2024, E3 Lithium expects to finalize its pre-feasibility study and make significant progress towards developing Canada’s first commercial lithium production facility. Lithium stocks have also performed well on Canadian exchanges, with companies such as Q2 Metals Corp. (TSXV:QTWO) and Volt Lithium Corp. (TSXV:VLT) seeing significant growth.
Canadian lithium exploration efforts, particularly in regions such as Quebec and Alberta, are already making inroads. So, if you are wondering is E3 lithium a good investment? It is because of its DLE extraction work and Canada’s government investment.
Conclusion
Investing in lithium in Canada offers significant opportunities as the global demand for electric vehicles and clean energy solutions continues to surge. The country’s wealth of natural lithium resources and government support for the green transition position Canada as a major player in the lithium market.
While lithium stocks and ETFs remain popular, potential risks such as price volatility must be considered. That said, with a continued focus on sustainability and Canada expanding its role in the global lithium supply chain, this sector remains an attractive long-term investment opportunity. So, if you were wondering initially, is lithium a good investment? You now have plenty of information to decide on investment in lithium.
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(Top photo: Adobe Stock)
