There was a recent major development that many investors have almost completely ignored: the U.S. government is getting into the domestic mining and battery industries, asserts Tony Daltorio, editor of Market Mavens.
As part of the Inflation Reduction Act (IRA), the Department of Energy handed several companies big lumps of cash in mid-October, ranging from $50 million to $316 million, adding up to almost $3 billion in total investment.
The key component for the current generation of EV batteries is lithium. China's existing expertise and production capacity mean it will comfortably remain the top dog for years to come.
As the electric vehicle market grows, other countries will need to increase their self-reliance due to the race for raw materials and the potential for geopolitics leading to export and import routes being closed off. That's why the IRA legislation was so important.
And make no mistake: a lot of lithium will be needed if the EV industry is to really take off. Benchmark Minerals says that by 2040, the industry will need to produce more lithium in a month than was mined in all of 2021!
I prefer to invest in a major lithium producer that is a member of the S&P 500 — Albermarle (ALB). The company is a global manufacturer of highly engineered specialty chemicals for a wide range of markets.
It became the world's largest lithium producer through its January 2015 acquisition of Rockwood Holdings. Its other leading products are bromine (second biggest global producer) — which is used in fire safety solutions — and the catalysts used in oil refining.
Lithium, though, generates the majority of total profits. Albermarle produces the metal through its own salt brine assets in Chile and the United States, as well as two joint venture interests in Australian mines: Talison and Wodgina.
Albermarle's Chilean operation is among the world's lowest-cost sources of lithium. And the Australian Talison site, in which the company has a 49% interest, is one of the best spodumene resources in the world. This allows Albemarle to be one of the lowest-cost lithium hydroxide producers, as spodumene (lithium hard rock concentrate) can be converted directly into lithium hydroxide.
Albermarle got a nice $150 million grant from the U.S. Department of Energy as part of the first set of projects funded by the IRA legislation. The grant funding is intended to support a portion of the anticipated cost to construct a new, commercial-scale, U.S.-based lithium concentrator facility at Albemarle's Kings Mountain, North Carolina site.
For long-term investors looking to invest in the lithium industry, Albemarle, which owns two of the best resources in the world, is a great choice. The stock is a buy anywhere around the $300 per share level.