The electric vehicle (EV) revolution is underway, even with a changing of the guard in some of the top names, and at its heart lies lithium, the “white gold” powering the batteries that drive this transformation. This surge in demand has placed lithium mining companies firmly in the spotlight, making them attractive options for those seeking exposure to the future of energy.
Lithium’s vital role in the global shift to renewable energy means that projected growth figures for the industry are eye-watering. In 2020, the global lithium market was valued at $2.7bn. Just one year later, it had grown to $6.83bn, and further growth between 2022 and 2028 was expected to have a CAGR (compound annual growth rate) of 12.0%.
However, the lithium market is not without its volatility, with many of those in the sector having come down substantially from highs. For those looking at the lithium sector as one for the future, we have looked at three of the best players in the lithium mining sector: Albemarle Corporation (NYSE: ALB), Pilbara Minerals Limited (ASX: PLS), and Mineral Resources Limited (ASX: MIN), to get a feel for what is happening.
Why Invest in Lithium Stocks?
Whilst there is a futures market, investors looking to gain exposure to the lithium sector are largely limited to taking positions in mining stocks. Equities, in many respects, represent a more convenient way to invest in any metal than holding it in physical form. Equities on listed exchanges operate in markets that are overseen by regulators, and because of the volume of trades being booked, stock trading can be more cost-effective.
There will be many ways to catch the upside of the coming green energy revolution, but these are our idea of the three best lithium stocks to buy, established names in a sector that has room to run.
Albemarle Corporation (NYSE: ALB)
Albemarle Corporation, a global specialty chemicals giant, stands as the world’s largest lithium producer. Its established presence across lithium, bromine, and refining catalysts provides a diversified portfolio, offering a degree of stability compared to pure-play lithium miners.
Recent headwinds have impacted the firm, primarily driven by a decline in lithium prices, down over 85% from their peak in the past few years. This price correction has forced the company to undertake significant cost-cutting measures, including the shutdown of half its Western Australian lithium processing facility and a freeze on expansion plans, resulting in job losses.
This strategic shift outlines the company’s commitment to long-term competitiveness in the face of market adversity. Despite these challenges, Albemarle’s early 2024 earnings revealed pockets of strength, particularly within its Ketjen specialty chemicals unit, which achieved record annual revenue. CEO Kent Masters’ bullish projection of a tripling in lithium demand by 2030 offers a glimmer of hope, suggesting that current low prices are unsustainable and paving the way for future growth.
Albermale’s stock (ALB) is trading down ~10% since the start of the year, yet has rallied more than 50% off the low, indicating that a broader shift in sentiment may be on the horizon. The company’s diversified business model, cost-cutting initiatives, and its long-term outlook could be setting the stock up nicely for the second half of the year and beyond.
Pilbara Minerals Limited (ASX: PLS, PILBF)
Pilbara Minerals is an Australian mining company, focused exclusively on lithium production. Its flagship Pilgangoora Lithium-Tantalum Project in Western Australia positions it as a major player in the spodumene concentrate market.
Unlike Albemarle’s diversified approach, Pilbara Minerals’ fortunes are directly tied to the fluctuations in lithium prices and the global demand for EV components. The company has been actively expanding its operations, with the completion of the P1000 expansion at Pilgangoora in January this year aimed at boosting spodumene production to 1 million metric tons per year.
Furthermore, Pilbara Minerals’ partnership with POSCO resulted in the launch of South Korea’s first lithium hydroxide processing plant in late 2024, a significant step towards enhancing its downstream processing capabilities.
These expansion efforts and strategic partnerships could set the firm up well to increase production capacity and diversify its revenue streams for upcoming periods.
Pilbara Minerals’ stock (ASX:PLS) has dropped ~20% since the start of the year, yet has seen the price rally more than 55% since the start of June. The company’s ‘pure-play’ lithium focus makes it more exposed to price volatility but could also offer outsized potential upside if lithium demand rally’s. Whilst this is a name that trades primarily on the Australian Stock Exchange, you could also gain exposure via ticker PILBF on the U.S OTC market.
Mineral Resources Limited (ASX: MIN)
Mineral Resources Limited, another Australian mining powerhouse, operates a diversified business model encompassing iron ore, lithium, and mining services. This diversification provides a buffer against the cyclical nature of the lithium market. However, like its peers, Mineral Resources has also been adapting its operations in response to the recent downturn in lithium prices.
The company decided to scale back operations at the Mount Marion lithium project due to low demand, targeting lower spodumene production for the financial year 2025.
Furthermore, Mineral Resources and Albemarle revised their MARBL Joint Venture, with Mineral Resources increasing its share of the Wodgina lithium mine to 50% and assuming operational control, while Albemarle took full ownership of the Kemerton lithium hydroxide plant. This strategic realignment underscores the dynamic nature of the lithium market and the importance of adapting to changing market conditions.
Mineral Resources’ diversified revenue streams and its strategic partnerships offer a more balanced investment profile compared to Pilbara Minerals. However, its involvement in iron ore mining also exposes it to fluctuations in the iron ore market, which warrants consideration.
MinRes’ share price (ASX:MIN) has fallen 13% since the start of the year, yet has more than doubled off the lows seen in April. There is volatility in this one on multiple fronts, so careful risk management is required.
Side-by-Side Comparison
| Feature | Albemarle (NYSE: ALB) | Pilbara Minerals (ASX: PLS) | Mineral Resources (ASX: MIN) |
|---|---|---|---|
| Business Model | Diversified (Lithium, Bromine, Catalysts) | Pure-Play Lithium | Diversified (Iron Ore, Lithium, Mining Services) |
| Market Cap | Generally Larger | Mid-Cap | Large Cap |
| Lithium Exposure | Significant, but not sole revenue driver | Sole Revenue Driver | Significant, but not sole revenue driver |
| Recent Strategy | Cost-Cutting, Production Adjustments | Expansion, Downstream Processing | Production Adjustments, JV Realignment |
When evaluating stocks in the lithium sector, you would be wise to consider the underlying price of the mined commodity, aswell as each company’s operational efficiency.
The future trajectory of lithium prices will significantly impact the profitability of all three companies. Supply and demand dynamics, technological advancements in battery chemistry, and government policies related to EVs are all likely to have an impact on each of the company’s, with outsized impacts based on the proportion of the business that applies to lithium.
Separating names in the sector could also be done by looking at the various costs they have to mine a fixed unit, and evaluating the relative efficiency. The ability of each company to efficiently extract and process lithium will be crucial for maintaining profitability in a competitive market.
