Lithium stocks to consider in 2022

Lithium stocks to consider in 2022
Learn how to trade lithium stocks and check out some of the 10 most popular lithium stocks to watch.
George Sweeney
August 31, 2022

There’s a new raw material charging into the spotlight, and its name is lithium. With an increasing number of use cases for this chemical element, plenty of lithium stocks, specifically lithium battery stocks and lithium mining stocks have been attracting a lot of attention. 

UK investors looking to buy the best lithium stocks on the market need to be aware of a few things. It’s important not to dive into the lithium industry or a particular lithium company without carrying out proper research first. Especially if your interest in lithium investments is based upon excitement stemming from the world’s richest person, ahem Elon Musk. 

Investing in lithium

Lithium in one form or another is used in plenty of industries like consumer electronics, medicine, the naming of Nirvana songs and even pyrotechnics.

Lately, the increasing use of rechargeable lithium-ion batteries in things like mobile phones, laptops, and electric vehicles (EVs) has created a growing market for the material. 

To meet the growing demand, the lithium industry has expanded over recent years. This growth has resulted in an increasing number of lithium stocks and lithium battery stocks available as a result. Also, some traditional mining stocks have been switching at least some of their attention over to lithium too. 

But before you go ahead and buy lithium stocks, it’s best to get some context to give you the full picture of the lithium market. 

What is lithium?

Lithium is a chemical element, you may remember it from your periodic table studies back in chemistry class.

For a quick overview that doesn’t require a textbook, it’s an alkali metal that’s actually quite unstable in its pure form. 

Yet, its makeup and properties also make it extremely useful. Without getting too nerdy, alkali metals are able to give up electrons. Being a light alkali metal with a low density means lithium has the capacity to store and conduct energy efficiently. 

This is why the lithium battery is like the teacher’s pet, favoured above other material candidates. Perhaps most importantly, you get the most bang for your buck when it comes to storing energy in lithium-ion batteries.

Who are the biggest producers?

The main countries where the bulk of lithium mining stocks operate are:

  1. China
  2. Australia
  3. Chile

These three countries are the largest lithium producers and account for roughly 86% of total lithium production across the globe, according to BP’s ‘Statistical Review of World Energy, 2021’.

What is lithium used for?

Although lithium-ion batteries are the use-case catching the limelight, lithium is no one-trick pony. The material is used across a range of industries, including:

  1. Medicine 
  2. Metallurgy
  3. Air purification
  4. Military rocket propellants
  5. Nuclear fusion and weapons
  6. Electric vehicles (EVs) and consumer electronics

Why is lithium important?

Lithium is important because it’s a material in limited supply. Not just on our planet but across the whole known universe.

The rarity of lithium, combined with its increasing popularity as a vital part of battery production, means that it’s essential to the continued development of the electric vehicle market and other sectors. 

The demand for products linked to lithium is leading to a growing number of lithium stocks, even in countries without much supply at home.

The varied uses for the material mean that there are plenty of US and UK lithium stocks cropping up more frequently to explore and refine reserves found abroad. This international exploration is needed in large part because the US only has a small native supply of lithium, and the UK’s reserves are non-existent.

Lithium mining companies to buy

Before you make the decision to buy lithium stocks, make sure you have a well-rounded understanding of the lithium market and the lithium industry.

The mining and production of raw materials come with some unique challenges. For instance, with the bulk of lithium reserves being located in just three countries, there is an added possibility of geopolitical risks that you may not have with other stocks.

So, when looking for the best lithium stocks or lithium-ion battery stocks, make sure you’re fully aware of the risks involved before you decide to invest.

Are these the top 10 lithium mining stocks to buy?

When you’re looking to buy lithium stocks and searching for the best lithium stocks on the market, it’s important to remember that there is no guaranteed way to find the top shares.

But, to help guide your research, we’re going to reveal some of the most-bought lithium mining stocks on the Freetrade app. Being popular doesn’t necessarily make them the best lithium stocks to buy, yet it does give you some insight into the lithium stocks other UK investors are buying.

So, without further ado, these were some of the most popular international and UK lithium stocks trading on the platform last year:

10 lithium stocks on Freetrade

Company Ticker Description
Rio Tinto RIO A UK lithium mining stock that also mines and processes other mineral resources such as iron ore and diamonds.
Kodal Minerals KOD A lithium exploration company with the bulk of focus on its development of the Bougouni Lithium Project in Southern Mali.
Lithium Americas LAC A US-based lithium stock working on projects in both North and South America, searching for lithium deposits. The LAC share price has been volatile over the last year, something to be expected for a mining stock.
Zinnwald Lithium ZNWD A mineral explorer from Ireland and Sweden with a focus on supplying lithium products for electric vehicles and energy storage.
Albermarle ALB A miner and chemical producer that creates specialised lithium products used by the likes of Panasonic for batteries.
Romeo Power RMO A US lithium stock that designs, engineers, and produces lithium-ion batteries for EVs.
Cadence Minerals KDNC Another lithium stock UK investors can find on AIM. It’s engaged in the discovery and development of lithium deposits.
Atlantic Lithium ALL An Australia-based lithium mining stock operating mainly in Australia and Africa looking for a diverse range of minerals.
European Metals EMH This lithium mining stock is dual-listed in Australia and the UK, but the bulk of its physical operations are located in the Czech Republic.
Piedmont Lithium PLL This is a lithium company that puts all its efforts into the development of its Piedmont Lithium Project in North Carolina.

Source: Freetrade 2021.

How to invest in lithium

Even though lithium in some forms is technically a commodity, you can’t buy and trade lithium by itself.

Being a relatively unstable material, it’s not something you’d want to physically store and keep hold of either. 

So, your best bet for investing in lithium is to explore various types of lithium stocks. This gives you plenty of options to choose from, including:

  1. Direct lithium stocks
  2. Lithium mining companies
  3. UK lithium stocks and ETFs
  4. Lithium battery stocks
  5. Hedge funds or investment trusts with large lithium investments
  6. Electric vehicle battery producers

The most important thing is to find lithium stocks that fit in with your overall investing strategy, sitting comfortably within your appetite for risk. 

How to buy lithium stocks

Once you’ve considered the investment risks and weighed them up against the potential benefits of investing in lithium stocks, here’s a straightforward step-by-step guide explaining how to invest:

  1. Compare brokerage accounts to decide which one best suits your investing platform needs.
  2. Open a stocks and shares investment account with your broker of choice. You might want to factor in tax efficiencies here. Think about whether a GIA, stocks and shares ISA or SIPP could help. Once you’ve decided, make your first deposit.
  3. Research the type of lithium company you want to invest in - ie lithium battery stocks, US or UK lithium stocks, lithium mining stocks, or an ETF focused on the lithium market.
  4. Make sure the stock fits in with your overall investment strategy in a diversified portfolio, and that the rest of your finances are in a healthy position.
  5. Select how much of the stock you’d like to invest in. You can buy fractional shares on the Freetrade app for US shares. So you don’t have to purchase a full share if it's outside of your budget. Or, if you’d just like to start with a smaller investment, you can begin with a fractional share and then build up your position gradually. 

For some more guidance, you can read our in-depth guide on how to invest in stocks. Whichever way you decide to invest in lithium stocks, make sure that you only use lithium investments to play a part in your diversified portfolio. 

As an investor, it’s extremely difficult to consistently pick investments that will succeed in the long run. This is especially true for volatile commodity-focused sectors like the lithium industry. Many lithium stocks are reliant on the performance of a single mine, or on accessing natural resources and minerals based in another country. This comes with added risks and potential obstacles that other stocks may not face.

Lithium stocks to watch in 2022

Along with all the popular lithium stocks mentioned above, there are plenty of other lithium mining stocks and lithium battery stocks you can explore for yourself.

Just make sure when you’re researching, that you find the right investment you’re looking for. Sometimes, even the names of companies can lead you in the wrong direction.

For example, if you’re hoping to dig into the Cornish Lithium share price, it’s important to double-check you’re not mixing it up with Cornish Metals, a completely different company. 

Are lithium stocks overvalued?

The difficult thing about valuations is that for the most part, they are subjective.

You can’t really look at the whole lithium market and claim with certainty whether it’s overvalued or undervalued. 

In reality, you’d need to dig into each lithium company individually. And even then, the valuation of individual lithium stocks may be interpreted differently depending on your point of view. 

Make sure you read our guide if you’d like to find out more about how to value stocks. Just keep in mind that it’s not an exact science and unexpected things can still happen which could very well be impossible to factor into your lithium stock valuations.

Why are lithium stocks down?

Most lithium stocks are tied in one way or another to sectors like tech stocks, EV stocks, and green transformation companies. 

These are all areas that have witnessed a significant downtrend in recent times and this tends to have a knock-on effect. 

Higher interest rates combined with supply chain issues alongside rising costs and inflation is creating a tough immediate landscape for even the best lithium stocks. 

With wider economic pressures set to continue in the UK and abroad, it may take a while before lithium battery stocks and lithium mining stocks pick up the pace and return to past highs. 

But, like with all stocks and shares, this is why a long-term investing plan and mindset is so important. Good stocks will outperform in the long-run, and should be able to weather turbulent times here and there - all of which are to be expected with market fluctuations. 

Lithium IPOs for 2022

Initial public offerings (IPOs) don’t operate on a strict schedule, so it’s difficult to anticipate the exact date for any particular IPO of a lithium company. 

But, for a helping hand to keep up to date with the latest IPOs for lithium and other stocks, we’ve got a calendar for upcoming IPOs as well as a list of the top 10 IPOs to watch in 2022. Those resources will keep you in the loop so that you can be the first to know about any UK lithium stocks about to go public. You’ll also be able to keep your finger on the pulse when it comes to IPO news surrounding lithium mining stocks or lithium battery stocks from the US listing on the stock market. 

Just remember that if you plan to buy lithium stocks soon after an IPO, lithium share prices can be volatile. This isn’t something unique to lithium companies, even the best stocks tend to have a turbulent time right after an IPO because stock market investors are trying to decide on a fair price for the shares.

What are some lithium ETFs? 

Outside of investing directly in lithium stocks, you may also want to consider looking at an ETF (exchange-traded fund). 

Sometimes considered one of the best investments for beginners, using a lithium ETF can allow you to invest in a combination of lithium battery stocks, lithium mining stocks, UK lithium stocks, or international lithium shares.

One example of a popular ETF from the Freetrade platform that tracks part of the lithium market is the WisdomTree Battery Solutions UCITS ETF - USD Acc (CHRG). This lithium ETF includes the likes of Ganfeng Lithium and Solid Power (SLDP).

Unlike a hedge fund or other style of human-led pooled investment vehicle, ETFs tend to have lower fees if they’re passively managed. The main benefit of an ETF is diversification, but there will usually still be added investment costs to think about. And, it's still important to make sure you check the underlying holdings in an ETF containing lithium stocks. 

While a range of lithium stocks might give you diversification within the industry, remember that any big global influences on the lithium market are likely to affect every firm within that ETF. It’s an important point to recognise, so we don’t fall into the trap of assuming all ETFs automatically diversify all types of risk.

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Important Information

This should not be read as personal investment advice and individual investors should make their own decisions or seek independent advice.

When you invest, your capital is at risk. The value of your portfolio, and any income you receive, can go down as well as up and you may get back less than you invest. Past performance is not a reliable indicator of future results.

Eligibility to invest into an ISA and the value of tax savings depends on personal circumstances and all tax rules may change.

Freetrade is a trading name of Freetrade Limited, which is a member firm of the London Stock Exchange and is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales (no. 09797821).

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