Lithium ETF: Anticipating the Switch to Electric Cars

| About: Global X (LIT)

In a world of scarce resources, we can’t rely on fossil fuels to power us into the future. Our focus is shifting toward green technology such as electric/hybrid cars, which bodes well for the Global X Lithium ETF.

Last year, the Chevrolet Volt and the Nissan Leaf, two of the first plug-in hybrid and electric vehicles, came out into the marketplace, reports Frank Yu for TheEpochTimes.

Market research firm IDC Energy Insights believes that around 2.7 million electric vehicles will be zipping around by 2015. This prospect could potentially be rewarding for those betting on a long play for lithium, which is a major component for the electric battery tech along with solar power and portable electronics.

Investors may play the lithium market through the Global X Lithium (NYSEArca: LIT) ETF. The fund is an equities-based ETF exposed to lithium producers and battery makers companies.

Some of the fund’s top holdings have been doing decently, too:

  • Despite a fourth-quarter loss due to higher restructuring charges, FMC Corp. (NYSE: FMC) experienced better-than-expected 12% revenue growth on greater sales across all major product lines and higher numbers from the Americas and Asia, report John Kell and Lee Roberts for The Wall Street Journal. FMC is is the second-largest holding in LIT, with 16.4% of the assets.
  • Avalon Rare Metals Inc. (NYSE: AVL) is invested in mining operations of a well diversified set of rare earths, writes Michael Filloon for SeekingAlpha. The company has invested $27 million in the Canadian Avalon’s Thor Lake deposit at Nechalacho, and by its 2012 completion, the large reserve will yield 20% to 28% heavy earths. AVL is 9.1% of LIT.
  • Rockwood (NYSE: ROC) has the industry’s top EBITDA margins and is in a good position to capitalize on lithium demand for electric cars, according to Benzinga. However, Rockwood doesn’t not believe business will skyrocket this year, but the company is focusing on growth and positioning itself for the lithium rush. ROC is 6.3% of LIT.

Lithium’s future looks to be all LIT up (pun likely intended).

Max Chen contributed to this article.

Disclosure: None