The future of electric vehicles has led several investors to view lithium as the hot new commodity.
Governments and car manufacturers alike have taken steps to electrify fleets and further phase out the combustion engine. In turn, a number of traders now believe lithium to be a high-return investment as demand soars.
This is no surprise; lithium is a vital component to lithium-ion batteries. These rechargeable batteries are used in devices as common as smartphones and laptops. They have increasingly become popular with electric car manufacturers due to being able to produce more electricity per unit than conventional batteries.
“Any consumer behavior is going toward electric vehicles so the market is forced to come with them,” Brian Paes-Braga, CEO of Lithium X, told CNBC via phone call last month. “I’m absolutely a believer in electric vehicles.”
But trading lithium is no easy task.
“There’s very few ways to play the space. You’ve got to provide investors with the opportunity to play this revolution that’s happening in the transportation business and energy business,” Paes-Braga said.
Traders can buy the physical metal but there is not yet a single lithium commodities exchange in existence.
One alternative is to bet on a fund that tracks a basket of lithium producers and battery tech manufacturers. The Global X Lithium & Battery Tech ETF (LIT) has climbed at least 50 percent in the last 12 months.
“It’s not exactly a lithium ETF (exchange traded fund). It’s an ETF of companies that have exposure to lithium, and it includes both producers and consumers of lithium,” Jeffrey Christian, managing director at CPM Group, told CNBC via phone call last month.
But now analysts believe there could be an alternative to investing in lithium, one that would allow traders to make hedge investments to reduce risk, or bet on possible movements in the price of the commodity.