The lithium and battery metals ‘boom’ is three from four – at least, that’s what the data from the SelfWealth community in 2021 shows. 

Having first risen to prominence in 2018, only to be met by a ‘bust’ the following year, the lithium and battery metals segment of the ASX has built on last year’s strong showing. Throughout the course of 2021, SelfWealth members have been eager to chase or otherwise contribute to the roaring momentum in this sector.

Across the SelfWealth platform, no other segment of the market showed the same growth in interest as that seen among lithium and battery metals names. While volumes may not have pipped the big banks, nor the major iron ore miners and buy-now pay-later stocks for that matter, there is no denying the segment’s growth. Trade numbers soared even as a number of stocks from this corner of the market transitioned from small-cap players into mid-to-large-cap leaders in their field.

The tale of the story

One glance says it all, but the most sought-after and highly-traded stocks in this segment were also some of the strongest-performers. Among the top 20 lithium and battery metals stocks traded across the SelfWealth community in 2021, 16 of them have seen their share prices more than double throughout the year. Across the cohort, the average gain has been nearly 300%.

These 20 stocks were traded feverishly, with the combined value of shares swapping hands across the SelfWealth community reaching nearly $1.3 billion, up from $225 million in 2020. The top 5 (by value) have accounted for almost $700 million in trading activity.

Despite the overall ‘bullishness’ in this field, money-flow between buying and selling was closer than one might believe, with 53% of all shares traded by value being buy orders, and 47% being sell orders. 

However, across nearly 115,000 trades involving these stocks (vs ~24,000 in 2020), buy orders represented 64% of all trades, suggesting SelfWealth members have been more than happy to buy in small and take profits off the table once the value of their holdings increased – with many even keen to ‘buy the dip’.

What’s driven lithium and battery metals stocks in 2021?

Whereas the ‘bust’ of 2019 was fuelled by concerns around lithium oversupply that led to prices collapsing, the emergence of the electric vehicle revolution in 2020/21 has turned that equation on its head. 

From an estimated global demand for lithium carbonate equivalent of around 345,000 tonnes last year, forecasts suggest this could triple by 2025 and hit 2,000,000 tonnes by 2030, leaving the market in a significant deficit. 

Lithium prices have rallied strongly throughout the year, and the transition to electric vehicles – led by Tesla, but pursued by a number of other manufacturers – is accelerating, especially in markets such as China and Europe. What’s more, the broader acceleration of a digitised global economy, brought on by the pandemic, has lifted demand for lithium-ion in a number of other applications.

However, it hasn’t just been lithium front and centre. Although it is favoured for its high charge-to-weight ratio, other commodities integral to battery development have risen to the fore, including rare earths, graphite and nickel among others.

It’s also hard to look past the sheer momentum of investment options driving action in this field. There are more than 60 ASX-listed names leveraged directly to lithium, countless others offering exposure to battery metals, and an ever-growing number of ETFs tapping into the ESG and renewable energy thematics.

The highlights

As we turn to a few of the standout stories from this segment in 2021, there were a number of companies that had a busy year.

The most-traded lithium and battery metals stock by value in Pilbara Minerals (ASX: PLS) not only further progressed the restart of its Ngungaju plant, and boosted the resource size and production at its Pilgangoora plant, but it launched the Battery Material Exchange. Each of its spodumene concentrate auctions set record prices, bolstering industry sentiment. It also signed deals with the likes of POSCO to develop a downstream lithium hydroxide chemical facility in South Korea.

Meanwhile, the most-traded stock by orders filled was aspiring zero-carbon lithium producer Vulcan Energy Resources (ASX: VUL). Although it found itself the subject of a short report late in the year, it didn’t stop the ambitious company from signing a number of binding offtake agreements with automotive and chemical giants as it progresses a DFS now due in the second-half of next year.

The merger between Galaxy Resources and Orocobre led to a new large-cap player in Allkem (ASX: AKE), which as the world’s fifth-largest lithium chemicals company is about to take up a place in the ASX 100. In a sign of the emerging dominance of the battery metals industry, Allkem joins the likes of diversified players like Mineral Resources (ASX: MIN) and Wesfarmers-owned (ASX: WES) Kidman Resources.

Similarly, among the biggest names in this sector, Novonix (ASX: NVX) has transformed into a battery metals tech powerhouse in 2021, and will join the ASX 200 next week. The company’s position in the US market as a locally-sourced battery anode materials supplier has been instrumental, but it has been the electric vehicle revolution proving central to Novonix’s rise as regulations and mandates hasten the transition.

That same theme has underpinned the popularity of trading in rare earths miner Lynas (ASX: LYC), which has hit its operational straps and soared to a nine-year high as revenue records tumbled. SelfWealth members have reacted quickly in identifying the EV revolution as more than just a lithium trend, with Lynas a top-five favourite based on soaring demand for its specialised metals including neodymium and praseodymium (NdPr).

Elsewhere, AVZ Minerals (ASX: AVZ) hit all-time highs recently as it progresses to securing 90% of the funding required to build its monster Manono lithium project in the Democratic Republic of Congo. It claims Manono is the biggest undeveloped lithium deposit in the world, and the second-highest by grade with bottom-quartile production costs and emissions. AVZ has also signed binding sales agreements with Chinese lithium converter firms in 2021, while securing cornerstone investment support from Suzhou CATH Energy Technologies to the tune of US$400 million.

And not to be outdone, a number of players such as Liontown Resources (ASX: LTR), Lake Resources (ASX: LKE) and Core Lithium (ASX: CXO) emerged in this space to become favourites among SelfWealth members, buoyed by positive exploration results and studies, deal-flow and the fast-changing ESG landscape.