Lithium-themed ETFs touched 52-week highs last week, prompting questions on if the rally is driven more by political tailwinds than commodity fundamentals.
LIT is approaching key resistance levels. See the full breakdown here.
On Friday, Sept. 26, the Themes Lithium & Battery Metal Miners ETF (BATS: LIMI), Sprott Lithium Miners ETF (NASDAQ: LITP), ProShares S&P Global Core Battery Metals ETF (NYSE: ION), and the flagship Global X Lithium & Battery Tech ETF (NYSE: LIT) all reached new yearly highs. This came after reports that the Trump administration wants to take up to a 10% stake in Lithium Americas’ Thacker Pass project, a Nevada mine that will be North America’s largest source of lithium by 2028.
For investors in ETFs, the news strengthened faith that Washington is serious about supporting key minerals, a theme which has attracted consistent inflows into battery-metal funds so far this year. Policy support is being priced into these ETFs, regardless of the near-term supply picture.
That supply picture remains the sticking point. Battery-grade lithium carbonate prices, which soared to records in 2022 on EV optimism, have since fallen sharply. Analysts say oversupply, particularly from China, continues to weigh on the market, as reported by Reuters.
John Berman, CIO and founder of Berman Capital Group, said the market for lithium is still meaningfully oversupplied and probably will be for the near future, according to U.S. News. This temporary bump in miner stocks and ETFs is possibly short-lived.
Which leaves ETF investors with a choice:
Near-term: Funds such as LIT and ION might continue to climb should political backing get stronger and high-profile developments such as Thacker Pass gain traction.
Long term: Sustainable returns rely on whether the world supply tightens and lithium prices stabilize, neither of which appears to be on the horizon.
That is, lithium ETFs are rallying more on policy wagers than price recovery. Whether that’s a sustained jolt or a short-circuit will depend on how soon fundamentals close the gap with investor excitement.
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