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Why Standard Lithium Got Charged Up With a 16% Gain This Week

By Rich Duprey – Oct 29, 2021 at 11:02AM

Key Points

  • Lithium company stocks in general are rising on the prospect of higher prices and tighter supplies of the metal.
  • The electric vehicle market could be near a tipping point that will greatly enhance the value of Standard Lithium and its peers.

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There may be unstoppable forces converging that will push this lithium miner to even greater heights.

What happened

Shares of Standard Lithium (SLI -2.12%) have soared by 16% since last Friday's close, according to data provided by S&P Global Market Intelligence. No news has come out that specifically concerns the lithium miner, but there has been some positive news for its industry -- or at least, for domestic producers.

Analysts have become increasingly bullish about the sector, and that's helped lift Standard Lithium.

Miner holding a silver-colored nugget

Image source: Getty Images.

So what

A boom era in lithium is coming, and pricing for the metal is already at all-time highs due to demand exceeding its tight supply.

In July, a Bank of America research report asserted that the electric vehicle industry was in danger of running into a "sold out" situation for lithium-ion batteries as early as 2025, with shortages intensifying between 2026 and 2030.

Lithium-based batteries are also used to store excess energy generated by wind turbines and solar panels for later use. President Biden's multitrillion-dollar infrastructure package would include billions of dollars to finance such green energy projects.

The U.S. has some of the planet's largest reserves of lithium, but currently, it produces less than 2% of the world's total supply, with most of that coming from the Silver Peak mine in Nevada. Most lithium used in the U.S. comes from Latin America and Australia, while China has a virtual lock on lithium-ion EV battery production.

A massive lithium deposit was just discovered in Maine this week, with a potential value of $1.5 billion. But the unusually restrictive mining law that state implemented in 2017 may make exploiting the find impossible.

Lithium on the period table

Image source: Getty Images.

Now what

Standard Lithium is not actually engaging in any commercial production of lithium yet, but is poised to reap the benefits of doing so. It has a partnership deal with Lanxess that will soon see it extracting lithium from the brine produced as a byproduct by the German chemicals giant's bromine facilities in Arkansas. It also has a partnership with Tetra Technologies (TTI -1.51%) to extract lithium from the brine that Tetra produces, and that project recently hit an important milestone.

The market has started to get behind lithium stocks again, just as it did back in the 2015-to-2017 period. But now, the electric vehicle market is close to hitting critical mass, so perhaps this surge in lithium miners' shares might not be followed -- as that last one was -- by prices cratering.

Rich Duprey has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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