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What are ASX lithium shares?
Shares in ASX-listed companies involved in lithium exploration, mining, or processing are known as ASX lithium stocks.
Lithium is a valuable commodity with uses in everything from medications to batteries. It is a key ingredient in lithium-ion batteries, the lightweight, rechargeable batteries that power laptops, phones, electric vehicles (EVs), and other digital devices.
Lithium is attractive for industrial applications because it has the highest electrochemical potential among all the metals.
The lightest known metal, lithium may become scarce as demand increases. Global demand is expected to more than double between 2025 and 2030,1 with supply security becoming a top priority for ASX technology companies.
The world's largest known lithium deposits are in Australia, Chile, China, and Argentina. Australia is the world's biggest producer and exporter of lithium.2
Lithium is produced by mining lithium-containing rock or extracting lithium salts from underground brine reservoirs. Extraction requires a variety of processes and the use of speciality chemicals.
Why invest in them?
As lithium price momentum continues, investment in ASX lithium shares has gone from strength to strength. Demand for the battery metal remains strong, driven by the shift to clean energy and EVs.
ASX lithium stocks have benefitted from this continued high demand, which has provided tailwinds to share prices. It is not just EVs that are powered by lithium. Lithium batteries are used to power portable devices such as computers and smartphones, too.
Investors wanting exposure to this sector can invest in lithium mining stocks, which are shares in companies involved in the mining of lithium, and lithium battery stocks, being the companies that develop the batteries.
Top lithium stocks on the ASX
There are 64 ASX-listed lithium shares in the materials sector, ranging from diversified miners and explorers to pure-play producers and companies that rely on lithium as a raw material.
Here are the top three based on market capitalisation from high to low.
| Company | Description |
| Rio Tinto Ltd (ASX: RIO) | A mining and metals company that produces lithium in the United States and has plans for a new lithium project in Serbia |
| Mineral Resources Ltd (ASX: MIN) | Owns a portfolio of mining operations across lithium and iron ore, with two hard rock lithium mines in Western Australia |
| Pilbara Minerals Ltd (ASX: PLS) | Strategic metals producer that owns the Pilgangoora lithium-tantalite project in the Pilbara region of Western Australia |
Rio Tinto
Rio Tinto is a giant of the Australian resources sector, producing raw materials including copper, iron ore, aluminium, and industrial minerals. The company sources battery-grade lithium from mining waste rock at operations in California. A breakthrough lithium production process is used that involves separating lithium from rock that has already been mined. The California plant has an initial capacity of 5,000 tonnes per year of lithium – enough to make batteries for approximately 70,000 EVs.
In early 2022, Rio Tinto completed its acquisition of the Rincon lithium project in Argentina. Rincon is a large undeveloped lithium brine project capable of producing battery-grade lithium carbonate. CEO Jakon Stausholm said the Rincon acquisition positioned Rio Tinto "to meet the double-digit growth in demand for lithium over the next decade".
Rio Tinto also has plans for a new project in Serbia, which would become one of the world's largest greenfield lithium projects. The company is exploring options to secure the necessary government permits. Rio Tinto believes market fundamentals for battery-grade lithium carbonate are strong. Demand is forecast to grow 25%–35% per annum over the next decade, with a significant supply deficit expected in the second half of the decade.
Mineral Resources
Mineral Resources has two hard rock lithium mines in Western Australia. Operations are based out of Mt Marion in the Goldfields, and Wodgina, in the Pilbara region.
Spodumene is considered the most important lithium ore mineral. The Mt Marion mine was initially designed to produce 206,000 tonnes of spodumene concentrate per annum. An upgrade is underway to increase production to 600,000 tonnes per annum.
Wodgina is one of the world's largest hard rock lithium deposits. Mineral Resources is also upgrading operations at Wodgina to produce 750,000 tonnes of spodumene concentrate per annum.
Mineral Resources is focused on significantly expanding its spodumene supply to capitalise on continued growth in the global EV market.
Pilbara Minerals
A pure-play lithium company, Pilbara Minerals owns the world's largest independent hard rock lithium operation. The Pilgangoora Operation produces spodumene and tantalite concentrate in Western Australia's Pilbara region.
The company is pursuing a diversification strategy to become a sustainable, fully-integrated lithium producer and supplier. This will position Pilbara Minerals as a significant player in the growing lithium supply chain.
What might the future hold for Australia's lithium industry?
The price of lithium carbonate more than quadrupled in 2021, hitting all-time highs thanks to heavy demand from the automotive sector. Since then, prices have held steady as EV demand has jumped and supply tightness has increased. The ASX lithium sector has benefitted from increasing global demand for the metal.
But lithium prices can be volatile. As demand increases, new mines can open, increasing supply and putting the brakes on price increases. Analysts expect lithium prices to begin to soften from the second half of 2023 as supply starts to catch up with demand.
Like most commodity-linked stocks, lithium share prices tend to fluctuate based on the market price of lithium.
Soaring demand for lithium does not necessarily equate to higher prices and profits for lithium companies. If supply outpaces demand, lithium prices will fall, and getting new lithium projects up and running can be costly.
Diversification is key to ameliorating these ups and downs.
Pros of investing in ASX lithium shares
Sustainability contribution: The metal extracted by lithium miners can be used for sustainable purposes, with lithium used to power EVs, wind turbines, and smart electric grids, all of which can reduce emissions.
Diversification: An investment in lithium can serve to diversify your portfolio by providing exposure to a different sector of the market. The key with diversification is to ensure your money is spread across a range of different investments whose performance is not directly correlated.
And the cons?
Geopolitical risks: Lithium producers operating in different jurisdictions face risks in the form of local laws, which may be unpredictable and which are beyond investors' control.
Environmental concerns: Lithium mining has a large environmental footprint. Mining lithium, like mining most metals, is a fairly dirty business. Nonetheless, the industry is advancing its sustainability efforts towards cleaner and safer operations.
Are ASX lithium shares a good investment?
Whether ASX lithium shares are a good investment for you will depend on your investment goals and financial situation. Lithium is a valuable commodity due to its wide range of applications and projected increase in demand from EV manufacturers. Nonetheless, before investing in lithium stocks you should conduct thorough research and ensure the investment aligns with your goals, timeframe, and tolerance for risk.
A lithium-focused exchange-traded fund (ETF) may suit investors wanting broad exposure to the sector. Investors should also ensure their portfolio is sufficiently diversified outside the lithium sector. Bear in mind that past financial performance does not indicate future performance. If in doubt, speak to a professional financial advisor.
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