After 5 years of sheer agony, investors in The Global X Lithium ETF (NYSEARCA:LIT) finally had a good year in 2016. Bolstered by favorable government policies toward renewable energy and talk of battery gigafactories, the share price of LIT gained 35% in 2016, and another 10% so far this year. But have this ETF's fortunes truly turned the corner?
Despite public perception, the majority of lithium is not used in batteries, but in industrial applications, such as glass, ceramics and casting powders, as illustrated in the chart below.
Lithium Supply Vs. Demand
While Electric Vehicle (EV) batteries currently represent a small portion of total lithium consumption, Tesla Motors (NASDAQ:TSLA) could account for 17% of total global lithium supply once the Tesla Gigafactory and EV production lines are operating at full capacity.
The other application for lithium batteries is of course, electric grids where demand for lithium batteries in energy storage is expected to grow fast in the next decade.