Charging Up on Lithium - the Metal or the Miner?

Abstract

Until the recent introduction of lithium futures, there was no direct way to invest in the lithium commodity itself. We find that an indirect way to invest via a portfolio of lithium miners provides full exposure to lithium price movements. However, the miner portfolio has higher average returns and volatility than the commodity, reflecting the systematic and industry-specific risks of lithium mining. In addition, miner returns lead lithium returns implying that lithium trades at lagged prices in the physical market with negative welfare consequences.

Keywords: lithium, mining, investor exposure, decarbonisation

JEL Classification: C32, G12, Q02, Q42