The hype surrounding ASX-listed lithium producers has taken off in 2016, with shares of Orocobre Limited (ASX: ORE) the latest to benefit.
Orocobre’s share price has risen 6.7% today to trade at $4.16, although it did rise as high as $4.24 earlier in the session. It has also risen almost 213% since mid-December when it hit a low of $1.33.
But Orocobre isn’t the only lithium share that has benefited so far this year. Here’s how some of its rivals have performed by comparison:
- Altura Mining Ltd (ASX: AJM) up 300%
- Dakota Minerals Ltd (ASX: DKO) up 155%
- Galaxy Resources Limited (ASX: GXY) up 239%
- General Mining Corp Ltd (ASX: GMM) up 141%
While much of the resources industry is facing gail force headwinds in the form of a Chinese slowdown, investors think they may have found the exception in the lithium industry. The commodity has soared in price in anticipation of stronger demand given that lithium batteries are expected to play a key role in renewable energy, with more cars and even homes expected to be powered by rechargeable batteries.
The problem, however, is that rising prices will attract bigger and stronger competitors wanting a piece of the action. Indeed, Rio Tinto Limited (ASX: RIO) is already a potential threat, while several smaller entities are also making a push into the sector, including Kingston Resources Ltd (ASX: KSN).
If lithium does continue to soar, BHP Billiton Limited (ASX: BHP) and various other mining powerhouses could also become interested.
Lithium prices are expected to continue rising, but that does not mean that every business in the sector will be a winner. Sure, many shareholders have been well rewarded thus far, but how long that can or will continue is impossible to tell. If you insist on having exposure, the safest option would be to invest in one of the bigger guys, although even that could be a risky play.
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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.