Investing in ASX lithium shares

As the world turns increasingly toward alternative energy sources, the investment spotlight is landing on lithium, an essential component of the batteries used to power electric vehicles and much more.

A green fully charged battery symbol surrounded by green charge lights representing the surging Vulcan share price today

Image source: Getty Images

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. Most importantly, it is a crucial 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 metals. It 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 specialty chemicals. 

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 in the future.

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 

Why invest in them? 

Like most resource-based companies, ASX lithium shares can be a volatile investment proposition due to the strong link between commodity prices and share price performance.

Global production of the metal gained momentum in 2021, with lithium prices peaking at record highs in 2022. This, in turn, saw a massive increase in lithium output in 2023 and investment in ASX lithium shares went from strength to strength.

But the dramatic increase in production and weaker EV sales in FY24 has led to a global oversupply and lower lithium prices in the short term.

Long-term demand for the battery metal remains strong, though, driven by the continuing global shift to clean energy and EVs. And lithium doesn't just power EVs – lithium batteries are also used to power portable devices such as computers and smartphones. 

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, the companies that develop the batteries. 

Top lithium stocks on the ASX

There are more than 60 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. 

Lithium companies range in size from smaller emerging players to more established blue chips. Emerging lithium miners include Lake Resources (ASX: LKE), which has a flagship lithium project in Argentina, and Liontown Resources Limited (ASX: LTR), which is developing the Kathleen Valley project in Western Australia. 

More established lithium miners include global giants like Rio Tinto Ltd (ASX: RIO), which owns lithium assets in Argentina and Serbia as part of its diversified mining portfolio. Investors with lower risk appetites may prefer investing in established mining companies like Rio, as its share price is likely less volatile than emerging companies.

Here are three top lithium shares ranked by market capitalisation from high to low.

Pilbara Minerals Ltd

Strategic metals producer that owns the Pilgangoora lithium-tantalite

project in the Pilbara region of Western Australia 
Mineral Resources Ltd

Owns a portfolio of mining operations across lithium and iron ore, with

two hard rock lithium mines in Western Australia 
Allkem Limited

Lithium miner with operations in Argentina, Canada, Australia and Japan

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. It is a low-cost, long-life scalable lithium operation that can be expanded to meet rising demand.

In addition to its operations at Pilgangoora, Pilbara Minerals also has an extensive portfolio of exploration projects in Western Australia. It has a 70% stake in the Mt Francisco joint venture with Atlas Iron, which has returned elevated levels of tin, tantalum and lithium.

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 and could make it a great long-term share to hold for lithium investors. 

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. 


Allkem was formed in late 2021 after the merger of Orocobre Limited and Galaxy Resources Limited. It is a diversified lithium miner with operations across the whole lithium battery supply chain. 

Its flagship asset is its brine-based lithium project at Olaroz in Argentina, which produces high-grade lithium carbonate. However, it also operates other lithium projects worldwide, including the Nahara plant in Japan, which converts lithium carbonate into battery-grade lithium hydroxide.

It also has significant development and exploration assets, like the Sal de Vida and Cauchari projects in Argentina and James Bay in Canada. This means it could offer significant growth potential as global demand for battery-grade lithium ramps up. 

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. 

But lithium prices can also be volatile. As demand increases, new mines can open, increasing supply and putting the brakes on price increases. After peaking in late 2022, lithium prices plunged in 2023 as many new projects coming online caused global lithium supply to outstrip demand. Demand for lithium also took a hit early in the year after the Chinese government stopped paying subsidies to buyers of new electric vehicles. 

Given these big price swings, investing in lithium miners can be risky. That's because, like most commodity-linked stocks, lithium share prices tend to fluctuate based on the market price of lithium. This is especially true of pure-play lithium companies like Pilbara and Allkem, whose revenues depend entirely on the lithium price. 

The other problem for lithium investors is that higher demand for lithium does not necessarily equate to higher prices and profits for lithium companies. As we've seen so far in 2024, if supply outpaces demand, lithium prices will fall, and getting new lithium projects up and running for emerging players can be costly. 

Diversification is critical 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 diversify your portfolio by providing exposure to a different market sector. The key to diversification is to ensure you spread your money across various investments whose performance is not directly correlated. 

And the cons?

Geopolitical risks: Lithium producers operating in different jurisdictions face risks from local laws, which may be unpredictable and beyond investors' control. 

Environmental concerns: Lithium mining has a large ecological footprint. As with most metals, mining lithium 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.

  • With additional reporting by Rhys Brock

Article Sources

This article contains general educational content only and does not take into account your personal financial situation. Before investing, your individual circumstances should be considered, and you may need to seek independent financial advice.

To the best of our knowledge, all information in this article is accurate as of time of posting. In our educational articles, a 'top share' is always defined by the largest market cap at the time of last update. On this page, neither the author nor The Motley Fool have chosen a 'top share' by personal opinion.

As always, remember that when investing, the value of your investment may rise or fall, and your capital is at risk.

Motley Fool contributor Katherine O'Brien has no position in any of the stocks mentioned. Motley Fool contributor Rhys Brock has positions in Pilbara Minerals. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.