Lithium Gets Its Own ETF

Source: MetalMiner, Lisa Reisman  (7/20/10)

"Global X Lithium will track lithium producers and battery makers."


Lithium gets its day in the limelight as Global X Lithium, an ETF, will launched later this week. Global X Lithium will track lithium producers and battery makers. The idea for the fund came from R. Marcelo Claure, a Bolivian businessman and founder of Brightstar Corp. a $3b distributor of hand-held devices, according to the WSJ. Bolivia contains the largest deposits of lithium so it’s no surprise that the idea for the fund came from that country. Claure, an investor in MC Capital Advisors, a hedge fund, approached Global X Management to start the ETF.

What we find particularly interesting while watching the development of these funds, involves the rationale behind the funds. We understand those rationales to include:

  1. General demand for ETFs, according to The Wall Street Journal, "there were 914 listed ETFs at the end of June up 21% from a year ago. . .Since 2007, ETFs have raked in $480 b in net cash inflows, bringing total assets to $780b."
  2. Trend in partnering among companies looking to create markets for "obscure" materials for which there is rising demand.
  3. Creating physical inventories via financially traded products to supply a growing market.
  4. And as a result of three above—creating the unintended (or intended) consequence of raising the price for some of these rare earth metals (thus resulting in more attractive mining economics)—which is a good thing if you believe the demand for these metals will increase over time.
As a result of all four trends listed above, we suspect the number of ETFs in the rare earth metals, minor and related metals markets will continue to grow.

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