Are You Ready for India's Lithium Stocks Gold Rush?

China's lithium industry is reeling.

Its top production hub, responsible for around a tenth of the world's supply, faces sweeping closures. The government is probing the facility on account of environmental infringements.

The crackdown in Yichun, Jiangxi province, follows a local lithium frenzy over the past year. Miners in China had raced to feed rampant demand for the EV battery fuel. Especially, to benefit from record global prices of lithium.

Now, the miners are grappling with a close-up inspection by environment officials sent from Beijing. And if found at fault, they even risk closures.

Meanwhile, in India, the lithium frenzy has just begun.

In 2010, only 23% of the available Lithium was being used by industries for lithium-ion batteries. Ceramics and glass sectors dominated lithium demand with 31% of total share. But over the past decade, the demand for lithium has grown in massively.

Electric mobility has become the epicentre of India's drive towards carbon neutrality. Auto makers and ancillary companies are seeking every share of the e-mobility pie.

Batteries are core to EVs. The demand for Lithium-ion batteries has surged.

India has set an EV sales penetration target of 30% for private cars, 70% for commercial cars, 40% for buses, and 80% for two and three-wheelers by 2030. That makes lithium discovery critical to India's targets of meeting its climate-related commitments.

Understandably, the share of lithium in EV batteries has increased by more than 200%.

In the last financial year, batteries comprised 74% of lithium consumption all across the world.

Now the production of lithium was cornered by Australia, Chile, and China over past few years. Through mergers, acquisitions and mining rights, Chinese state backed companies control 60% of the world's capacity for processing raw lithium.

In fact, not just lithium, China has cornered production of other rare minerals too, which may be necessary for electronics manufacturing.

A report by the International Energy Agency says more than half of lithium, cobalt and graphite processing and refining capacity is located in China.

Being dependant on Chinese exports is not a long term solution for India. Hence, India has been looking for Lithium reserves in countries all across the world.

Recently, the Geological Survey of India (GSI) found 51 lithium and gold deposits in the state of Jammu and Kashmir. The potential tonnage, 5.9 million, catapulted India from zero to among the top 10 in the world in lithium sourcing overnight.

However, both the nature and actual tonnage need to be verified.

Also, like in China, lithium mining in India will have it its own gold rush.

The lithium gold rush will have its own sets of miscreants who will find loopholes in environmental regulations.

And like in China, few Indian miners too may face backlash due to indiscriminate lithium mining to cash in on the steep prices. This could cause environmental hazards and put India's electric vehicle ecosystem at risk.

So, by all means keep a watch on the trend in lithium mining in India. But be careful before you decide to dive into the gold rush.

Rather hedge yourself by participating in the upside for other viable EV industry fuels like green hydrogen.

At the latest Equitymaster Conference, I spoke extensively on the importance of green hydrogen in India's EV ecosystem.

Here is my video on the checklist for green hydrogen stocks.

Warm regards,


Tanushree Banerjee
Editor, StockSelect
Equitymaster Agora Research Private Limited (Research Analyst)