After the launch of Tesla Model S Barron's is making its take on Lithium - the Next Big Thing story is coming back on mainstream investors' radar screens.
"There are a lot of bargains now among Lithium developers after the recent scare in Argentina. Catalyst will come with clear picture from Argentina, Risk On Trade,rise in M&A activity and Tesla Model S, which will start to be delivered to public in the next couple of days."
By TATYANA SHUMSKY
Growing demand for technology means the future looks brighter for the lightweight metal.
Lithium's future is set to burn brighter.
The lightweight metal is used for high-powered batteries that pack enough punch to power an electric car, let alone a cellphone or laptop. As the world goes more mobile, investors should expect powerful demand to push lithium prices higher.
"When it comes to battery demand for lithium, we're looking at growth of 20% to 25% a year over the last several years," said Tim Tiberio, a senior analyst with investment bank Miller Tabak.
The metal isn't traded on an exchange, so investors should look to buy shares in the four companies that control about 95% of global lithium production. Talison Lithium
(ticker: TLH.Canada) and Rockwood Holdings (ROC) vie for the top spot, and are joined by NYSE-listed Sociedad Quimica y Minera de Chile (SQM) and FMC (FMC).
Lithium's use in technology has been growing about 20% a year since 2000 and today accounts for 30% of global lithium demand, said Peter Oliver, CEO at Talison Lithium, the world's top lithium producer.
Worldwide shipments of smartphones, a mobile-phone segment, are set to grow 38.8% in 2012, with 686 million units expected to be shipped by vendors this year, according to market researcher International Data. All mobile-phone shipments (including not-so-smart devices) will increase 4% this year, from 1.7 billion in 2011. This boom in consumer demand for high-tech gadgets has helped lithium prices shake off the recession slump and prompted producers to raise their prices, says Timothy McKenna, vice president at Rockwood Holdings, which produces about a third of the global supply.
LITHIUM PRICING IS AN OPAQUE business. Sometimes, it's sold in a salt form, such as lithium carbonate and lithium hydroxide. Sometimes, it's sold as a metal. Sometimes, it's sold as a salt or metal in client-specific formulations, which collect higher prices.
Broadly, this year Rockwood has raised its lithium prices by $1,000, or 20%, to about $5,000 per metric ton in May, McKenna said. Talison Lithium has raised prices by 15% on contracts concluded in early 2012, according to company filings.
Still, the majority of lithium supply heads into industrial applications such as strengthening glass and hardening ceramic glazes, said Christopher Ecclestone, an analyst with Hallgarten. This leaves lithium prices vulnerable to any slowdown in the global economy.
But lithium producers and analysts say that as sales of portable electronics and electric cars increase, the influence of the industrial segment will wane.
Toronto-listed Talison Lithium is up 11.2% this year, trading at 3.78 Canadian dollars (US$3.68) a share. At its competitors, Rockwood Holdings is up $14.5%, to $39.37, and FMC is up 17.1% at $50.38, while laggard SQM is down 0.7% this year at $53.47 a share. This comes as the Standard & Poor's 500 has risen 6.2% since January.
Investors can also get a broad exposure to the sector through an exchange-traded fund such as the Global X Lithium
ETF (LIT). However, that fund includes rare-earth metals companies and battery makers, as well as the Big Four lithium producers, and this diversified approach could dilute the lithium bet. The ETF is up 3.2% this year. It closed at $14.79 Friday. "