Investors from JPMorgan Chase & Co. to BlackRock are trying to make money from the exploding popularity of iPads and increasing sales of hybrid cars by investing in producers of lithium for batteries.
Prices for the metal, the lightest in the periodic table, have tripled since 2000 in a market now worth $1 billion a year as uses expand in vehicles, ceramics, electronics and lubricants. Apple and Toyota, maker of the Prius electric-gasoline car, have few alternatives as they pursue higher performance and mobility, leading Dahlman Rose & Co. analysts to forecast lithium demand will double by 2020.
Talison Lithium, whose shares have gained 22 percent in the last month, together with Soc. Quimica & Minera de Chile, Rockwood Holdings and FMC, account for almost 95 percent of world supply. Rio Tinto Group, the third-biggest mining company, may join the largest suppliers if it goes ahead with a mine in Serbia it says is capable of producing 20 percent of global output of the metal.
"There are some companies now that we think are attractive to get a hold of lithium exposure," Evy Hambro, who manages mining stocks for BlackRock in London, said in an interview. "We've got a small exposure today and we're looking for some more," he said without naming any companies.
Demand for lithium-ion rechargeable batteries out of Asia has helped prices climb threefold in the last 12 years, London- based Roskill Information Services analyst Robert Baylis said. Global use doubled from 2000 to 2011 according to Roskill, which has recently consulted on six lithium projects.
The advantage of lithium-ion over other battery types is that a typical cell can generate more electricity than competing cells like such as lead-acid. There is about 1.7 grams of lithium carbonate equivalent in a mobile phone, 2.1 grams in a smart phone and 20 grams in a tablet, according to Dahlman Rose.
There will be a "step change," in the global lithium industry in 2016 or 2017 when electric cars became more commonplace, Rockwood Chief Executive Officer Seifollah Ghasemi said. Hybrid electric vehicles that are fitted with a lithium-ion battery contain about 1.3 kilograms (2.9 pounds) of the material, plug-in hybrid electric vehicles have about 12.8 kilograms, while an electric vehicle uses about 19.2 kilograms.
The four-strong lithium "oligopoly has the capacity to significantly ramp supply higher, but it will take time and significant capital to accomplish," Dahlman Rose analysts Anthony Young and Anthony Rizzuto said. "There are a limited number of known high-grade resources that can be economically extracted, and there has not been a new lithium mine constructed in the last 25 years."