Lithium, the silvery metal that goes into batteries powering electric and hybrid cars, among other things, is turning heads. And with the way lithium companies are performing, this "white gold" might be worth a serious look.
What's driving the lithium wave?
Lithium, a lightweight metal that can store large amounts of energy, has made our lives easier in many ways. From the snazzy BlackBerrys and Macbooks we can't do without, to the hot electric cars we all swoon over, lithium batteries can be found everywhere.
While gadgets continue to rule, automakers' interest in electric vehicles has also gone up, fueling demand for lithium batteries. Last month, General Motors (NYS: GM) surprised many with its plans to roll out the electric Spark in 2013 in the U.S. Some of the biggest names have been backingTesla Motors' (NAS: TSLA) electric run, and demand for its Model S sedan, due in mid-2012, is outpacing supply.
The higher the automakers' enthusiasm, the better it is for the companies who have been happily riding the lithium wave.
Riding the wave
There couldn't be a tastier treat for lithium producers than the metal's high demand and tight supply. Lithium king Sociedad Quimica y Minera's (NYS: SQM) third-quarter lithium volumes and revenues were significantly higher from the previous year, by around 25% each, and are expected to remain as firm.
Being the world's largest lithium producer and having the Chile (the hub of lithium reserves) advantage, SQM can emerge as the biggest winner here. Here's an intriguing tidbit: Chemical king PotashCorp currently holds 32% of SQM. It's got to be loving SQM's lithium position right now.
The other company to watch out for is Rockwood Holdings (NYS: ROC) . Its specialty segment's third-quarter top line climbed 17.4% as lithium volumes and prices rose. Upbeat about lithium, Rockwood is directing major investments into this business.
Things aren't any different for FMC. Higher prices and volumes for lithium helped push its specialty segment's third-quarter revenues up by 8% to $217.9 million from last year, thus driving its total revenues up by 11.6%. FMC is anticipating higher lithium prices next year, and SQM is equally optimistic. Understandably so, given how lithium is boosting their revenues.
It's even more impressive to see how every company that has anything to do with lithium is enjoying the party. Consider Polypore International (NYS: PPO) , which makes membranes for lithium batteries. It was a solid 65% growth in the sale of lithium battery separators that took its third-quarter revenues to $190.1 million, up 25% from last year.
Similarly, shipments hit record highs for lithium-ion battery maker A123 Systems (NAS: AONE) in its third quarter; revenues shot up a staggering 145% from the year-ago quarter to $64.3 million.
Catching the wave
FMC is planning significant lithium business expansions and is likely to start a new plant by 2014. Rockwood is building new plants in North Carolina and Germany to meet the growing demand for lithium.
These moves are giving clear indications of where the lithium market could be headed, and it might be foolish to ignore the metal's potential.
The Foolish bottom line
Subsidies, rebates, funding -- President Barack Obama is keen on pushing electric technology, aiming to make the U.S. the first country with 1 million electric cars on the road by 2015.
Fool contributor John Rosevear wrote earlier this week about how concerns about fires in the Chevy Volt hybrid car suddenly have investors raising the question of whether the electric-car revolution -- or at least the lithium-ion battery revolution -- is in trouble.
I don't expect the Volt incident to affect automakers and their use of lithium batteries in the long run. Automakers might get more cautious, but they aren't going to get their foot off the electric-car accelerator so soon. The optimism around lithium strengthens further as gadgets reach more hands.
A great alternative for fossil fuels, betting on lithium could turn out to be a smart move. Who knows, we might just strike gold with lithium! I suggest Fools keep a close eye on the lithium story. Add these stocks to your personalized stock-tracking service, My Watchlist, and stay updated on all the news and analysis.
Add Sociedad Quimica y Minera to your stock watchlist.
Add Rockwood Holdings to your stock watchlist.
Add Polypore to your stock watchlist.
Add A123 Systems to your stock watchlist.
Add Tesla to your stock watchlist.
Add Ford to your stock watchlist.
Add General Motors to your stock watchlist.
At the time thisarticle was published Neha Chamaria does not own shares of any of the companies mentioned in this article. The Motley Fool owns shares of Rockwood Holdings and Ford Motor. Motley Fool newsletter services have recommended buying shares of General Motors, Sociedad Quimica y Minera, Polypore International, Ford Motor, and Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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