Lithium Industry Q411 Outlook

Source: Dave Brown, Lithium Investing News  (9/12/11)

"Lithium remains the far superior choice for energy and power storage needs and is likely to see continued strong demand over the next decade."


The overall outlook for the lithium industry is dependent upon demand from a number of contributing areas including future adoption and accelerated market penetration within the electric vehicle industry as well as continued global demand for consumer electronics and mobile devices according to some analysts.

Long Term Prospects Intact

In an exclusive interview with Lithium Investing News, Edward Otto, Mining Equity Research Analyst for Cormark Securities Inc. indicates, "The lithium market is supplied by an oligopoly of producers: Talison Lithium Ltd. (TLH:TSX), SQM (NYSE: SQM), FMC Corporation (NYSE: FMC), Rockwood Holdings (NYSE: ROC) that have both the resources and capacity to meet global lithium needs over the next decade. Several lithium developers are being brought to production through the support of their joint venture partners, electric vehicle manufacturers that are seeking diversity and security of supply. Talison Lithium Ltd. (TLH:TSX) continues to face strong demand from Asia with prices likely to increase in the next six months, demonstrating no shortage of demand."

A Challenging Environment

Addressing some issues for the industry this year, Otto offered some cautious support, "South American producers have weathered a tough winter resulting in increased costs and reduced production. Several price increase announcements have been made to offset production issues. [In] Australia, Talison Lithium Ltd. (TLH:TSX), continues to operate above capacity with a major expansion, to double production, ongoing. We see a limited number of lithium developers entering production in the next decade and take a more conservative view of earlier stage exploration lithium projects."

Electric Vehicle Market Segmentation

In a report titled "Lithium, Batteries and Vehicles: Perspectives and Trends", Chilean research firm signumBOX said the electronics industry and hybrid and electric vehicles, including electric bikes, would drive growth in demand for lithium over the next 12 months. According to signumBox, approximately 16 million electric cars and hybrid vehicles will be on the world's roads by 2025, utilizing 181,000 tons of lithium carbonate in batteries. It might be of interest to investors to note that this implies a 34% rise in the firm's forecast total demand for lithium this year at 119,000 tons.

Demand for various types of vehicles and the marketability and function of models is addressed in a recent report titled Hybrid Medium and Heavy Duty Trucks. In the report released by clean tech market intelligence firm Pike Research the challenges and opportunities within the markets for hybrid electric, plug-in hybrid, and battery electric medium and heavy-duty trucks are explored. Technology costs should decline and diesel prices are likely to increase, the value proposition for hybrid trucks will be strong and Pike Research forecasts that sales will surpass 100,000 vehicles annually by 2017.

Pike Research's analysis further indicates that most hybrid electric, plug-in hybrid, and battery electric medium and heavy-duty trucks will operate with various chemistries of lithium batteries. The expectation is that the use of nickel-metal-hydride (NiMH) batteries will peak in 2016, as vehicle manufacturers move their remaining systems toward lithium technologies. The global lithium battery market is expected to reach 3.6 million kilowatt hours in the heavy duty and medium truck market by 2017.

European Infrastructural Expansion

Frost & Sullivan industry analyst Anjan Hemanth Kumar forecasts that by 2017 Europe could have 2 million charging stations, including home-charging facilities which could support 3.1 million electric vehicles. Working on the delivery for standards in charging infrastructure is critical for the success. Kumar says "Infrastructure programs will be concentric [around] specific regions and urban areas. The UK, France, Scandinavian regions and Germany will lead in terms of infrastructure development."

Chemical Processing Development

According to a recent webcast, Trey Hamblet, Vice President of Research for Industrial Info indicates that positive momentum in the Chemical Processing Industry (CPI) is directly correlated with rising consumer demand for consumer goods like mobile devices and automobiles as well as maintaining highly efficient plant operations and processes. Global requirements for the underlying products will ultimately be responsible for growing demand for lithium compounds, in addition to catalysts, polymers and additional chemical constituents.

As the industry moves forward, Otto agrees that, "Increased use of mobile electronics and electric vehicles relies on both energy efficiency requiring rare earth metals and energy storage capacity [requiring] lithium. Lithium remains the far superior choice for energy and power storage needs and is likely to see continued strong demand over the next decade." -Lithium Investing News