Invest in Lithium Instead
From Batteries to Electric Cars
Editor's Note: In today's Cabot Wealth Advisory, you'll hear from Nathan Slaughter, editor of StreetAuthority's Scarcity & Real Wealth and Energy & Income. Nathan discusses a metal that's in high demand and could lead to big profits for investors. I hope you enjoy his issue!
It's one of the most highly sought metals on the planet. If I'm right, demand could surge over 800% in the next four years ...
And no, I'm not talking about gold, or any other precious metal for that matter.
The metal I'm thinking of is much more practical. It's a key ingredient in everything from pharmaceuticals to rocket fuel. It's a lubricant, a propellant and a nuclear reactor coolant. It's also crucial for fireworks, airplanes, glass cookware and even medicine cabinets.
Generally speaking, it has more uses than duct tape ... but that's not why I like it.
I like it because, pound for pound, this featherweight metal can store more electric energy than just about any other material ...
I'm talking about lithium, the battery maker's best friend. You probably have some of this metal within arm's reach of you. If you own an iPod or iPad, you definitely do.
Lithium is the central ingredient used to manufacture lithium-ion batteries.
You've undoubtedly heard of lithium-ion batteries. They have twice the energy density of yesterday's outdated nickel-cadmium technology. Consequently, they're becoming mandatory in everyday products from digital cameras to portable videos games.
Just within the Apple (AAPL) family alone, lithium batteries are used to power iPads, iPods and iPhones. Even the MacBook Pro line of laptops uses advanced lithium-polymer batteries that are ultra-slim and capable of running 10 hours on a single charge.
All told, the global production of handheld lithium batteries rose 27% last year to 3.9 billion units. And this year, the total is expected to climb to 4.5 billion units.
Now, you may be thinking lithium's already seen its hey-day. After all, Apple can only sell so many more iPhones and iPads. The developed world has been exposed to high-tech consumer electronics for a few years now.
But electronic gadgets are just one of the sources of demand for lithium. There's another major use for lithium, and I think it's going to be the most powerful demand driver yet.
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That's cars, but more specifically electric cars.
Lithium-based batteries are used in the production of electric vehicles like the Chevy Volt and the Nissan Leaf. As more consumers trade in their gas-guzzling SUVs in exchange for these fuel-efficient alternatives, demand for lithium could be greatly augmented.
For every plug-in electric car that rolls off the assembly line, it's going to take roughly 20 pounds of lithium to make it run. By comparison, it takes one ounce of lithium to make a laptop, and a tenth of an ounce for a cell-phone. That means every electric car produced will need 320 times more lithium than a laptop and 3,200 times more than a cell phone.
And right now, the market for electric cars is still in its infancy. The high costs associated with owning an electric vehicle have deterred consumers for years. But thanks to President Obama, that's about to change.
In an attempt to get one million electric vehicles on the road by 2015, Congress has offered a $7,500 tax credit to anyone willing to buy a new electric car.
If that's not enough to spur interest, Uncle Sam has also dished out $2.4 billion for battery development and $25 billion to help get automakers on board.
That cash has greased the wheels and provided ample incentive to get lithium-laden electric vehicles from the research-and-development stage to the showroom floor. Automakers already plan to introduce 42 new electric models in 2012.
And that's just the U.S.; there is even more potential overseas ...
In fact, China will likely overtake the U.S. and become the world's largest electric vehicle producer by 2020.
Due to heavy government subsidies spurring consumer demand, Beijing intends to deploy $1.5 billion annually over the next decade to speed up the transition. For its part, Hong Kong is tripling the number of public recharging stations by next summer. Within the next few years, 500,000 electric vehicles could be rolling out of Chinese assembly lines annually.
All-in-all, Pike Research, a market-research and consulting firm, believes the global lithium-ion transportation battery industry will soar more than 800%, from revenues of $878 million last year to $8 billion by 2015.
These are some big numbers. Anytime you see revenues measured in millions moving to revenues in the billions, something big is happening ...
As market penetration rates rise, global production of electric/hybrid vehicles could surpass 200 million units per year by 2020. That's a lot of car batteries--and yet another reason why the world has become increasingly hungry for lithium.
Editor of Scarcity & Real Wealth and Energy & Income
P.S. Investing in lithium can be tricky. It doesn't trade on a major exchange, and there's no exchange-traded fund that tracks the price of lithium. Consequently, it can be difficult for investors to gain exposure.
In my December issue of Scarcity & Real Wealth, I identified two of my favorite lithium plays in the business. One of my picks is up over 429% in the past five years alone, but I'm confident there is room to run. You can learn more about my advisory by clicking here.