The Growth of Lithium
Mary is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The growing popularity of devices that use Lithium batteries is turning into a boom for miners. Prices for lithium have tripled since 2000 as more products, such as the iPad and Toyota’s Prius, are using the technology. Lithium’s use in technology has been growing about 20% a year since 2000, and today accounts for 30% of global lithium demand. Approximately 95% of the lithium market is controlled by four companies: Talison Lithium, Rockwood Holdings (NYSE: ROC), Sociedad Quimica y Minera de Chile (NYSE: SQM), and FMC (NYSE: FMC).
Rio Tinto (NYSE: RIO) is on its way to becoming the world’s largest supplier of lithium, surpassing these four companies. It is currently developing a new site in Serbia, which would be the world’s first new lithium mine in 25 years. The miner saw flat iron ore production in June. Currently Rio derives approximately 80% of its earnings from iron ore. However, according to Chief Executive Tom Albanese, the company’s expansion projects still stack up. If its new lithium site in Serbia meets expectations the miner has a bright future.
The Department of Energy (DOE) recently made a $28.4 million investment in Rockwood Lithium, a division of Rockwood Holdings, to expand U.S. Capacity. With the funds, Rockwood opened an expanded manufacturing plant in North Carolina and is planning to open an expanded plant in Nevada as well. Rockwood Lithium has been spending considerable amounts of money recently to expand their plants and hire more workers, proving that clean energy production can be good for the U.S.
The Andean nation of Chile is currently the world’s largest producer of lithium, and only two companies, Sociedad Quimica y Minera de Chile and Sociedad Chilena de Litio, mine there. This provides these companies with a large competitive advantage in the lithium market. However, Chile’s state-owned Codelco is trying to get in on the action. The Chilean government has been strongly urging them to to study the possibility of starting lithium production. This makes Rio Tinto’s new site in Serbia all the more appealing. A state-owned entity controlling the largest producing nation of lithium could be detrimental to the ebb and flow of the market.
As the demand for lithium grows, FMC might be falling behind the times. There have been no announcements for plans of expansion or new developments recently from the company. It appears they might be falling behind in this market. Rio Tinto is busy at work developing a new site. Rockwood is expanding on current facilities. Rio’s new site might provide the best advantage for meeting the demands of the lithium market. Of course, Rockwood’s home-grown lithium facilities are not to be overlooked. These two appear to be the up-and-comers in this market, and they are set to grow their lithium production capabilities.
MaryPosey has no positions in the stocks mentioned above. The Motley Fool owns shares of Rockwood Holdings and Sociedad Quimica y Minera (ADR). Motley Fool newsletter services recommend Sociedad Quimica y Minera (ADR). 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.If you have questions about this post or the Fool’s blog network, click here for information.
