The "Oil Of The 21st Century" Is On The Verge Of Taking Off

Nathan Slaughter
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Posted: Sep 21, 2012 12:01 AM

It's one of the most highly sought commodities on the planet. If I'm right, then expect demand to surge during the next couple of years...

And no, I'm not talking about gold, oil or any of the other usual players for that matter.

The commodity I'm thinking of is 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.

Just within the Apple (Nasdaq: AAPL) family, lithium batteries are used to power iPads, iPods and iPhones. And 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.

Here's what really excites me: The average cell phone contains just one-tenth of an ounce of lithium; the average laptop computer about one ounce. By contrast, a plug-in hybrid car, which runs on gasoline and electricity, will need 20 pounds of lithium materials. That's 320 times more than a laptop and 3,200 times more than a phone.

That's why I call it the oil of the 21st century. Before long it is going to power hundreds of thousands of vehicles across the globe.

Let me explain... 

Data shows that expansion into hybrid and electric cars will be the biggest demand driver for lithium. The global lithium-ion transportation battery industry will soar more than 800%, from revenue of $878 million in 2010 to $8 billion by 2015, according to market-research and consulting firm Pike Research.

These are some big numbers. Anytime you see revenue measured in millions moving to revenue in the billions, something big is happening...

One of the company's best positioned to take advantage of this growing trend is Rockwood Holdings (NYSE: ROC).

Rockwood is one of the world's largest lithium suppliers. The company serves more than a thousand lithium customers around the world. But its lithium exposure is diluted with other specialty chemical products. In fact, lithium accounted for just 14% of last quarter's revenue.

To increase its presence in the lithium space, Rockwood just acquired Talison Lithium Limited, a well-positioned Australian producer that has been mining high-grade deposits for more than 20 years.

Talison will rake in more than $100 million in sales this year, mostly to customers in China. And those customers just can't seem to get enough, which is why the company has been able to push through a 25% price increase this year.

That speaks to rising demand for lithium, which Talison is fully prepared to accommodate. On Aug. 10, the firm held a ribbon-cutting ceremony to celebrate upgrades and expansions at its main Australia plant.

Production capacity at the facility has now doubled to 100,000 tons of battery-grade lithium carbonate per year -- enough to satisfy two-thirds of current global consumption.

As it stands, Talison enjoyed record sales volume of 54,000 tons of lithium carbonate in the fiscal year ended June 30, with prices rising to $351 per ton, up from $302 per ton a year ago.

With production capacity set to double and yet another price hike just now taking hold, Rockwood's timing on this acquisition couldn't be better.

Risks to Consider: Of course with investing, nothing is 100% certain. Despite all the tailwinds for Rockwood, a number of risk factors -- including a slowing Chinese economy -- could hurt the demand for lithium.

Action to Take --> But, with that said, 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 good news for Rockwood holdings.

P.S. -- There is an energy crisis looming in the U.S. In case you haven't heard, in six months a major event will take place that could cause 10% of America's electric energy supply to dry up. As the country scrambles to react, one company could shoot up by hundreds of percent. For more information on how to profit from the coming crisis, click here.

Nathan Slaughter does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC does not hold positions in any securities mentioned in this article. This article orginally appeared in StreetAuthority.com.