Growth In Consumer Demand For Power Hungry Mobile Electronics Lifts Lithium Demand

by: Livio Filice


Growth of key industry stats in the smart and mobile phone industry.

Review of Apple's growth in the consumer mobile electronics industry.

Lithium industry reaping the rewards.

Lithium has been one of the cornerstones of success for the mobile phone, smartphone, laptop, and tablet PC markets over the past decade. Lithium batteries for consumer electronics is clearly an area that has seen significant growth due to population increase, increase in buying power in developing countries, and price decreases in electronics. Lithium ion batteries are at the core of mobile phones and other consumer devices for their ability to withstand memory effects, slow discharge when in standby, safety features, and high energy density. Furthermore, these batteries have less of an impact on the environment when they are disposed of compared to other battery chemistries.

According to an eMarketer report, it's expected that 4.55 billion people worldwide will use a mobile phone in 2014. Mobile adoption is slowing, but new users in the developing regions of Asia-Pacific, the Middle East, and Africa will drive further increases. Between 2013 and 2017, mobile phone penetration will rise from 61.1% to 69.4% of the global population.

Focusing on Apple Inc. (NASDQ:AAPL) who has emerged as a leader in the consumer electronics industry with its popular line of products, which include the iPhone, iPad, and iPod. However, Apple is facing increasingly tough competition from other global consumer electronic providers such as Amazon (NASDAQ:AMZN) Google (NASDAQ:GOOG), BlackBerry Ltd (NASDAQ:BBRY), Samsung (OTCMKTS: SSNLF), Microsoft (NASDAQ:MSFT) and LG (NYSE:LPL), amongst others. The common theme is that the need for lithium is greater than ever and will continue to climb alongside the growth of the consumer mobile electronics market. In fact, as these handheld devices become increasingly energy-demanding, the need for lithium will be even greater.

On January 27, 2014, Apple announced its financial results for the 2014 fiscal first quarter, which ended December 28, 2013. The company delivered extremely positive results to their shareholders - in fact, record results were achieved with a quarterly revenue of $57.6 billion and a quarterly net profit of $12.1 billion. Apple also provided insight on the number of units sold within each product line: the company sold 51 million iPhones, an all-time quarterly record; 26 million iPads, another all-time quarterly record; and 4.8 million Mac computers. In a 90-day period, Apple sold over 80 million consumer mobile devices, all of which are powered by lithium ion batteries.

New technologies, such as those from Apple, have spurred the demand for lithium carbonate to such a great extent that pricing for the white metal has tripled in the past few years and is projected to double by 2020. Research group signumBOX estimates the total lithium compound consumption rate to be approximately 140,000 MT LCE per year and expects this to rise to approximately 325,000 MT LCE by 2020, which will be followed by an extremely rapid growth that could see the industry consume 540,000 MT LCE by 2025.

Investors who believe that innovative companies, such as Apple, will continue to deliver widely accepted new consumer electronics may also have some interest in companies that are benefiting from Apple's growth in the lithium space. For investors who can tolerate a greater risk of tolerance, Orocobre Limited (OTCPK:OROCF) is currently building a substantial Argentinean-based industrial mineral company through the construction and operation of its portfolio of lithium, potash, and boron projects and facilities. Construction at the companies "Olaroz Lithium-Potash-Boron Project" continues to move forward on time and within budget. As of Dec 31st, 2013 the company has spent or committed via executed contracts in totaling approximately $164 million representing approximately 75% of the physical construction. In an interview with AAP, Orocobre managing director Richard Seville disclosed that Orocobre will be one of the lowest-cost producers, selling lithium for an estimated $6000/tonne for less than $2000/tonne in cost. To put this in perspective Orocobre will generate $70 million EBITA. Further, household name Toyota has bought into the project. Toyota Tsusho Corporation (OTCMKTS:OTC:TYHOF), one of the largest trading companies in the world key partner supplier to Toyota, owns a 25% stake in the Olaroz project. Toyota Tsusho is 22 percent owned by Toyota Motor Corporation (NYSE:TM). Toyota Tsusho is a core lithium business includes the sale of lithium materials to Toyota Motor Corporation and other companies in the battery space including Japanese and Asian companies such as Panasonic Corp (OTCMKTS:PCRFY) and Sanyo, a division of Panasonic. Orocobre's lithium products will eventually make their way into consumer electronics, hybrid and pure battery-powered vehicles through their strategic partner.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.