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Can Lithium Reserves Support their Rising Automotive Fan Base?

The global market for lithium is valued at more than $4 billion a year, ultimately due to its extensive list of applications, which include batteries, specialty glass, lubricants, pharmaceuticals and lithium alloys.

Lithium ion (Li-ion) batteries are the darling of electronics, and are the most widely used rechargeable battery in cell phones, computers, hybrid-electric cars and electric cars. Many auto manufacturers have taken notice of increasing demand and are working plans to build Li-ion battery-powered vehicles. As such, the market demand for lithium-powered vehicles is expected to grow five times by 2012.

Ideally, the U.S. auto industry would have a solid lithium source to meet the rising demand for Li-ion to support its “clean” endeavors. But according to the recent United States Geologic Survey, top producing countries for lithium last year were Chile, Australia, China and Argentina.

Recent market studies report that while mid to long-term fundamentals of lithium appear strong, lithium supply and production lagged in 2009. Worldwide estimates for lithium for 2009 totaled 18,000 tonnes, down from production of 25,400 tonnes in 2008. The affects on major lithium producers is significant; sales volumes for major lithium producers were reported to be down between 15 percent and 40 percent by the end of 2009. The weakened state of the U.S. economy in 2009 also crippled the end-use markets for batteries, ceramics and glass, grease and pharmaceuticals all declined in 2009 and 2010.

In support of clean environmental efforts, the Obama Administration visualizes about 1 million new plug-in hybrid or electric vehicles in service by 2015, which will fuel the Li-ion battery and ultimately influence the major automakers.

However, lithium supply remains in the hands of a relatively small number of well-established companies, somewhat securing it’s position, though it is still considered a diminishing resource. If automakers fledge all-out consumption of lithium and aggressively push toward an oil-free automotive industry, the supply of lithium is sure to suffer. Many analysts estimate that the squeeze on the lithium supply will result in significant price increases. And some fear that lithium reserves are simply not extensive enough to meet increased demand driven by the auto industry.

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