Quick Take: Plugging Into Lithium Demand

The race is on to roll out the first commercial plug-in electric hybrid vehicle. Toyota Motor (NYSE: TM  ) is working on a plug-in version of its Prius hybrid, and General Motors (NYSE: GM  ) just announced similar plans for its Chevy Volt. The main barrier to getting these cars on the road is the limitation of existing battery technology.

I don't know who among the automakers will win the race. I also have no idea which of the various cleantech startups will develop a world-beating battery. Perhaps it won't be a start-up at all -- Johnson Controls (NYSE: JCI  ) has a formidable R&D effort in this arena, as do various Japanese and Korean industrial powerhouses.

But I do know that lithium-ion technology looks like the anointed successor to the nickel-metal hydride battery that powers present-day hybrids. That lithium has to come from somewhere, and more likely than not, that somewhere is Chile.

According to the U.S. Geological Survey, fully 75% of the world's lithium reserves are chillin' in Chile. The world's largest producer is Chemical & Mining Company of Chile (NYSE: SQM  ) , or Soquimich for short. Like its large shareholder, Potash (NYSE: POT  ) , Soquimich is a large fertilizer company. That angle alone is enough to make the company worth investigating. Shares of fertilizer companies like Potash and Mosaic (NYSE: MOS  ) have been absolutely ripping over the past year. The rosy demand picture for lithium just makes Soquimich that much more intriguing.

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Fool contributor Toby Shute doesn't own shares in any company mentioned. The Motley Fool has a state-of-the-art disclosure policy.

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10/24/2016 12:06 PM
SQM $29.40 Up +0.04 +0.14%
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