This from Today’s Financial News:

Much of our popular technology is powered by lithium carbonate.

The compound has been used in the creation of heat-resistant glass, ceramics and alloy for aircraft.

It also sees effective use as a mood stabilizer and treatment for ALS (Lou Gehrig’s disease).

But it’s the rechargeable power needs of modern technological devices that made this lightest of all minerals a serious commodity for investors.

Lithium’s value has climbed with the sale of each laptop, PDA, cell phone, and iPod it inhabits.

Whether the motivation is gas prices, a desire to lower one’s carbon footprint, or a reluctance to further enriching nations in the Middle East, demand has increased for hybrid vehicles.

The ONLY practical option for rechargeable vehicles is the lithium-ion (Li-ion) battery.

Now, I say that knowing that Toyota has delayed the installation of Li-ion batteries due to some safety concerns it’s working on resolving. The corrosive quality of lithium gives it the potential to short-circuit in batteries and catch fire.

And there are aging issues with Li-ion batteries and the technology to recycle them is not in place.

These challenges have researchers at hundreds of companies competing to perfect their version of the battery.

But what makes Li-ion batteries so perfect for cars is that they are lightweight and can store more than twice the amount of energy (110 –130 watt hours per kilogram) when compared to its biggest competitor, nickel-metal-hydride (NiMh) batteries.

They also lose power at a slower rate than other batteries between uses.

In August 2008, Mitsubishi Motors Corp. announced it was partnering with GS Yuasa to complete a manufacturing plant for lithium-ion batteries. The company anticipates that demand will increase fivefold to meet the needs of electric vehicles. The new facility is slated to open in the spring – the same time the company expects to launch its Mitsubishi I-MiEV electronic compact car.

Nissan will use Li-ion batteries for the 65,000 hybrids they hope to manufacture by 2010.

Most of the next generation hybrids like GM’s Chevy Volt and Saturn Vue Green Line, and Mercedes’ hybrid version of its S-Class sedan, are planning to use Li-ion batteries.

About the element

Though not uncommon, lithium appears in low concentrations and is typically interwoven with other minerals.

The largest commercial deposits currently mined are in Chile and Argentina. China, Russia, Australia and the U.S. are working to pickup production.

And the amount of lithium carbonate required for a car battery is about 100 times that needed for a laptop.

Bottom line?

• Lithium demand will skyrocket as more and more hybrids roll down the assembly line.
• Current processing potential is limited, making it vulnerable to market disruption.

And limited supplies could mean big profits for lithium miners and processors.

How to play this soon-to-be strategic commodity

In current market conditions, it is possible this renewable technology cannot be explored to the degree anticipated.

But in the longer term, investing in this evolution could bring triple-digit gains in just a few years.

The best way to play it?

New manufacturers are cropping up daily with ever-improved versions of the Li-ion battery. The competition is fierce and it’s difficult to know who will come out on top.

Instead, for our first pick, we are going directly to the source…

Sociedad Quimica y Minera de Chile (ADR) (NYSE:SQM) is based in Chile and is a leading producer of lithium carbonate. The company also sells specialty plant nutrition products, iodines and derivatives and other industrial chemicals.

This past October, the company reported a revenue growth of 56% for the first 9 months of 2008 when compared to the same period in 2007.

Website: http://www.sqm.cl/aspx/en/Default.aspx
Market Cap: $7.04B
P/E: 16.42
Forward P/E: 13.58
Recommendation: Buy shares under $30 and hold for the long-term.

Our second selection is a supplier of the battery manufacturers…

Polypore International, Inc. (NYSE:PPO) is a U.S.-based manufacturer of mono- and multilayer membrane separators for lithium batteries – including those used in hybrid electric vehicles (HEVs).

Website: http://www.polypore.net/
Market Cap: $316.83M
P/E: 7.07
Forward P/E: 9.28
Recommendation: Buy shares under $8.25 and hold for the long-term.

Both these companies have good fundamentals and great potential. We urge you to check them out and see if they are right for your portfolio.

Source: Lithium: The commodity with a profitable future

The merger would create Japan’s second-largest electronics manufacturer behind Hitatchi Ltd. (ADR:HIT), as Panasonic is the world’s No. 1 plasma TV maker and Sanyo is one of the world’s largest rechargeable battery makers, Reuters reported.

Should the deal clear regulators, Panasonic said one of its intentions is restructuring both companies. It targeted three “primary synergy” areas:

• Solar: The combined company plans to expand its silicon solar cells and batteries and accelerate development and commercialization of next-generation solar cells. Panasonic expects “a significant increase” in solar sector sales.

• Rechargeable Batteries: In addition to fusing Sanyo’s lithium-ion rechargeable batteries business with Panasonic’s black box technology, the companies plan to make “active investments” in batteries for hybrid electric vehicles and electric vehicles. More practically, the deal would nearly quadruple Panasonic’s share of the rechargeable-battery market.

• Financial and Business Position: Panasonic believes the combined enterprise will produce cost cuts in procurement and logistics.

“Panasonic and Sanyo recognize that existing strategies must not only be accelerated, but also that drastic action is now required for further strengthening initiatives to achieve potential revenue and profit growth in the global economic recession stemming from the financial crisis as well as in the midst of intensified global competition,” Panasonic said in a statement.

The company added: “Combining the accumulated technologies and manufacturing knowledge of both companies, Panasonic and Sanyo believe that together they will evolve into a corporate group which will be highly admired globally by enhancing the quality of life for the people worldwide and becoming a business entity coexisting in harmony with the global environment.”

The deal cleared a major hurdle Thursday when Goldman Sachs Group Inc. (GS) agreed to share its 29% in Sanyo to Panasonic for at least $6.4 billion, Reuters reported. Goldman had previously rejected two other offers from Panasonic.

“A merger would supply much-needed funds for Sanyo to maintain its position in the solar-battery market,” Yuuki Sakurai, general manager of investment planning at Tokyo’s Fukoku Mutual Life Insurance Co., told Bloomberg. “It’s difficult to imagine Sanyo succeeding by going it alone, and in that sense the offer is progress.”

Sanyo was founded by Toshio Iue, who in 1946, quit his job at Panasonic’s former entity Matsushita Electric Industrial Co. to form Sanyo the following year, Bloomberg reported.

Source: Panasonic Offers $9 Billion for Controlling Stake in Sanyo

Sanyo said it started procuring the display panels from Sharp in April, and would use them for the LCD TVs it’s producing for the North American market. And while Sanyo said it will keep buying LCD panels from other suppliers, too, the company also said that it’s in talks with Sharp about a program in which the two would jointly develop a line of kitchen appliances.

With its consumer-electronics business struggling, Sanyo has refocused itself strategically, betting its future on solar cells and rechargeable batteries, Reuters reported.

“We hope to expand our business by having a mutually complementary relationship with Sharp,” Sanyo spokeswoman Yuko Hosaka told Reuters. “Sharp’s strength in LCD [panels] is part of that.”

Sanyo sold about 1 million LCD TVs in North America in the business year that ended March 31.

Sharp’s Growing List of LCD Disciples

Sharp, which markets the Aquos line of LCD TVs, is the world’s third-largest maker of the flat-panel televisions, trailing South Korea’s Samsung Electronics Co. Ltd. (PINK: SSNLF) and Japanese consumer-electronics giant Sony Corp. (ADR: SNE). But Sharp has been trying to boost its market position and establish a consistent market for its LCD panels among rival flat-panel TV producers even as it invests to elevate its own productive capacity, Reuters reported.

As Money Morning reported back in February, Sony agreed to take a one-third stake in a $3.5 billion LCD plant that Sharp is building in Japan to meet the soaring worldwide demand for flat-screen television sets.

It plans to transform the LCD plant – which would be the world’s largest – into a joint venture: The Osaka-based Sharp will take a 66% stake, while Sony will take the remaining 34%.

While the companies would not say how much Sony would invest for its stake, Japan’s Nikkei newspaper said that Sony agreed to pony up $926 million, Bloomberg News reported. The factory will start production by March 2010.

While Samsung, Sony and Sharp rank one, two and three on the list of the world’s largest makers of LCD TVs, Japan’s Matsushita Electric Industrial Co. Ltd. – maker of the Panasonic brand – controls one-third of the plasma TV market.

Sanyo joins Sony, Toshiba Corp. (OTC: TOSBF) and Pioneer Corp (PINK: PNCOF) as companies that have all said that they plan to buy LCD panels from Sharp. But the Sony-Sharp alliance is an especially aggressive example of the linkups taking place among Japan’s flat-panel TV producers.

If it seems odd to have competitors buying and selling such a key component as an LCD screen, consider the challenges Sharp and its rivals face:

• They need to have a big-enough supply of the liquid-crystal display (LCD) panels to meet the accelerating demand.
• But these companies also need to keep their capital investments low at a time when flat panel displays are becoming a commodity, meaning the actual component prices can be expected to undergo the same steep declines as computer memory chips or memory drives.

In the face of burgeoning demand and tight supplies for LCD panels, companies are choosing different routes to fill their needs. Late last year, Toshiba decided to buy LCD panels from Sharp. But earlier this month, Panasonic-maker Matsushita said it would spend $2.8 billion to build an LCD plant of its own.

“Sony needed an extra source of panels because the large-size LCD TV market is growing faster than it had expected. As Sony expands TV production, it is natural to seek to diversify panel sources,” Park Hyun, an analyst at Prudential Investment & Securities, said during a recent interview. “Sony is likely to continue the partnership with Samsung … therefore Sony’s diversification strategy won’t have a negative implication for
the alliance with Samsung.”

For Sharp, the linkup with Sony serves as a hedge at a time when aggressive industry investments in panel-production capacity is boosting worries about a supply glut down the road.

“The problem will be 2010 and 2011,” said Shinko Securities Co. Ltd. (PINK: SKSTF) analyst Hideki Watanabe. “Just when TV demand is likely peaking, Sharp’s 10th-generation plant will come on-stream, and so will Matsushita’s new factory [causing the potential glut. But this] deal gives Sharp good risk hedging.”

The new Sharp-Sony factory would utilize the so-called “10th-generation” glass substrates, which can yield more panels than earlier-generation, smaller glass substrates, improving production efficiency and helping both Sharp and Sony offer flat-panel TVs at competitive market prices.

The new factory will produce LCD screens that have a diagonal reach of as much as 60 inches. Sony will receive a third of the factory’s output, with the rest going to Sharp. Initially, the monthly output will be 36,000 glass substrates, although the ultimate monthly output will reach 72,000 glass substrates.

The substrates are the output from which the flat panels can be cut.

Besides the flat-TV panels, the factory will also make so-called “LCD Modules,” which are flat-panel displays equipped with such components as a backlight unit and LCD driver chips.

“For Sharp, this is a positive step since it means a major buyer that would keep the 10th-generation factory busy,” Kazuharu Miura, a Daiwa Institute of Research analyst, told Reuters.

The venture reduces Sony’s reliance on Samsung – currently its main supplier – at a time when LCD TV sales are projected to rise 29% this year, easily outpacing demand growth for rivaling plasma-based TV sets. Both UBS AG (UBS) and Lehman Brothers Holdings Inc. (LEH) predict that the LCD shortage will persist throughout the year.

Worldwide sales of LCD TV are expected to reach 155 million units by 2012, double the 74.8 million sold in 2007, predicts the Japan Electronics and Information Technology Association. Demand for plasma TVs will likely reach 25 million units in 2012, 119% more than the 11.4 million sold last year, the JEITA said.

Sony is expecting to sell 10 million of its Bravia LCD TVs in the current fiscal year, which ends March 31. The suggested list price of the TVs range from about $500 to $1,600, according to the Sony Web site.

The company also has a second LCD joint venture – this one with Samsung – known as S-LCD.