If electric cars ever populate our roads at anywhere near the level environmentalists would love to see, lithium will become a hot commodity. Bolivia controls a massive amount–over 50%–of the world’s supply.
The small nation has been talking about nationalizing its efforts around the good as a way to build up its economy. However, our friend the Mad Hedge Fund Trader thinks that there’s still a way to trade on the coming rise in lithum production.
Mad Hedge Fund: Lithium ion batteries are four times more efficient than the current generation of nickel cadmium batteries, and are essential for electric cars to finally become economically viable. But now that the country finally has something the world wants, nationalism is rearing its ugly head.
Local politicians see their country as the Saudi Arabia of the highly corrosive, toxic, reactive metal, and are already discussing ways to restrict access. Will La Paz become the headquarters of OLEC, the organisation of Lithium Exporting Countries? The only other supplies are to be found in Chile, Argentina, Australia, China, and Nevada. Will American oil company executives be programming their cell phones with the 591 country code? Should the US invade to insure supplies? Iraq worked didn’t it?
The best way for opportunistic investors to play this is to buy Sociedad Quimica Y Minera (SQM), Peru’s largest producer of lithium.
UPDATE: As commentors point out, SQM is a Chilean company. We’re not sure how Peru popped into this thing, and we regret not catching it. While SQM has Peruvian sales offices, those are dedicated to the commercialization of fertiliser products (that are made in Chile). SQM is a Chilean Company and a leader in the lithium industry as the largest producer and distributor of lithium carbonate and lithium hydroxide.
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