March 23rd, 2009

As I stated in my post on PGM's, one of the things that has been pushing down prices for PGM's is the assumption that electric cars will become more common and therefore demand of catalysts (along with PGM's) will decrease. This assumption seems justified since all major auto-manufacturers have been presenting new electric-driven models lately.

The type of electric cars that will probably be most viable are the ones with plug-in and a combustion engine recharging system, like the Chevy Volt. I assume this because it allows an easy switch between gasoline/oil and electric power generation as prices fluctuate. Therefore I also doubt the long-term potential of great depreciation of oil-prices, but neither do I see any real potential for greater appreciation.

Because of the rise of the electric car some have called out for a great rally in lithium. Lithium is the chemical element with the highest electrical potential of all the ions, and therefore makes for the best ion-/rechargable batteries. Only last week the junior-explorer TNR Gold Corp. announced some new acquisitions of lithium-properties, whereas they had previously only focused on the common precious and base metals. The TNR-stock rallied because of these news.

But there are a few problems in the belief that lithium will appreciate perhaps somewhat like uranium did. First, lithium is the 20th most common element in the earth, and secondly, batteries can be recycled. For these simple reasons I wouldn't buy into a lithium hype, but it is very possible that there could be a quick surge in the price before the new paradigm sets in.

So, if not lithium, then what are we supposed to investment in? Well, the PGM prices have almost crashed completely on the basis that the demand for catalysts will go down. But, if a lot of people want to buy these Chevy Volt type of cars (I know I do) then the catalyst demand could actually go up, because that's a lot of new cars to be made, and they all come with combustion engines.

Then there's the actual batteries. There are a few real good battery manufacturers out there like EnerSys or the Korean supplier of GM's batteries, LG Chem. Companies like these will be the new greatest auto-suppliers in the coming years, and should make some good profits from it.

I know that I myself have been wanting an electric car for a long time and I know a lot of other people who have been saying the same thing; actually I've never heard anyone say that they wouldn't want an electric car. I think that there will be a strong demand for these cars as they start coming out and people feel more willing to spend money again. Based on the potential for investment-demand (and the trouble in South Africa) for PGM's as well as a renewed demand for catalysts and the overall strong growth that's coming for the batteries-business, I see this as a really great investment opportunity.

I'd say that the best places to invest would probably be in PGM ETF's and some good looking battery manufacturers. I doubt that these investments would make you a lot of money in the coming year or so, but in the long term there should be a fairly comfortable appreciation - just like watching paint dry, as someone once said.