Lithium market: One of the biggest concerns with regard to lithium-ion batteries in e-cars has been longevity. Last week, GM announced that it will guarantee the lithium-ion battery in the new Volt for 100,000 miles, or eight years, whichever comes first. The Volt is expected to run on electricity for the first 65 kilometres followed by a travel on the small "range extender" internal combustion engine. Production is still on schedule for late 2010 with targeted sales of 10,000 and 30,000 units in 2011 and 2012, respectively. Wall Street Journal reported this week that MC Capital Advisors is launching an ETF focused on lithium. The Global X Lithium ETF will invest in lithium producers and battery manufacturers. Among lithium producers, the three dominant companies are specialty chemical producers with limited exposure to lithium, specifically, Sociedad Quimica y Minera (SQM: NYSE: US$34.63 | Not rated), FMC Corp. (FMC: NYSE: US$58.03 | Not rated) and Rockwood Holdings (ROC: NYSE: US$24.20 | Not rated). As reported last week, Salares Lithium (LIT: TSX-V: C$0.62 | Not rated) has agreed to be acquired by the largest spodumene (hard-rock lithium, 28,500 t/a lithium carbonate equivalent) producer globally, Talison Minerals. Galaxy Resources (GXY: ASX: A$1.10 | Not rated) has only recently commenced mining at its spodumene project in Western Australia. Among lithium explorers and developers, the companies with advanced projects that have the potential to cross the finish line in the race to production are Canada Lithium (CLQ : TSX : C$0.50 | SPECULATIVE BUY, C$1.00 target), Lithium Americas (LAC : TSX : C$1.19 | Not rated), Lithium One (LI : TSX-V : C$0.90 | UNDER REVIEW) and Orocobre (ORE : ASX : A$1.80 | ORL : TSX : C$1.56 | Not rated). Orocobre has hired an experienced new Argentine general manager for the Olaroz project in Argentina, which should make the delivery of the definitive feasibility study in Q1/11 smoother.

Eoin Treacy's view Lithium as an investment theme holds the great promise of offering direct leverage to growth in the electric car industry. Just about every car manufacturer is developing some form of zero emission car and many are using lithium based batteries. However, as this article from oilprice.com points out, a battery that could successfully replace the internal combustion engine does not yet exist. Nevertheless, progress is being made, the necessary capital is being injected and it would appear to be only a matter of time before a workable solution is found.

Most of the larger companies with an interest in lithium are in the diversified chemicals sector. Socieda Quimica y Minera de Chile (SQM) is primarily a fertilizer company but is also one of the largest lithium producers in the world. The ADR has been ranging for more than a year and found support above $30 form May. It has returned to test the overhead 200-day MA and a sustained move below $34 would be required to question scope for further upside. Both FMC and Rockwood Holdings also fall into the Diversified Chemicals sector and share a similar pattern with DuPont (also see David's review of fertiliser shares yesterday). They remain in relatively consistent uptrends and sustained moves below their 200-day MAs would be required to question scope for further upside.

All of the smaller companies listed in the above piece can be found in the Chart Library. Orocobre has halved since April but is steadying in the region of the 200-day MA. A sustained push back above A$2 would break the progression of lower highs and suggest demand is regaining the upper hand beyond the short term. Canada Lithium initiated a buy back of minority shareholders on the 20th which saw the share find support in the region of the 200-day MA, near C50¢, and a sustained move back below that level would be needed to question scope for some further upside.

Of the main battery manufacturers, the best performers remain primarily in Asia. (Also see Comment of the Day on March 24th ). LG Chem continues to hit new highs but is becoming increasingly overextended relative to its 200-day MA and some consolidation of recent gains is becoming increasingly likely. Nevertheless, a pullback below KRW250,000 would be required to question the consistency of the medium-term uptrend. Samsung SDI found support in the region of the 200-day MA from February, rallied back to retest the high near KRW180,000 by mid-June and broke upwards last week. A pullback below KRW160,000 would be required to question the medium-term uptrend. BYD encountered resistance at the previous high in April and has since pulled back below the 200-day MA and the January low. The share has experienced significant technical deterioration and if the medium-term bullish outlook is to be sustained, it will need to rally soon. The case is now for the bulls to prove. Johnson Controls pulled back sharply from the April high near $36. It found support in the region of the 200-day MA and today's upward dynamic sees prices pushing to a new two-month high and back above the MA. A sustained move back below $25 is now required to question scope for some further upside.