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January 21, 2010

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Home » Business » Auto

Toyota arm secures lithium supply

A SISTER company to Toyota Motor Corp signed a lithium supply deal in Argentina yesterday that could help the world's largest auto maker keep its lead in developing gasoline-electric hybrid cars.

The deal sent shares in the lithium project's owner and operator, Australian-listed Orocobre Ltd, soaring almost 50 percent to an all-time high of A$2.04 (US$1.86).

Lithium, a highly reactive and versatile metal, is expected to be in increasing demand as car makers choose costly but more efficient lithium-ion batteries to power hybrid and electric vehicles.

"When it comes to mass production of hybrids, the main hurdle has been a shortage of batteries," said Yoshihiko Tabei, chief analyst at Kazaka Securities. "Toyota is taking a step on its own to secure the materials it needs to ensure stable production."

Toyota Tsusho Corp, a trading house and key Toyota supplier 22 percent-owned by the auto maker, said it would jointly develop a new lithium project in Argentina with Orocobre.

Orocobre shares jumped to a record peak yesterday in its heaviest ever trading volume. The stock has risen almost tenfold in the past 12 months, and closed up 32 percent at A$1.85.

Toyota Tsusho rose 6 percent, while Toyota Motor's stock ended down 0.9 percent, roughly in line with other auto shares.

The Salar de Olaroz project in Argentina is estimated to cost around US$80-100 million, with the final figure to be determined after a feasibility study, Orocobre spokesman Paul Ryan said, adding the study should be complete by late September.

"As environmentally friendly electric car demand continues to grow, Toyota Motor will have the opportunity to become a cornerstone offtake customer," Orocobre said.

Toyota uses nickel-metal-hydride batteries for the current Prius hybrid but has decided on lithium-ion batteries for future plug-in models.

Concerns about carbon emissions and their impact on climate change plus high and volatile oil prices are increasing the popularity of hybrid and electric vehicles despite their higher costs.

Toyota aims to double its global output of gas-electric hybrid cars to 1 million units in 2011, as it fights to stay in the lead in the growing market for low-emission cars, the Nikkei business journal reported this month.

Orocobre went public in December 2007 and now has market capitalization of nearly A$150 million.

Managing director Richard Seville said the lithium market had been growing at a compound annual growth rate of about 7 percent between 1997 and 2007, before the global financial crisis, thanks largely to demand from consumer electronics makers.

"That growth will continue, but on top of that we have the step change in demand with a new application which is in large format batteries for use in electrical vehicles," he said.


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