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Between 2008 and 2009, the global production of lithium declined by 30%, entirely for economic reasons. In fact, I created a definition for rare metals in 2009, in which I defined a rare metal in 2009 as one produced at a global rate of 25,000 metric tonnes per year or less. Lithium was my threshold rare metal in 2009 by this definition. In 2008 it was in fact produced at a rate of 25,000 t a year. When updating my rare metals chart earlier this year, to produce my list of the rare metals for 2009, I fully expected that lithium’s production would have increased to the point where it was no longer a rare metal by my definition. Instead, to my surprise, lithium tracked the recession. Its 2009 production was in fact 30% less than it had been in 2008; it was, in 2009, only 18,000 t for the year.

Like every other commodity metal besides gold, silver, or platinum, the production and price of lithium is dependent on the demand for the element in the global industrial marketplace and has no intrinsic value component at all. This demand in its turn is a direct function of the end use of lithium, in all of its chemical forms in mass produced devices, chemical catalysis, and pharmaceuticals.

Therefore, instead of just being based on lithium metal production, a lithium market ETF for a small investor is much better based on being indexed to not only actual production and demand but also to the probability of future demand and supply increases, due to technological breakthroughs. An indexed ETF that includes investments in technological breakthroughs that can drive future high demand, is the best bet for a small investor, providing that the companies indexed by the ETF are chosen for their ability to increase existing production of lithium, or to economically bring new production on line when called for, and/or for their ability to innovate uses for lithium and to commercialize those innovations profitably.

There is a threshold of investor awareness and confidence that the rare earths have not yet passed; I don’t know if the rare earth sector will ever even achieve that threshold much less pass through it, but I do know why it hasn’t so far. There are indeed many critical uses for the rare earths and they, the rare earths as functional components, are pervasive in our technological culture. Understanding those uses requires specialist education and/or technical skills. Explaining why, exactly, the rare earths are important to the general public, involves teaching skills far beyond that of the typical disgruntled or adventurous scientists and engineers, who have become analysts and publicists for the financial firms servicing the high-tech sector of the stock markets.

The lithium battery sector has been better served by the educational and analyst establishment than the rare earth sector. I think this is because everyone with even a general higher education, thinks they understand at least the use of batteries. Thus the technical language of the battery sector of energy storage economics, seems to them to be at least familiar enough for them to be comfortable, that they understand it generally.