Factors to watch for in 2015While lithium has no doubt been a welcome exception to the performance of other metals in 2014, Berry cautioned that there are several important factors worth watching next year. First, while Tesla has no doubt been a boon for the lithium industry, its effect could go both ways. "The stock is arguably priced for perfection," Berry said, "so any consistent misses in sales targets or delays in rollouts of future models (Model X, for instance), could have negative implications for the lithium market — in particular the junior mining companies hoping to join the ranks of producers." He's also closely watching prices and demand for by-product commodities such as potash, pointing out that "[a]ny sustained fall in potash demand or lower pricing will affect the overall economics of a lithium project that may depend on a potash by-product credit to lower the overall cost of production." On top of that, Berry pointed to a struggling global economy and falling oil prices as factors that could put a dent in lithium demand. Cheaper prices at the pump could lower demand for electric vehicles, which might inadvertently take focus off of lithium exploration or development. More broadly, he suggested keeping an eye on lithium product pricing (for example, FMC's (NYSE:FMC) recent price hike), capital expenditures by lithium producers and mining activity in China as indicators of lithium supply and demand. For example, rising environmental concerns in China could possibly lead to mine shutdowns. Finally, Berry said that keeping an eye on battery research and development is a must given the "exorbitant amount of R&D money" going into the space; however, he added that "it could take a decade or more for any major paradigm shift to really integrate into global supply chains." Companies to watch Some lithium companies have been getting a positive response despite the wider state of the commodities market. One is Orocobre, which Berry pegged as one to watch in 2015. It reached first production at its Olaroz project in November, and intends to ramp up production next year. "Given our position and growing credibility in the lithium sector, we are fortunate to have a receptive capital market willing to support our management and team," Calaway said of his company.
Berry also recommended keeping an eye on Lithium Americas (TSX:LAC) in 2015 given its agreement with Korean steelmaker POSCO (NYSE:PKX), and suggested watching majors such as SQM (NYSE:SQM) for indications of wider trends."Currently only about 10 percent of their revenues come from lithium and associated products," he stated. "An increase in this percentage is a good clue on the trend in both pricing and volume growth." Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article. Related reading: Lithium in 2014: Tesla Takes Center Stage Lithium Outlook 2015: Expect Continued Consolidation from Lithium Investing News