(The opinions expressed here are those of the author, a columnist for Reuters.)
By Clyde Russell
LAUNCESTON, Australia, May 12 (Reuters) - Lithium is the hottest commodity around these days, enjoying spectacular price gains and a blue-sky outlook that's the envy of the natural resource sector.
There's just one problem though. It's extremely difficult, and somewhat risky, to gain exposure to the sector.
Lithium isn't traded on any major exchange, and doesn't have futures contracts or swaps, thereby cutting out one of the main ways investors gain exposure to a commodity.
This means the best way to access lithium's story is through equities, but this isn't as straightforward as it may seem.
But before looking at how to get into lithium, it's worth asking what the hype is about, and whether it's justifiable and sustainable.
Lithium prices in China have risen from about $7,000 a tonne to over $20,000 recently, according to research by consultants CRU, while industry website Asian Metal says lithium carbonate, the compound used in batteries, has jumped by 76 percent in the past 12 months.
Basically, lithium's positive story can be put down to the so-called Tesla effect, namely that the rapid growth in electric vehicles will boost demand for the light metal beyond the current level of supply.
Certainly, Tesla Motors has ambitious plans to boost the number of vehicles it produces using lithium-ion batteries, and it's not the only maker of electric vehicles with rapid growth projections.
The demand for lithium for batteries also makes the metal seem like it's not a China play, something that can't be said for most commodities, prices for which are often driven by what's happening in the largest importer and consumer of natural resources.
While Tesla's plan to make 1 million electric cars a year is the headline act behind lithium's dramatic price rise, it does mask some other realities about the market.
The first is that lithium is a very diverse metal, with numerous grades, with numerous applications.
Batteries accounted for about 44 percent of lithium demand in 2015, and this is forecast to rise to about 55 percent by 2020, exceeding its uses in areas such as ceramics, glass and pharmaceuticals.
The other factor worth noting is that lithium demand is still likely to be driven by Asia, and China in particular, with CRU forecasting that the continent's share of consumption will rise to 60 percent of the global total by 2020 from about half last year.
This is largely because China's electric vehicle market is expected to grow at a faster pace than those in the rest of the world, as is its demand for batteries for other applications, such as storing electricity.