What's the deal with indium?

Indium: It's a metal that most folks have never heard of. But in today's high-tech economy, demand for this material is soaring in everything from thin-film solar panels to flat-screen TVs. The mounting demand for this unknown metal presents us with an unique investment opportunity.

Before talking about the investment side, let's talk a bit about the history and properties of indium.

Discovered virtually by accident in 1863 by two German chemists, Ferdinand Reich and Theodor Richter, indium was once thought to be incredibly rare. In fact, prior to 1924, only a single gram of indium existed in its isolated form.

Since then, however, we've found that this metal is fairly plentiful. As is turns out, indium is the 61st most abundant mineral in the earth's crust. That means it's about three times more abundant than silver or mercury. But that doesn't necessarily mean that we're busting at the seams with the stuff. Fact is: finding indium in high concentration is extremely difficult. For mineral firms, that means having a property with a lot of indium can be jaw-droppingly profitable.

Indium is a soft, silvery-white element named after the brightest line on the color spectrum, indigo. which has the abnormal characteristic of producing an odd sound when being bent. Metallurgists call this sound a "scream." which sounds like the crackle of a fire.

Although it is reactive with certain acids, indium is highly stable in air and water. It is also faintly radioactive. But it is not regarded as dangerous, as the decay rate is almost 50,000 times slower than that of natural thorium. With such a low toxicity, scientists can safely handle and work with indium.

So what the heck do they use indium for, anyway?

Some of indium's uses include: making semiconductors, high speed transistors, specialized solders and other specialized alloys. It is also used in the control rods for nuclear reactors. But the main use of indium, which accounts for almost 50% of the consumption of the element, is in the creation of thin-film coatings to make electronic devices such as thin-film solar panels and liquid crystal displays (LCDs), screens that transform electricity into light energy.

Now, even if you aren't as tech-savvy as you would like to be, I can promise that you've used LCDs at one point or another. In fact, it's likely that you're staring at a liquid crystal display right now. LCDs are used in a wide variety of products, including projectors, cameras, televisions, watches, cell phones, desktop monitors and laptop computers.

As you can imagine, with the explosion of the high-tech information age, the demand for LCDs is soaring. In fact, the Japanese electronics manufacturer Sharp Corp., the world's largest producer of LCD televisions, says that it expects this year's sales of LCD TVs to expand by 50% over 2006, to 68 million units.

Remember, all LCD products contain a thin film coating of indium. That's where the investment angle comes in.

Decades of underinvestment in the indium sector has led to an acute supply deficit. Global demand now far outstrips both main production and capacity. More importantly, demand growth over the past few years has been increasingly heavy, while producers struggle to ramp up their production.

This supply-demand imbalance has propelled indium prices nearly 900% higher since 2002! But the party's not over yet. Not by a long shot. The increasing demand for LCDs alone is enough to continue to push prices even higher.

Some stocks which include Indium - GXM, SDN