Alarm bells ringing for rare earths and record highs for hydrogen! Hensoldt, Plug Power, Mercedes, and BMW partner European Lithium

Mercedes & Co.: Production halt due to a shortage of rare earths?

Are Volkswagen, Mercedes, and Co. facing a raw materials problem? This was recently discussed in the business magazine Wirtschaftswoche. In recent months, China, the largest supplier of rare earths, has increasingly restricted exports and, in some cases, even banned them altogether as part of the tariff war with the US. The new licensing system has been slow to get off the ground. Insiders from the German automotive industry report this and more in Wirtschaftswoche. A Mercedes spokeswoman is quoted as saying: "Due to the great complexity and volatility, it is difficult to make reliable predictions based on speculation." This shows the tension and the need to develop rare earth projects outside China and Russia. This is one reason why European Lithium's stock is exciting. The stock is trading at EUR 0.026, while analysts at First Berlin have a price target of EUR 0.14.

European Lithium: Rare earths for the German automotive industry

European Lithium recently published the results of the preliminary economic assessment (PEA) for the Tanbreez rare earth project located in Greenland. The country is under Danish sovereignty and thus belongs to the EU. The fact that there are huge deposits of raw materials there has attracted global attention due to regular annexation hints by US President Donald Trump.

According to the PEA, Tanbreez in South Greenland is one of the world's largest known rare earth deposits. European Lithium reported a robust resource base of 45 Mt of ore with 0.40% total rare earth oxide (TREO) with 27% heavy rare earth elements (HREE). Compared to most rare earth projects, the proportion of heavy elements is unusually high. The net present value (NPV) is estimated at USD 2.4 to 3 billion, and the pre-tax internal rate of return is expected to be 162%. An exploration permit for the next 30 years has also already been granted.

European Lithium has a second exciting project, for which it has already secured BMW as a partner: lithium production in Austria. Here, too, mining permits have already been granted. Lithium will be mined as early as next year, processed into battery-grade lithium hydroxide, and delivered to BMW, which has already made a down payment in the millions.

Hensoldt shares: 30% downside potential?

Even if rare earths become scarce in the German defense industry, investors are currently completely ignoring the issue. A FOMO rally is underway. The share prices of Rheinmetall, Renk & Co. are unstoppable. Last week, Hensoldt's share price broke through the EUR 90 mark and reached a new all-time high. In the current year alone, the security has gained around 170%. Its market capitalization now stands at an impressive EUR 10.6 billion.

According to analysts at Jefferies, the defense electronics manufacturer is now significantly overvalued. They see the fair value of the share at EUR 60, which means a potential decline of over 30%. Their recommendation for Hensoldt shares is "Underperform." Analysts believe that Hensoldt has made a cautious start to the new year. Growth is expected to increase in the coming quarters, but this is urgently needed. The analysts also do not see the possible sale of a low-margin division in South Africa as a catalyst for the share price.

Overall, analysts are currently conspicuously cautious about Hensoldt. According to marketscreener.com, 3 of 11 experts recommend the stock as a "Buy", which is relatively low given the hype. In addition to Jefferies, two other analysts recommend the share as a "Sell".

Plug Power: Success in its home market

At Plug Power, 6 of 23 analysts recommend buying, but 4 recommend selling. In recent months, the optimists have been completely wrong. The former hydrogen high-flyer is unable to get its losses under control and is burning through capital. At USD 0.88, the share price is not far from its all-time low. The valuation has now fallen below USD 1 billion. Still too much, say the bears.

At least there was a small milestone to celebrate recently. In April, Plug Power produced 300 tons of liquid hydrogen at its plant in the US state of Georgia. On a monthly basis, this is an industry-wide record. Plug Power commissioned the plant with a nominal capacity of 15 tons per day over a year ago and has been ramping it up bit by bit since then. With plants in Tennessee and Louisiana, Plug Power is currently building a hydrogen production network in the US with a production capacity of 40 tons per day. Customers include companies such as Walmart, Amazon, and Home Depot. They use the hydrogen to decarbonize their logistics. Given the US government's environmental policy, whether this growth will continue remains to be seen.

Buying Plug Power shares is not currently a priority. On the other hand, there are several arguments in favor of European Lithium shares. Rare earths are increasingly becoming a weapon in global politics, and BMW aims to launch its new class next year. Consolidation would be good for Hensoldt shares, but the momentum is too strong.