April 29th, 2022 | 12:20 CEST
BASF, Standard Lithium, Almonty Industries, BYD - Industrial shares in focus: Now it matters!
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"[...] China's dominance is one of the reasons why we are so heavily involved in the tungsten market. Here, around 85% of production is in Chinese hands. [...]" Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.
BASF - Heavy dependence on Russian gas becomes a danger
Chemical company BASF is drawing further consequences from the war in Ukraine. The Ludwigshafen-based company has announced that it will almost completely cease its business in Russia and Belarus. The exception is to be activities to support food production. In justification, BASF pointed out that the war could result in a global food crisis. Currently, 684 employees are working in the two countries, and they will continue to be supported until the end of the year. How it will go on then, nobody knows today.
Since March, the Group has not concluded any new business in Russia. Now, gas deliveries to Poland and Bulgaria have also been suspended. The Russian energy company Gazprom stopped gas deliveries via the Yamal pipeline to Poland and Bulgaria on Wednesday. The pipeline runs from Russia via Poland to Germany. The German Federal Ministry of Economics says that German gas supplies are currently guaranteed but that the situation is being monitored very closely.
The Ludwigshafen-based chemical giant is one of the largest gas consumers in Germany. BASF CEO Martin Brudermüller predicts the destruction of our prosperity if Germany stops Russian natural gas imports in order to halt financing Vladimir Putin's war in Ukraine. Germany is highly dependent on Russian gas and will not get rid of it anytime soon. A complete breakaway would swallow up investments of over EUR 50 billion. And who will pay for this? Today, BASF is calling its Annual General Meeting. At a share price of EUR 51, a dividend of EUR 3.40 or 6.6% will be paid out. However, nobody knows today how things would continue without Russian gas. It will be exciting to see how management will weave the topic into its speech today and what critical shareholders will have to say. Wait and see!
Almonty Industries - The year 2022 could be exciting
With the troubled supply chains, rare and critical metals are coming back into sharp focus. European governments should have developed an emergency plan for certain commodities long ago. Now, acting out of necessity as warfare progresses and shortages increase will complicate everything and make it more expensive. So inflation via the commodity side will continue!
Almonty Industries is on the verge of groundbreaking progress at its Sangdong property in Korea. In February, CEO Lewis Black received the green light for USD 75 million in KfW financing. Now it is up to the Company to raise the necessary equity to finalize the mine expansion and restart production. Tungsten is a metal with the highest heat requirements, and it is urgently needed in both the high-tech and defense industries. Further uses in e-mobility could send tungsten demand through the roof. The use of tungsten replaces the highly toxic cobalt, and at the same time, the nickel content in the battery can be increased. That, in turn, increases the charging performance, safety and longevity of the units. More than 80% of the world's production comes from China, and here, too, the dependencies of the industrialized countries are apparent. The geographical proximity of the new mine to the high-tech locations of South Korea and Taiwan is a strategic advantage for Almonty. It also comes in handy for local high-tech producers such as Samsung and TSMC as a China alternative.
Almonty's stock is currently trading between CAD 0.85 and 0.92, giving it a market capitalization of about EUR 122 million. Currently, the news situation is thin, but the share will likely take off significantly when the first progress reports from Korea arrive.
Standard Lithium - Industry giants follow China's BYD
Against the backdrop of the continued high global demand for e-cars, many high-performance batteries will be needed in the future. As a result, just about every automaker is planning with its own specifications on how to handle battery procurement. BYD, VW, Daimler and Tesla already have gigafactories or are currently planning them.
Lithium is currently one of the most important raw material components of a battery, along with nickel, cobalt, graphite and copper. However, the available production volumes on the markets are limited. According to Benchmark Mineral Intelligence, the deficit is expected to increase from 26,000 tons of lithium carbonate in the current year to more than 80,000 tons in 2024. Looking toward 2030, researchers are uncomfortable, as 50% of the internal combustion vehicles on the road today will reportedly be gone by then. That will require investment in mines, infrastructure and charging capacity of several trillion USD. Given current government debt levels and the exploding inflation trend, this could be a monster task for government budgets and industry.
The top dogs among producers can meet some of the current additional demand by expanding their mining sites and are currently earning handsomely. Explorer Standard Lithium (SLI) is one of the companies expected to start production by 2024. Also in the game in the US state of Arkansas is the German Lanxess Group. With its direct lithium extraction (DLE) technology, it is currently a global leader.
Chinese car and battery manufacturer BYD is impressively going full throttle domestically despite global dislocations in production. In March 2022, more than 100,000 e-vehicles, including plug-in hybrids, were sold for the first time, which corresponds to an almost fourfold increase compared to the previous year. So the signs in the industry are pointing to a storm, those who can deliver make the sales. Both the SLI and BYD shares have turned impressively upwards after the last correction. However, the risk remains high. Currently, however, techs are sold off again. Therefore, set tight stops: For SLI, this is at around EUR 5, and for BYD, the EUR 25 mark is very important.
The volatilities on the stock markets are still beating. Many good stocks are becoming fallen angels, and investors are pulling back for now. The top dog Tesla lost 20% of its market value in one week; USD 200 billion has disappeared into thin air. Apart from the partially beaten up standard stocks, the small Almonty remains a good admixture.
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