Commodities, Travel, Defense: Almonty, Lufthansa, and Rheinmetall in focus

US seeks tungsten alternative to China: Almonty's South Korean mine gains in importance

South Korea has already won five gold medals at the 2024 Olympic Games in Paris. In addition to the precious metals from the Olympics, the country is well-positioned in the commodities sector and offers investors high-yield investment opportunities. Whether Harris or Trump, the world power urgently needs a clean supply chain for raw materials such as tungsten. Given the geopolitical tensions with China and Russia, South Korea could become a key country here.

The recently published draft of the National Defense Authorisation Act for the US budget year 2025 addresses precisely this dependence on China and Russia for tungsten supplies. The report calls for progress in developing domestic or allied tungsten sources for the US defense industry. Tungsten, also known as Wolfram, is a rare metal with unique properties. It is characterised by its extremely high melting point of 3422 °C, significant hardness, and high density. In the defense industry, it is used in ammunition and missile warheads.

The Committee requires a report from the Ministry of Defense by March 31, 2025, on efforts to cultivate a tungsten supply chain and investment in production capacity. This is where Almony Industries comes into play. Almonty Industries Inc. is a Canadian mining company focused on tungsten. The Toronto-based company operates the Panasqueira mine in Portugal and is developing the Sangdong mine in South Korea, considered the largest tungsten project outside China. Almonty also owns projects in Spain: the producing Los Santos mine and the Valtreixal project in the development phase. As one of the few western tungsten producers, Almonty is strategically positioned in a market dominated by China. The Company aims to serve the growing demand for tungsten in various high-tech industries.

The mining company recently received the seventh and penultimate eighth disbursement from a loan from KfW IPEX-Bank for its Sangdong tungsten project in South Korea. The disbursement of USD 10.6 million is part of a total credit facility of USD 75.1 million for mine construction. Lewis Black, President and CEO of Almonty sees the financing as proof of the mine's construction progress. In light of the recently published report by the US and the strong financing of Almonty Industries, investors should take a closer look at this Company.

Lufthansa warns of profit slump in Q3 - Price pressure and rising costs weigh on earnings

Deutsche Lufthansa AG forecasts a significant decline in adjusted operating profit (EBIT) for the third quarter of 2024 compared to the previous year's figure of EUR 1.5 billion. The main reasons are intensified price pressure and rising costs. The Lufthansa share has fallen by around 25% in the last six months. Other airlines such as Air France-KLM and Ryanair have also recently reported weaker results.

CEO Carsten Spohr speaks of a normalisation of ticket prices, some of which had risen by more than 20% during the travel boom following the Coronavirus Crisis. The airline group expects unit revenues to fall slightly in the current quarter while costs are rising. The Lufthansa core brand, in particular, is suffering from the tough competition in Asia and the reluctance of business travellers to fly. Strikes by cabin and ground staff had a negative impact of around half a billion euros in the first half of the year. Delivery problems at Airbus and Boeing are also leading to flight cancellations.

In the second quarter of 2024, adjusted operating profit fell by more than one-third to EUR 686 million. Net profit almost halved to EUR 469 million, despite record revenue of over EUR 10 billion and an 8% increase in passenger numbers to 36 million. The Company now expects an operating result of EUR 1.4 to 1.8 billion for the full year. This figure is well below the previous year's figure of EUR 2.7 billion.

In response, Spohr has announced a turnaround program for Lufthansa Airlines in order to accelerate the 'overall modernisation'. The airline group plans to reduce the winter flight schedule to stabilise ticket prices. Quality should take priority over growth. A recent IT outage, triggered by a software update at CrowdStrike, caused costs in the low double-digit million range. Lufthansa is examining potential claims for damages. Lufthansa must now assert itself in a highly competitive environment. The Company is focusing on increasing efficiency, cost management, and quality enhancement.

Rheinmetall expands despite Russian threats: New projects in Hungary and Ukraine

The German defense contractor Rheinmetall is pressing ahead with its expansion in Eastern Europe, despite growing tensions with Russia. The Company recently delivered the first KF41 Lynx infantry fighting vehicle produced in Hungary and plans to deliver the first units to Ukraine before the end of 2024.

Rheinmetall has been operating a production facility in Zalaegerszeg, Hungary since August 2023. Of 217 Lynx units ordered for Hungary, 172 will be produced locally, valued at around USD 550 million. The remaining 45 units will be manufactured in Germany. At the same time, Rheinmetall opened a production facility in Ukraine on June 10. CEO Armin Papperger announced that the first infantry fighting vehicle manufactured in Ukraine will be completed by the end of 2024.

Additionally, the Company plans to build an ammunition factory in Ukraine, with production set to start within 24 months. This announcement was met with harsh criticism from Moscow. The deputy spokesman for the Russian Foreign Ministry, Andrei Nastasin, warned that such a factory would be a 'legitimate target' for the Russian military.

Despite these threats, Rheinmetall is continuing its expansion strategy. In a separate project, sensor manufacturer Hensoldt, a partner of Rheinmetall, received an order worth almost EUR 100 million to supply SPEXER air defense radars for the new Skyranger 30 anti-aircraft tank. Rheinmetall CEO Armin Papperger emphasises the need for long-term strategies in the defense industry, a view shared by Hungarian Defense Minister Kristóf Szalay-Bobrovniczky. The share is currently trading at EUR 503.60.

Almonty Industries is strategically favourably positioned in the global tungsten market. The Sangdong mine in South Korea is gaining particular importance in light of US efforts to achieve more independent supply chains. The recently received financing from KfW IPEX-Bank shows the financial cushion for the project's progress. Almonty could benefit from the growing demand for tungsten, especially from the defense industry. Declining profits, intense competition and rising costs are weighing on Lufthansa AG. Despite increased passenger numbers and revenue, profit margins are under pressure. The announced turnaround program and the focus on quality instead of growth show that management has recognised the problems. Investors should closely monitor the implementation of the announced measures and the further development of the aviation market. Despite geopolitical tensions, Rheinmetall is pursuing a continuous expansion strategy in Eastern Europe. Russia's threats regarding the planned munitions factory in Ukraine are not deterring the Company from continuing to position itself there. Investors should carefully weigh up the geopolitical risks.