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June 22nd, 2022 | 14:35 CEST

Metal rally: BYD, Almonty Industries, BASF, Nordex - Which shares will be climate change winners?

  • Tungsten
  • Electromobility
  • Battery
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Germany is bracing itself for a difficult winter. Gas supplies from Russia are dwindling. The reason that Siemens Energy is not getting a move on with urgent maintenance here is more likely to be interpreted politically. If Germany continues to join the international arms deliveries to Ukraine, things will likely get tense in the winter. Minister Habeck is calling on the German people to save energy and wants to offer corresponding rewards, but nuclear power plants are still being left out. It is all a bit confusing, but France is already standing by to compensate for Germany's botched energy policy with high-priced electricity supply contracts. So the citizen will have to pay for the red-green climate policy. Where are the opportunities for investors in this environment?

time to read: 5 minutes | Author: André Will-Laudien
ISIN: BYD CO. LTD H YC 1 | CNE100000296 , ALMONTY INDUSTRIES INC. | CA0203981034 , BASF SE NA O.N. | DE000BASF111 , NORDEX SE O.N. | DE000A0D6554

Table of contents:

    Dr. Thomas Gutschlag, CEO, Deutsche Rohstoff AG
    "[...] 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

    Full interview


    BYD - The Tesla hunter from China

    By now, word should have spread that BYD has a good standing in China. Only its international market presence is still lacking. While Tesla already offers more than 80% of its vehicles abroad, BYD only has around 10% in the passenger car sector. BYD is, however, represented in buses, and many local transport companies rely on the technology of the Chinese technology giant. Recently, the good news is now piling up. Net income rose a whopping 241% in the first quarter to USD 123 million on revenue growth of just over 63%. Most of this was due to solid sales in the e-car division.

    The manufacturer continues to benefit from the fact that the Company's vertical integration model across multiple production stages has significantly mitigated the logistical issues faced by competitors. Moreover, the latest figures for April show that BYD's sales are up 270% year-on-year. BYD's main competitors, NIO, Li Auto and XPeng, could not keep up and Tesla's China business also almost came to a standstill in April with sales of only 1,512 vehicles.

    The advantage of vertical integration is likely to increase rather than decrease in the future, as many raw materials are becoming increasingly scarce, especially for batteries. BYD is well-positioned here, and the pivotal point could be global access to the all-important lithium. In any case, the share continues to soar and recently reached an all-time high of EUR 38.05. In order to secure profits, we now tighten the safety stop to EUR 34.50.

    Almonty Industries - Underway with a critical metal

    With supply chains permanently battered, rare and critical metals are once again coming into focus. Western governments have as yet only made pronouncements for the inclusion of certain metals on the "Critical List". Measures to secure their supply, i.e. regulatory intervention in the free market economy, have not yet been sighted.

    Almonty Industries has done its homework in recent months and will be able to make a full start with its Korean Sangdong mine in the foreseeable future. In addition to the USD 75 million KfW financing already committed, the Company has raised equity capital consistently. Most recently, at the beginning of June, the Company was able to conclude an equity deal with one of the principal shareholders, Deutsche Rohstoff AG, for 2.494 million shares at AUD 0.85. The Chess Depositary Interests (CDIs) were placed for a gross consideration of AUD 2.12 million or EUR 1.4 million. The proceeds from this placement will be used for general working capital prior to the drawdown of the USD 75.1 million KfW IPEX Bank financing facility and to accelerate ongoing growth strategies. A good financial setup has now been established.

    The primary business of Toronto-based Almonty Industries is the mining, processing and shipping of tungsten concentrate from its operating Los Santos mine in western Spain and Panasqueira mine in Portugal, as well as the development of its new tungsten property in Sangdong, Korea. The Sangdong mine, historically one of the largest tungsten mines in the world and one of the few long-life, high-grade tungsten deposits outside of China, was acquired in September 2015 through the acquisition of a 100% interest in Woulfe Mining Corp. Almonty also owns 100% of the Valtreixal tin-tungsten project in northwestern Spain.

    Furthermore, there is an opportunity for the metal tungsten to replace the highly toxic and rare cobalt in future battery developments. Tungsten is able to increase the nickel content in the battery, increasing the charging performance, safety and longevity of the units. The geographic proximity of the new mine to the high-tech locations of South Korea and Taiwan is a strategic advantage, as it reduces dependence on the "quasi-sole supplier" China. Following the recent transaction, Almonty shares are currently trading between CAD 0.86 and CAD 0.92, giving a market capitalization of approximately EUR 136 million. The share price has coped very well with the last sell-offs in the indices; currently, long investors clearly predominate. Collect!

    BASF - The chemical giant enters the battery recycling business

    The Ludwigshafen-based chemical giant is one of the largest gas consumers in Germany, which could still lead to operational restrictions in the near future if it is not possible to switch out in time. However, many chemical processes only work by using natural gas, so BASF cannot juggle energy sources and is dependent on substitute supplies.

    Now the chemical giant from Ludwigshafen is announcing its entry into battery recycling. An excellent idea because in a few years, the market will likely be full of spent batteries, which are now being installed in large numbers with the new e-mobility wave. Nevertheless, the units are unlikely to last longer than 10 years and are more likely to be recycled before then. The recycling plant is intended to close the loop from used batteries from electric vehicles to cathode materials for new batteries. The Company plans an annual processing capacity of 15,000 tons. The mass of batteries currently in use contains large quantities of the most important and expensive metals for producing cathode materials, such as lithium, nickel, cobalt and manganese. With this investment, BASF intends to strengthen its Schwarzheide site, as there are many cell producers and manufacturers of electric cars in the surrounding area. Whether the downward slide of the BASF share can be stopped in the short term is more than questionable. After all, the group has to cope with entirely different problems in its operating business due to the raw material price explosion. Wait and see!

    Nordex - Now the problems are becoming all too obvious

    Nordex came to the market yesterday with bad news. Higher costs for raw materials and logistics, as well as a change in production and lower installation output, caused higher losses at wind turbine manufacturer Nordex in the first quarter. The forecast, which was lowered in May, was confirmed once again, but the overall picture of the Nordex Group is nevertheless becoming increasingly gloomy.

    CEO Jose Luis Blanco comments: "The start into 2022 has been difficult and has certainly gone differently than everyone expected. The cost situation remains volatile, and significant supply chain disruptions exist." Nordex's share price suffered another hefty discount of 9%, falling back to EUR 8.50 by the afternoon. Thus, the paper is now halved on a 12-month view. We had permanently advised against an engagement and are waiting for a technical bottoming after the sell-off. The long-term chart shows weak support in the EUR 7.2 area, another 16% lower. At the moment, it makes no sense to set a limit, as long as one profit warning follows the next and the environment is becoming increasingly gloomy.

    Apart from bear market rallies, there have been no major upward corrections so far. This is especially true for growth stocks that have yet to turn a profit. Standard stocks such as BYD and BASF at least offer long-term protection, yet they are performing differently. Almonty Industries is moving forward step by step and can at least refinance itself well.

    Conflict of interest

    Pursuant to §85 of the German Securities Trading Act (WpHG), we point out that Apaton Finance GmbH as well as partners, authors or employees of Apaton Finance GmbH (hereinafter referred to as "Relevant Persons") may hold shares or other financial instruments of the aforementioned companies in the future or may bet on rising or falling prices and thus a conflict of interest may arise in the future. The Relevant Persons reserve the right to buy or sell shares or other financial instruments of the Company at any time (hereinafter each a "Transaction"). Transactions may, under certain circumstances, influence the respective price of the shares or other financial instruments of the Company.

    In addition, Apaton Finance GmbH is active in the context of the preparation and publication of the reporting in paid contractual relationships.

    For this reason, there is a concrete conflict of interest.

    The above information on existing conflicts of interest applies to all types and forms of publication used by Apaton Finance GmbH for publications on companies.

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    Der Autor

    André Will-Laudien

    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.

    About the author

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