08. June 2021 | 07:47 CET
NIO, Almonty Industries, Daimler - The power struggle escalates
The US government bans American investments for 59 companies from China. They are accused of cooperating with the Chinese state apparatus and military. The response from Beijing is not likely to take long. The Middle Kingdom is pulling the strings concerning the globally planned energy revolution. Whether solar plants, wind turbines or electric cars. The switch from fossil fuels to a sustainable energy supply based on renewable energy requires many metals. At the moment, more than 80% of the production of rare metals takes place in China. The currently prevailing chip shortage could be just a precursor.
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ISIN: US62914V1061 , CA0203981034 , DE0007100000
"[...] 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
Extremely increasing demand
Decarbonization, or the shift to a low-carbon economy, is exploding global demand for nickel, lithium and rare earth metals. By 2020, excess demand was already evident for most metals. Yet the energy transition is only at the beginning of its cycle, considering that the share of electrified vehicles in Germany is just 10%. The problem of increased demand is now being joined by another problem in the form of the escalating trade war. The Chinese government's plan includes establishing export controls on 17 rare earth metals. The goal is to develop and preserve these resources to meet rising domestic demand and protect the strategic resource amid intensifying global competition.
Tungsten shortage problem
Western nations face a mammoth task. Thus, projects are being built outside of China, subsidized by politicians, to continue to guarantee the supply chain, but this cannot be accomplished under a time frame of 10 years. The same problem exists with the strategic metal tungsten, which is irreplaceable in many modern technologies due to its unique properties.
The global tungsten market is mainly driven by China, which will continue to dominate both the supply and consumption of tungsten. Global demand for tungsten is forecast to increase by up to 7% annually, outstripping available supply, which will drive prices up permanently in the near future. Tungsten prices continue to move higher, having increased by 25% in 2021. Traditionally, tungsten prices lag copper prices by six months.
Mitigation through megaproject
Almonty Industries, which specializes in mining and processing tungsten, is working to solve this bottleneck. In addition to mines at Los Santos in western Spain and Panasqueira in Portugal, the Company is developing another tin and tungsten project at Valtreixal in northwestern Spain. However, the financial closing expected in June for the world's largest tungsten mine, the Sangdong Mine, should provide a push into higher valuation territory. The Almonty Korea Tungsten deposit has the potential to produce 50% of the world's tungsten supply outside China.
In addition, a customer for the next 15 years with a guaranteed price floor has already been found in the Austrian Plansee Group. Alongside the German Rohstoff AG, Plansee is one of the Company's major shareholders. The Groundbreaking Ceremony was held at the end of May. On the capital market, Almonty Industries is aiming for a listing on the ASX in Sydney. As part of this, Andrew Frazer, who has experience in the capital markets, was appointed to the board. The Almonty share, which is also traded in Germany, is currently on the verge of a breakout at EUR 0.85. The expected financial closing is likely to result in a significant increase in the share price. The expected financial closing should push the Company further north. The share still offers considerable potential in the long term due to its unique selling proposition (ex-China).
Scarcity puts the brakes on
Even Chinese companies are already suffering from scarcity. This was the case with electric car maker NIO, which announced its sales figures for May. With the delivery of 6,711 units, it was possible to top the previous year's result by 95.8%. However, looking at the previous month of April, this represents a 6% decline. The Company cited the global semiconductor shortage as the reason for the May decline. Due to the lack of supply of semiconductors, there were delays in the production and delivery schedule. However, the Company expressed confidence in making up for last month's dip in June. Despite the relatively weak figures, Citigroup analysts were optimistic and raised the stock from "neutral" to "buy." The price target is USD 58.30.
Daimler puts the brakes on costs
The Stuttgart-based company is willing to shed its own sales houses and workshops in the UK, Spain, and Belgium in order to continue cutting costs. "In this context, our markets are continuously reviewing their existing and future local sales setups as well as networks," a spokesman for the automaker said on Monday. He added that this had already been communicated at the local level in the three countries affected. First, the "Handelsblatt" had reported. It involves 25 branches with about 2800 employees. The possible savings effects pushed the Daimler share to a new 52-week high of EUR 80.34.