04. March 2021 | 09:03 CET
NIO, Royal Helium, Xpeng - the fierce battle for raw materials!
The market price is determined by supply and demand. Due to the global climate programs of politics, the pressure increases and the demand grows enormously in the coming years. Raw materials such as rare earth metals, lithium, helium, copper or even silver will become extremely scarce commodities. There is a threat of drastic price increases. In recent years, significant investments in raw material projects have been neglected. To provide more supply, it will now be a race against time. In any case, the producers will profit.
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ISIN: US62914V1061 , CA78029U2056 , US98422D1054
"[...] We expect the first three wells to be drilled, cased, completed and tested by the second week of March [...]" Andrew Davidson, CEO, Royal Helium Limited
Not yet recognized by the market
In contrast to hydrogen stocks, helium companies, the stock market's current stars, have so far received little attention. Yet helium is defined by politicians as a strategically important raw material. Experts warn by the small supply and a strongly rising demand, we are already in a helium crisis. The raw material is increasingly needed in the healthcare sector for magnetic resonance imaging (MRI), particle accelerators and in the production of quantum computers. Demand from the aerospace industry is also steadily increasing. NASA is the world's largest customer for helium. Demand is being further boosted by other companies entering the market, such as SpaceX.
Royal Helium recognized the problem of helium shortages years ago. In addition to being one of the few publicly traded pure-play helium companies, Royal Helium can also call itself the second-largest helium landowner in North America. The Company has access to approximately 400,000 hectares of prospective helium land in southern Saskatchewan, Canada. Fundamentally, the Company has been making positive headlines for months. A significantly oversubscribed placement of CAD 6.16 million was completed at the end of last year. The proceeds were immediately put into the new drilling program for the Climax project. To this end, a three drill program was initiated in mid-January.
The Company expects all three wells to be drilled, completed and production tested by mid-March 2021. Unlike the production of metals such as silver or gold, with helium it is possible to go into production immediately with a drilled hole. This situation allows Royal Helium to produce cash flow immediately. As a result, further drilling programs are to be paid for from production in the future. For 2021, the Company's stated goal is to scale and bring significantly more wells into production. The market capitalization for the long-term promising Company is EUR 26.29 million. The share price is EUR 0.40. Trading takes place in Toronto as well as in Germany.
NIO - More lithium, please!
The situation for lithium looks almost dramatic. Due to the growth explosion of electric mobility, market experts assume that the demand for lithium will significantly exceed the supply by 2022 at the latest. In addition to the well-known electric car manufacturers such as Tesla, BYD or renowned carmakers such as VW, new players such as the tech giant Apple are also flocking to the market, which will further increase demand. Volkswagen AG, for example, plans to invest a total of EUR 33 billion in electric mobility by 2024. By 2021, the target is for electric cars to account for 8% of total sales. Due to the policy that has proclaimed the switch from all internal combustion engines to electric engines by 2030 at the latest, we should be facing a lively retooling and an unmet demand precisely for lithium in the next few years. Added to this is that lithium, which is needed for the batteries of the new automobiles, is produced almost exclusively in China.
The quarterly figures of the Chinese carmaker NIO are an example of the enormous growth. In the fourth quarter alone, a turnover of USD 1.02 billion was achieved, an increase of 133.2% compared to the previous year. NIO reported net income for shareholders of minus 1.49 billion yuan, or minus USD 228.7 million, a 48.4% improvement from a year earlier. However, this metric was 25.65% lower than the previous quarter. The NIO share lost double digits in the market as a result.
Xpeng - sales and share price dip
NIO's competitor, Xpeng, also reported its sales figures this week. In contrast to the previous month, the Company reported a sharp drop. The Chinese Company delivered 2,223 electric SUVs, a decline of 63% compared to January. Compared to the same period of the previous year, an impressive sales explosion of almost 580% was reported. According to management, the dip in sales was seasonal. The reason for this is the one-week New Year's vacation. Overall, Xpeng continues to recognize strong customer demand. Investors are less optimistic about the stock. Since its high in mid-January, the stock has lost exactly 50% and is currently trading at USD 31.50.