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March 8th, 2022 | 11:03 CET

Rheinmetall, Altech Advanced Materials, Varta, Standard Lithium - Who can deliver?

  • Technology
  • Electromobility
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Oil, gas, steel, and wheat - these are the goods that are becoming extremely scarce due to the Ukraine crisis. Scarce in the sense of expensive. Because, in the case of oil, OPEC does not yet want to adjust its production quotas. After all, they are currently earning splendidly with prices of up to USD 135 for Brent. Russia and Ukraine are important producers of steel and wheat, in addition to their 11% market share in oil and gas production. Steel is likely to be real short supply, as the start-up of several idle blast furnaces will take the West some time. And as for wheat, the futures market tells us it is up 46% this year. So it is clear the commodity rally and supply chain theme continues. Which companies should we be paying attention to?

time to read: 5 minutes | Author: André Will-Laudien

Table of contents:

    Uwe Ahrens, Director, Altech Advanced Materials AG
    "[...] We know exactly what we are doing and are implementing what we consider to be a proven technology in an industrially applicable and scalable way. [...]" Uwe Ahrens, Director, Altech Advanced Materials AG

    Full interview


    Rheinmetall - What can the defense group actually handle?

    News from the war front is pouring in. At the same time, the governments of the West are formulating their packages of measures to stabilize the situation. In addition to sanctions, long-neglected issues are now being brought to the table. One of the first debates the Bundestag dealt with was the unconvincing effectiveness of the German armed forces. After just half an hour, there was more agreement in Berlin than ever before: the German armed forces would receive a special fund of an additional EUR 100 billion to invest in its defense capability.

    In principle, the change, of course, has been well received by the defense industry, with Rheinmetall's stock experiencing a 50% fireworks display within 48 hours - a sizzling EUR 2 billion valuation premium. However, company representatives make it clear that the political turnaround must now be accompanied by a structural rethink of the German armed forces and, above all, its procurement system.

    The defense group expects to need 1,000 to 3,000 additional employees for new orders resulting from the German armed forces upgrade. The Düsseldorf-based company received its first order for several thousand new helmets last week. CEO Pappberger is confident. Last year, his warehouses were stocked up with goods worth around EUR 1 billion, including steel, aluminum and special chips. It is precisely these goods that are needed now. There is a lot of euphoria in the first hours. A price of over EUR 150 is probably only justified if Rheinmetall gets a big slice of the budget and can ultimately deliver.

    Altech Advanced Materials - Here lurks a saving technology for battery production

    Not necessarily for the case of defense, but for the upcoming climate and mobility turnaround, high-performance components are needed, especially in the area of power supply and storage. With innovative approaches for modern batteries, Altech Advanced Materials AG (AAM) could revolutionize the market for lithium-ion aggregates.

    Conventional LI batteries already lose significant power during the first charging cycle. Here, e-vehicle manufacturers are urgently looking for alternative technologies. Altech uses an anode coating with high-purity aluminum oxide (HPA) and silicon enrichment. This can increase the performance of batteries by more than 15% and even extend their service life by up to 30%. If the Heidelberg-based Company also succeeds in further increasing the proportion of silicon on the anode, performance increases of 50 or 100% are also possible.

    At the moment, feasibility is still being analyzed, so the potential market launch of the new technologies is still some time away. The next milestone is to set up a pilot production site and prove profitable industrial production. Of course, this still requires some research effort and further investment.

    Naturally, AAM knows that it is not alone in the market with these ambitions, as developments to improve the performance of batteries for electric drives have been in full swing for years now. However, the Company's positioning is promising due to its major shareholders. The AAM share is still trading quietly between EUR 1.00 and 1.15. Speculatively highly interesting and a hot potato if things start to take off.

    Varta - It remains quiet as a mouse

    If you think of batteries, you inevitably end up with the German Varta AG. Here, too, the potential supplier of a new super battery is suspected, according to rumors on the market. Whether the great advance will come from Ellwangen is questionable, but at least there are premium manufacturers who trust in the Swabian art of engineering. It remains highly exciting.

    Unfortunately, there have been no preliminary figures from Varta for 2021 so far, which leads to uncertainty on the stock market and, in these volatile times, to significant markdowns in the share price. Since the beginning of the year, a good EUR 25 has been missing from the chart. At around EUR 80, the critical support at EUR 75 is approaching. Very disappointing, considering the peak from the hype year 2021 with prices above the EUR 160 mark.

    Without real news or solid figures, the price of Varta will likely remain very volatile, so pay urgent attention to the releases on March 31 at the latest. In any case, the chart of Varta only invites investors to enter again above EUR 105, where we had last stopped out. In the meantime, we will continue to monitor Varta until news puts the silence to rest.

    Standard Lithium - Soon ready to serve the lithium shortage

    For the commodity side, specifically lithium, there is an advanced explorer from the US, Standard Lithium Ltd (SLI). Standard's project in Arkansas could become the largest lithium project in North America with the involvement of Germany's Lanxess Group. The long-term prospects are coherent, but unfortunately, many rumors and inconsistencies are weighing on the share price. After some short-selling activities, there are now class-action lawsuits from angry shareholders.

    The fact remains that the price of the white metal is rising faster than it has in years. For example, the Benchmark Mineral Intelligence research firm's lithium price index tripled between May 2021 and February 2022. And there is news from Arkansas. SLI and Lanxess are making significant progress on their joint project. After a 20-month test run of the specially constructed pilot plant, Standard Lithium will conduct a study to evaluate the construction of an industrial lithium carbonate production facility at Lanxess' El Dorado site.

    As one of the first financiers, Lanxess negotiated well. In the positive case, Lanxess has no investment risk but has the opportunity to acquire battery-grade lithium carbonate from Standard Lithium at a preferential price. That is because the Cologne-based company is already a 5% investor in 2021 via a conversion right, and German engineering expertise is in high demand.

    After the hype in November, the SLI share has halved to CAD 7.50, but the valuation is still around EUR 800 million. Should SLI deliver the first lithium carbonate as early as 2022, the story should gain further momentum.

    With the warlike conflict in Eastern Europe, today's uncomfortable dependence on our previously cherished neighbors becomes apparent. Shortages arise out of necessity, and these come at a very high price. Companies need to secure their procurement markets so that customer costing can occur. However, fear and hysteria are currently being traded on the stock market - this, of course, brings opportunities and high risks.

    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") currently hold or hold shares or other financial instruments of the aforementioned companies and speculate on their price developments. In this respect, they intend to sell or acquire shares or other financial instruments of the companies (hereinafter each referred to as a "Transaction"). Transactions may thereby influence the respective price of the shares or other financial instruments of the Company.
    In this respect, there is a concrete conflict of interest in the reporting on the companies.

    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 also 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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