Close menu




February 14th, 2022 | 11:56 CET

ThyssenKrupp, Defense Metals, Mercedes-Benz Group - Is war coming now?

  • RareEarths
Photo credits: pixabay.com

The situation around Ukraine is coming to a head. Last Friday, US citizens were called upon to leave Ukraine immediately. US intelligence services suspect that Russia's invasion could be imminent as early as next Wednesday. Stock markets fell in response. But will Russia really start a war? That remains to be seen, but it is clear that war is also an economic engine, despite the suffering it causes. The defense industry needs rare earths, as does the steel and automotive industries. We highlight three companies around rare earths.

time to read: 4 minutes | Author: Armin Schulz
ISIN: THYSSENKRUPP AG O.N. | DE0007500001 , DEFENSE METALS CORP. | CA2446331035 , MERCEDES-BENZ GROUP AG | DE0007100000

Table of contents:


    ThyssenKrupp - Decent quarterly figures

    ThyssenKrupp is active worldwide in the areas of automotive technology, industrial components, marine technology, steel and materials services. Rare earths are needed to refine steel to endow the finished product with specific properties. Today, the production of super steel is a science in itself, and there are now thousands of steel grades. Industry association BDI warned in late January that supply shortages of rare earths could occur as China's Ministry of Industry and Information Technology plans to re-regulate the rare earth industry. China produces by far the most rare earths in the world.

    Meanwhile, submarine propulsion systems with permanent magnets made of rare earths are also being developed in China to make the propulsion system silent. ThyssenKrupp is also active in this area. Supply bottlenecks would therefore affect the Essen-based group here as well. On February 10, the Company presented its first quarterly results, and it can be seen that the turnaround is slowly bearing fruit. Order intake increased by 33% YOY to EUR 10.4 billion. Sales also increased by 23% to EUR 9 billion. Adjusted EBIT was a whopping EUR 300 million higher than a year earlier at EUR 378 million.

    CFO Dr. Klaus Keysberg said: "The turnaround of ThyssenKrupp is in full swing. We have made important progress in improving our performance and focusing our portfolio." The Essen-based Company's stock has traded mainly between EUR 8.00 and EUR 10.00 since the middle of last year. Currently, the stock is trading at EUR 9.00 and has suffered a decline despite the decent figures. Currently, the share is trying to form a bottom at EUR 8.70. If this succeeds, a test of EUR 10.94 is possible.

    Defense Metals - Drilling results on the horizon

    China is in the lead in mining rare earths with 140,000t annually. Worldwide, 240,000t are mined. However, it is important to note that 85% of the processing takes place in China. The USA mines 38,000t annually, but this too is processed in China. The efforts of the West to become more independent from the Middle Kingdom are growing, at least since the Corona pandemic. One Company that could help is Defense Metals, advancing their Rare Earth project in Wicheeda, Canada. According to the Company, the site is 2,008 hectares in size and has a projected annual production of 25,000 tons of rare earth oxide.

    In November, the Company provided the preliminary economic assessment prepared by SRK Consulting. Annual sales of CAD 397 million at the cost of CAD 137 million and a total lifespan of 19 years were assumed. The net present value of the project is CAD 517 million after-tax. After the Company acquired 100% of all rights to the project, the management team was strengthened with Dr. Luisa Moreno as president and John Goode, an expert in rare earth processing. Next up are the first results from the 2021 diamond drilling. These are expected in mid-February. Further results are expected to be announced at the end of February. Management hopes the results will increase mineral resources.

    As a result, a target for 2022 would already have been worked off. Furthermore, the preliminary feasibility study is to be started, and the flow sheet for the production of high-grade concentrate is to be further optimized. The construction of a hydromet pilot plant is to begin as early as the first half of the year. The pilot plant products are to be used to facilitate the acquisition of customers and to conclude offtake agreements. The share is currently trading at CAD 0.275, well below the 2021 high of CAD 0.75. It may be that Dr. Moreno will be able to present the drilling results as early as at the International Investment Forum on February 17.

    Mercedes-Benz - Good financial results in 2021

    The tendency to fully rely on electric vehicles (EV) in the future also brings new challenges. The new vehicles require between 1-3kg of rare earths, mainly to produce neodymium-iron-boron magnets, which are used in over 90% of all EVs. 10 million EVs would represent 20% of the current annual neodymium supply worldwide. However, over 50 million vehicles are produced per year. So it is clear that there will be shortages of rare earths if they are not more heavily mined. The Mercedes-Benz Group, formerly Daimler, would also be affected by this.

    On February 11, the Stuttgart-based group announced preliminary annual results for 2021. In the process, the Cars & Vans division exceeded its adjusted return on sales forecast at 12.7 and achieved an adjusted EBIT of EUR 14 billion. The Mobility segment achieved an adjusted EBIT of EUR 3.4 billion with a return on equity of 22%. There was no information on the number of vehicles sold. But already in Q3, 30% fewer vehicles were sold than in the previous year due to supply bottlenecks in the chip shortage.

    CEO Ola Källenius commented on the figures as follows: "Our strong performance is the result of products in high demand and a focus on profitable growth and cost discipline. As the world's most valuable luxury car brand, we are accelerating into an all-electric, software-driven future." So the group remains fully focused on electrification. The stock shot up after the numbers, exiting trading at EUR 74.44.


    The demand for rare earths is growing due to new technologies. If we want to reduce our dependence on China, we need to invest in the future. ThyssenKrupp will need rare earths above all for its submarines and steel division. Defense Metals is on its way to becoming a rare earth producer. The Mercedes-Benz Group has to be careful that there will not be a supply shortage of rare earths. The fact is rare earths prices have already increased significantly in 2021.


    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.

    Risk notice

    Apaton Finance GmbH offers editors, agencies and companies the opportunity to publish commentaries, interviews, summaries, news and the like on news.financial. These contents are exclusively for the information of the readers and do not represent any call to action or recommendations, neither explicitly nor implicitly they are to be understood as an assurance of possible price developments. The contents do not replace individual expert investment advice and do not constitute an offer to sell the discussed share(s) or other financial instruments, nor an invitation to buy or sell such.

    The content is expressly not a financial analysis, but a journalistic or advertising text. Readers or users who make investment decisions or carry out transactions on the basis of the information provided here do so entirely at their own risk. No contractual relationship is established between Apaton Finance GmbH and its readers or the users of its offers, as our information only refers to the company and not to the investment decision of the reader or user.

    The acquisition of financial instruments involves high risks, which can lead to the total loss of the invested capital. The information published by Apaton Finance GmbH and its authors is based on careful research. Nevertheless, no liability is assumed for financial losses or a content-related guarantee for the topicality, correctness, appropriateness and completeness of the content provided here. Please also note our Terms of use.


    Der Autor

    Armin Schulz

    Born in Mönchengladbach, he studied business administration in the Netherlands. In the course of his studies he came into contact with the stock exchange for the first time. He has more than 25 years of experience in stock market business.

    About the author



    Related comments:

    Commented by Stefan Feulner on February 1st, 2023 | 18:17 CET

    Rheinmetall, Defense Metals, Lynas - Time is running out!

    • Mining
    • Tungsten
    • RareEarths
    • Defense

    Heavy weapons for peace. Tanks, submarines and fighter jets for Ukraine, whatever the cost. This scenario is the bitter reality right now and is being promoted across the board by Western politicians. It may not sound very understandable, but in order to guarantee peace, the world continues to arm itself. Companies in the armaments industry, now declared to be sustainable investment opportunities, are booming. With the seething conflict in Taiwan, tensions are again on the rise. With its raw materials, such as rare earth metals, China has the power to act. The West is frantically trying to reduce dependencies, which is impossible to achieve in the short term.

    Read

    Commented by Fabian Lorenz on January 31st, 2023 | 14:48 CET

    Energy transition price rockets: American Lithium, Plug Power, Auxico Resources

    • Mining
    • RareEarths
    • Lithium
    • hightech

    Are shares related to electromobility among the price rockets of 2023? In any case, the start of the year was promising. After a partially disastrous second half of 2022, many stocks are showing strength in the new year. Lithium shares, in particular, are in demand again. Among the high flyers of recent months is American Lithium. After the Nasdaq listing and the planned spin-off of the uranium division, investors are eagerly awaiting the feasibility study. Will the share price fireworks continue? Analysts also expect such fireworks at Auxico Resources. They believe that the share price of the trader of rare earths and critical raw materials could almost triple. Hydrogen pioneer Plug Power has also bounced back in the new year. But once again, the US company has disappointed operationally. How do investors react?

    Read

    Commented by Juliane Zielonka on January 26th, 2023 | 20:10 CET

    Freyr Battery, Auxico Resources, Plug Power - Rare earth battery boom in e-Mobility

    • Mining
    • RareEarths
    • fuelcell
    • Electromobility

    One of Norway's largest financial services companies is increasing its equity stake in Plug Power, the US hydrogen fuel cell company. The reason: Nikola Motors has selected the Company to upgrade its new e-mobility fleet with clean fuel cells. Freyr Battery also has similar ambitions. Here, Impact Clean Power Technology, the Polish manufacturer of battery systems for heavy-duty vehicles, has signed an agreement with Freyr to purchase clean batteries. Both big deals have one thing in common: demand for rare earths and valuable metals to make green technologies a reality. That is where Auxico Resources, a mineral exploration company focused on Africa, comes in.

    Read