【Guest】
Ghee Peh / Zhongyi Bai - IEEFA Environmental Protection New Energy NGO agency, analyst. Prior working at Jefferies Financial Group, BNP Paribas, UBS Securities, Ka Shing Securities, Citibank, ABN AMRO Bank, served as Asia Product Manager, Managing Director, and Head of Asian Commodity Research.
【Host】
Bonan Li - Managing Director of AceCamp (libonan@acecamptech.com)
1. If the fundamentals of EV are good and the supply of metals is limited then why are share and metal prices falling?
I will try and answer the question in three parts: the concept of “growth” stocks, US dollar strength, and investors who have forgotten about the last commodity upcycle.
EV is a growing concept that has done well under low to zero interest rates. As the economy is recovering post-pandemic then investors are focused on higher interest rates one year out and are looking at earnings and value. Therefore, the share price of growth stocks takes a hit and EV metal stocks like copper and nickel are also taking a hit. The demand for Ev-related metals remains in place and supply expansion is difficult.
When the US dollar strengthens, commodity prices drop. Investors have to monitor US dollar moves. As the market expects rates to go up then the US dollar strengthens and this type of adjustment is ongoing. Finally, the last commodity uptick was 2010-11 and most investors have had little experience in analyzing and pricing commodity stocks so there will be volatility.
2. How do we balance the supercycle with such a decline in share prices?
I am now retired and not analyzing full time so I will not go as far as saying that we are in a commodity supercycle. The good news is that we are in an upcycle as new demand from EV start while investment on the supply side has been falling since 2015 when the last upcycle ended. I refer again to the above answer as investors have not seen any commodity upcycle for a long time and will have difficulty trying to price the stocks accordingly.
3. Are there commodity stocks that have solid profits and pay dividends?
In fact, a friend working at a private bank just asked me this question. His clients are expecting the global economy to improve and some profits from certain industrial sectors. However, as interest rates remain low they would like to look for stocks that pay dividends. Yes, there are several commodity companies with that profile.
China Hongqiao 1378.HK has just announced strong results and will pay out HK0.50 per share dividend. I visited this company in 2011 and I recalled they shared the power cost with their company which a textile company. This helps with their cost as a major cost of aluminum is the cost of power.
When I did the IPO for Kinetic Energy 1277.HK in 2012, the company was building the coal mine and had bank debt. Thanks to the coal price rising in 2017-18, they managed to pay down debt and pay dividends of 8% yield at the current share price. 639.HK Shougang Resources has had a long track record of paying dividends and a net cash position.
4. What is the relationship between the US dollar and commodity prices?
As the US dollar strengthens commodity prices fall and the opposite holds true.
5. What is our take on manganese and also special steel?
When we worked on the CITIC Dameng IPO in 2012, Manganese was part of the BHP portfolio so they effectively controlled the price. Manganese was always used in steel production and there appears to be new demand for a certain type of EV battery. South 32 which contains the manganese assets has been separately listed and the disclosure is very detailed.
There is some technical expertise required for special steel and there is demand from EV and also wind energy. Also, traditional steel companies are likely to benefit from investment-driven growth plan. The iron ore price upside has been discounted by investors and an increase in steel prices will be welcomed by investors.
6. What are the metals that will benefit from EV? Solar? Wind?
I will start with EV as it covers most metals. At the battery level, you will need lithium, cobalt, nickel, and some manganese. For the body of the car, there will be three times more copper. There are also aluminum and steel alloys required. For wind power, there will be special steel and copper required. For solar, this is mainly silicon panels.
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更多详细信息，请联系：李博男/Bonan Li (libonan@acecamptech.com）
