Given the increase in wholesale gas prices you’d expect that investment vehicles and companies involved in the energy transition would have shot up in value. However Tesla’s share price is down by almost a third (-31%) in the year to date, while Umicore, a major player in recycling strategic metals, is down 13%. As for funds, L&G Battery Value-Chain ETF (LSE: BATT) has fallen 18% in the year to date while WisdomTree Battery Solutions ETF (LSE: VOLT) is down 21% over the same period.
The share prices of nuclear energy-related firms have also not moved that much given the renewed focus on nuclear. Yellow Cake (LSE: YCA), a London-listed uranium oxide physical holding company, has seen its share price advance by 20% in the year to date. However, Geiger Counter (LSE: GCL), which invests in uranium-exploration companies, has seen its share price fall by 3%.
There’s also a handful of newly listed uranium ETF trackers. HANetf partnered with Canadian commodities giant Sprott to launch the HANetf Sprott Uranium Miners ETF (LSE: URNP), while Global X launched Uranium ETF (LSE: URNG). Over the last three months these funds have increased by between 24% and 16% respectively. Those numbers are certainly an improvement on the S&P 500’s decline of 4% but they’re hardly off to the races.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Buoyant battery market will be good for strategic metals
Part of the reason for these mediocre returns is that investors in the battery complex and nuclear-power spectrum have grown jittery about over-capacity and some short-term price weakness in key metals. Chinese nickel-sulphate prices peaked at RMB56,000 per metric tonne on 10 March, but have come down around 34% to RMB36,900/mt as of 12 July, according to Scott Yarham at S&P Global Commodity Insights. One contributory factor has been the weakness of the steel sector in China – which accounts for more nickel demand than batteries, resulting in lower overall demand.
However, this analysis also points to a much more buoyant overall battery market. Lithium carbonate hit all-time highs of $78,000/mt in April and at S&P’s recent assessment was at $71,000/mt, up nearly 450% year on year due to increased demand for electric vehicle batteries and tight supply.
Cobalt hydroxide prices have also increased nearly 32% year on year, while battery-pack costs have increased and battery makers have made public announcements that prices will increase, says Yarham. “This is very unusual for battery costs, which have been consistently moving down for over a decade.” Some lithium producers are said to be fully booked for 2022.
Electric-vehicle growth will strain mining capacity
Short-term pricing pressures aside, it seems to me markets haven’t priced in long-term structural drivers. There will be a huge increase in electric vehicle deliveries over the next decade. This will strain mining capacity, especially in lithium. Prices must rise to stimulate investment in new capacity.
That’s also true for the uranium sector but with an added twist. Most deals avoid the spot market for uranium and opt for longer-term contracts. However capacity constraints will arise as demand from the developing world increases, forcing public sector buyers into the spot markets, which are thinly traded.
Finally, both the battery complex and nuclear sector lack the capacity to refine raw materials. Too much lithium-processing capacity is in China and uranium processing in Kazakhstan and Russia. If these countries were to use this capacity for geostrategic ends, prices would jump.
In short, if you think we are embarking on a structural transformation to wean us off increasingly expensive hydrocarbons, then recent price weakness in these alternative energy niches might represent a real opportunity.
-
Tycoon Truong My Lan on death row over world’s biggest bank fraudProperty tycoon Truong My Lan has been found guilty of a corruption scandal that dwarfs Malaysia’s 1MDB fraud and Sam Bankman-Fried’s crypto scam
-
Why undersea cables are under threat – and how to protect themUndersea cables power the internet and are vital to modern economies. They are now vulnerable
-
How to invest in Latin America’s metal reserves – the key to reaching net zeroTips Latin America’s base metals are crucial to stabilising global greenhouse-gas emissions, says James McKeigue. Here, he picks the best ways to invest.
-
Base metal prices are in freefall – will growth follow?News The price of copper has fallen to its lowest level since November 2020, with aluminium, nickel and many other base metal prices in freefall, too.
-
How to invest in copper, the most important metal in the worldCover Story As the world looks to electrify and try to move away from fossil fuels, copper looks set to be the biggest beneficiary. But how can you invest? Rupert Hargreaves analyses the sector.
-
Metals prices wobble on slowdown fearsNews The S&P GSCI index of 24 major raw materials has fallen back 9% since mid-June on growing fears of a recession, and copper has hit a 16-month low after losing 22% since a peak in early March.
-
How to invest in the copper boomTips The price of copper has slipped recently. But that’s temporary – the long-term outlook is very bullish, says Dominic Frisby. Here, he explains the best ways to invest in copper.
-
How to invest in the multi-decade boom in industrial metalsTips The price of key industrial metals has already begun to rise. The renewable energy transition will take them higher, says David Stevenson. Here's how to profit.
-
Copper is set for a long bull market – here’s how to invest in itTips Commodity prices have started to cool – with the exception of one industrial metal that is in short supply but is an essential ingredient in almost everything. Dominic Frisby picks the best ways to invest in copper.
-
How the London Metals Exchange saved the nickel short-sellers’ baconNews Short sellers were caught out as the price of nickel briefly soared to $100,000 a tonne. But the London Metals Exchange saved their skins by halting trading for more than a week.
