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extract - Resources Stocks: What's The Problem?

RUDI FILAPEK-VANDYCK

FNArena

 

Electric Vehicles

 

Macquarie's team of specialists earlier this month highlighted potential upside risks from the global switch towards Electric Vehicles, including new-technology batteries. The impact is likely most pronounced for cobalt. Even as battery producers are moving away from heavier cobalt loadings, Macquarie still projects global demand to grow by 8.9% CAGR between 2017 and 2022.

 

For a relatively small market, with primary supply highly concentrated in that top five producers supply more than 50%, and with 60% of total mine output from the as ever unstable Democratic Republic of Congo, Macquarie suggest global cobalt seems poised to experience severe shortages. This should translate into much higher prices.

 

Macquarie has also become more positive on the price outlook for other lithium-ion battery related commodities nickel and lithium. A recent sector update saw the broker lifting the price target for Clean Teq Holdings (CLQ) by no less than 75% to $2.10. Clean Teq is the owner of the Syerston Nickel/Cobalt/Scandium Project in NSW, which the company wants to develop into a low cost supplier of nickel sulphate and cobalt sulphate into the lithium-ion battery market.

 

Macquarie's update was remarkable because more optimistic price projections were accompanied by downgrades for Galaxy Resources (GXY) and Orocobre (ORE), both on valuation grounds.

 

In the same vein as Deutsche Bank, Macquarie analysts note 2017 and 2018 should see the best global growth since 2011, which should -all else being equal- prove supportive for commodities. But current strong momentum underpinning global growth should soon be replaced with a slowdown, argues Macquarie, albeit a rather mild one.

 

This means individual market dynamics will become increasingly important throughout the year ahead. Supply restraints are but the most obvious differentiator, alongside Chinese policy measures.

 

Macquarie's preferred short for the final quarter of 2017 is thermal coal, primarily because the price is too high for Chinese government comfort, say the analysts. In contrast, aluminium and steel stand to benefit the most from China's winter production cuts. Macquarie is also of the view the US dollar will remain weak. This should boost gold, silver, and platinum.

 

Current forecasts are for stronger-for-longer prices for zinc and lead, before demand destruction kicks in next year. Macquarie suggests copper looks better further out than short term. LNG remains under threat of a severe price decline, while uranium, simply, is priced unsustainably low.

 

As with Deutsche Bank, Macquarie's top favourite stock to play the sector is Rio Tinto.

 

Morgan Stanley analyst Rahul Anand recently returned from a trip through China, Korea and Japan with the notion that heavy government subsidies in China are likely to translate into a noticeable jump in production from the local Electric Vehicles and batteries industry in 2018.

 

Earlier this month, UBS's update on base metals prices was equally dominated by improved expectations regarding demand for Electric Vehicles, but UBS analysts were equally quick to express their low enthusiasm to jump on stocks including Independence Group and Western Areas, despite higher price forecasts for nickel. Also, UBS sits above market consensus for gold prices in the four years ahead, targeting US$1400/oz but here too preaches caution and restraint.

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China's Jinchuan Eyes New Nickel, Cobalt Project to Tap Electric Vehicle Boom

BEIJING ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâہ¡ÃƒÆ’‚ Jinchuan Group [JCHRP.UL], China's top nickel producer, will next year start building a new project in Guangxi that will produce raw materials for electric vehicle (EV) batteries, its chairman said, looking to tap the sector's "explosive" demand.

 

The project, in the southern port city of Fangchenggang, where Jinchuan already smelts copper and nickel, will have annual production of 30,000 tonnes of nickel and 3,000 tonnes of cobalt by 2020, Wang Yongqian said in an emailed Q&A with Reuters.

 

The company's three main metals "are all raw materials for electric cars," Wang said, forecasting "explosive growth" in EVs in China over the next five-10 years. Wang was in Beijing this week to attend the 19th Communist Party congress.

 

"We really feel the decline of momentum in traditional industries. At the same time, we deeply feel...the strategic transformation brought by the new economy," he said, describing the EV revolution as a "turning point" for Jinchuan that would have a "far-reaching" impact on the company, based in Gansu in northwest China.

 

By 2025, it is expected that China's nickel demand from the EV sector will increase to 150,000 tonnes, Wang said, without providing a current demand figure. For cobalt it will grow fivefold to 30,000 tonnes, he added.

 

Globally, UBS estimates there could be 300,000-900,000 tonnes per year of incremental nickel demand by 2025 due to the EV boom.

 

By 2020, Jinchuan's laterite - a claylike substance from which metal can be extracted - project in Indonesia, in which it holds 60 percent alongside a local partner, will have production capacity of 50,000 tonnes of nickel and 5,000 tonnes of cobalt, said Wang.

 

Combined with the new Fangchenggang project, that will help Jinchuan increase production of cobalt for batteries from 8,000 tonnes this year to 20,000 tonnes by 2020, when its nickel sulfate production will reach 300,000 tonnes. The company currently produces 150,000 tonnes per year of nickel.........................

https://www.nytimes.com/reuters/2017/10/20/...uan-cobalt.html

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WELCOME TO THE FUTURE Terrifying Tesla video shows unstoppable electric car inferno that took 35 firefighters to extinguish
OR
unsequenced video of Tesla car on fire after crashing. 19 y.o. loses control when two lanes reduce to one on divided highway. Three fireys use CO2 extinguishers to snuff flames while 32 others watch.
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China's recyclers eye looming electric vehicle battery mountain

Shanghai Jinqiao will be entering a market that includes Chinese companies like Jiangxi Ganfeng Lithium and GEM Co. Ltd, whose share prices have risen as they invest in battery recycling facilities of their own.

REUTERS | October 23, 2017, 07:37 IST

https://auto.economictimes.indiatimes.com/n...untain/61178481

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Tesla reportedly strikes deal with China to build ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Â¹Ãƒƒâ€Â¦ÃƒÆ’¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã¢â‚¬Å“wholly-ownedÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢ gigafactory in Shanghai

Fred Lambert - Oct. 22nd 2017 9:19 am ET

 

There have been several false alarms over the past few years about Tesla building a factory in China. Earlier this year, Tesla finally confirmed working with the Shanghai government to establish a manufacturing facility in the region and promised an announcement by the end of the year.

 

Now the Wall Street Journal reports that they have come to an agreement with the local authorities on a ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Â¦ÃƒƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“wholly ownedÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚ factory in the region.

https://electrek.co/2017/10/22/tesla-gigafa...china-shanghai/

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The massive impact of EVs on commodities in one chart

 

HOW DEMAND WOULD CHANGE IN A 100% EV WORLD

 

The Chart of the Week is a weekly Visual Capitalist feature on Fridays.

 

What would happen if you flipped a switch, and suddenly every new car that came off assembly lines was electric?

 

ItÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s obviously a thought experiment, since right now EVs have close to just 1% market share worldwide. WeÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢re still years away from EVs even hitting double-digit demand on a global basis, and the entire supply chain is built around the internal combustion engine, anyways.

 

At the same time, however, the scenario is interesting to consider. One recent projection, for example, put EVs at a 16% penetration by 2030 and then 51% by 2040. This could be conservative depending on the changing regulatory environment for manufacturers ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâ€Â¦ÃƒÆ’¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã¢â‚¬Å“ after all, big markets like China, France, and the U.K. have recently announced that they plan on banning gas-powered vehicles in the near future.

 

THE THOUGHT EXPERIMENT

We discovered this ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Â¦ÃƒƒÂ¢Ãƒ¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…âہ“100% EV worldÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚ thought experiment in a UBS report that everyone should read. As a part of their UBS Evidence Lab initiative, they tore down a Chevy Bolt to see exactly what is inside, and then had 39 of the bankÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s analysts weigh in on the results.http://www.advantagelithium.com/_resources/pdf/UBS-Article.pdf

 

After breaking down the metals and other materials used in the vehicle, they noticed a considerable amount of variance from what gets used in a standard gas-powered car. It wasnÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢t just the battery pack that made a difference ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâ€Â¦ÃƒÆ’¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã¢â‚¬Å“ it was also the body and the permanent-magnet synchronous motor that had big implications.

 

As a part of their analysis, they extrapolated the data for a potential scenario where 100% of the worldÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s auto demand came from Chevy Bolts, instead of the current auto mix.

 

THE IMPLICATIONS

If global demand suddenly flipped in this fashion, hereÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s what would happen:

 

Material Demand increase Notes

Lithium 2,898% Needed in all lithium-ion batteries

Cobalt 1,928% Used in the Bolt's NMC cathode

Rare Earths 655% Bolt uses neodymium in permanent magnet motor

Graphite 524% Used in the anode of lithium-ion batteries

Nickel 105% Used in the Bolt's NMC cathode

Copper 22% Used in permanent magnet motor and wiring

Manganese 14% Used in the Bolt's NMC cathode

Aluminum 13% Used to reduce weight of vehicle

Silicon 0% Bolt uses 6-10x more semiconductors

Steel -1% Uses 7% less steel, but fairly minimal impact on market

PGMs -53% Catalytic converters not needed in EVs

Some caveats we think are worth noting:

 

The Bolt is not a Tesla

The Bolt uses an NMC cathode formulation (nickel, manganese, and cobalt in a 1:1:1 ratio), versus Tesla vehicles which use NCA cathodes (nickel, cobalt, and aluminum, in an estimated 16:3:1 ratio). Further, the Bolt uses an permanent-magnet synchronous motor, which is different from TeslaÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s AC induction motor ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâ€Â¦ÃƒÆ’¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã¢â‚¬Å“ the key difference there being rare earth usage.

 

Big Markets, small markets:

Lithium, cobalt, and graphite have tiny markets, and they will explode in size with any notable increase in EV demand. The nickel market, which is more than $20 billion per year, will also more than double in this scenario. ItÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s also worth noting that the Bolt uses low amounts of nickel in comparison to Tesla cathodes, which are 80% nickel.

 

Meanwhile, the 100% EV scenario barely impacts the steel market, which is monstrous to begin with. The same can be said for silicon, even though the Bolt uses 6-10x more semiconductors than a regular car. The market for PGMs like platinum and palladium, however, gets decimated in this hypothetical scenario ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâ€Â¦ÃƒÆ’¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã¢â‚¬Å“ thatÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¡Ãƒâہ¡ÃƒÆ’‚¬ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â€š¬Ã…¡Ãƒâ€šÃ‚¬ÃƒÆ’…¾Ãƒâہ¡ÃƒÆ’‚¢s because their use as catalysts in combustion engines are a primary source of demand.

http://www.mining.com/web/massive-impact-e...ties-one-chart/

post-330173-1508755857_thumb.jpg

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