#7. Energy Transition Metals Continue to Outperform

-

 

#7. Energy Transition Metals Continue to Outperform

Reality Check: Energy Transition Materials versus Other Commodities

From a macro and fundamental perspective, we believe the energy transition investment opportunity is promising, but how well have critical minerals performed on a relative basis? We created charts to provide a visual as to their relative performance against standard benchmarks.

In Figure 4a, we created an unweighted basket of seven transition energy metals used in an EV battery. We compared this EV metals basket to the Bloomberg Commodity Index (a broad commodity index) and the Bloomberg Industrial Metals Subindex (base metals). Since 2020, the basket of battery metals has been in a steady outperformance trend relative to both the broad commodity and base metals indices.

Figure 4a. EV Transition Metals versus Bloomberg Commodity and Industrial Metals Indices (2020-2022)

Figure 4a. EV Transition Metals versus Bloomberg Commodity and Industrial Metals Indices (2020-2022)

Source: Bloomberg. Data as of 12/31/2022. Included for illustrative purposes only. Past performance is no guarantee of future results.

Part C: The Important Role of Precious Metals

2022 Year in Review

Gold closed 2022 down $5.18 per ounce or -0.28%, to close at $1,824.02. For the year, the spot gold average was $1,802.46 versus an average of $1,798.85 for 2021 (up $3.61 per ounce). Gold began the year surging to a closing high of $2,050.76 by late February as Russia invaded Ukraine, sparking fears of a broader military conflict involving nuclear superpowers. Within weeks, the war had reached a military stalemate, and gold began to drift lower, driven by a new concern: a very hawkish Fed caught offside by surprising soaring inflation. A series of much-higher-than-expected inflation reports sparked four consecutive 75 basis point rate hikes, pressuring gold and virtually all risk assets.

2022 saw the most aggressive interest rate hikes in over 40 years, compressing valuation multiples and long-duration assets. Due to the lag effects of monetary policy, we believe that 2023 is when economic and financial system risks are likely to emerge. Gold historically performs poorly with rising interest rates but does better in risk-off environments as a safe-haven asset. Gold sold off during the aggressive rate hike portion as CTA-type funds13 reduced longs and heavily shorted gold. With the Federal Reserve (“Fed”) announcing the end of outsized rate hikes and better-than-expected inflation data (CPI, consumer price index), gold, by yearend, had recovered from its summer price swoon.

Comments

Post a Comment

Popular posts from this blog

Fossil Fuel not dead yet

-
Image
Fossil Fuel not dead yet “Old energy” will carry most of the load during the early years of the transition, as it guides “new energy” to the pinnacle of global power production. Producing an electric vehicle (EV), for example, requires about twice as much energy as producing an internal combustion engine vehicle. That’s because EVs are essentially batteries on wheels… and batteries are basically just hunks of metal. Mining and processing all of that metal demands a lot of energy. To unearth enough raw ore to produce a  single  midsize EV battery, for example, mining operators must excavate about 250 tons of terrain. After that, they must transport roughly 50 tons of ore to various facilities around the world that can extract the targeted metals and then refine them to battery-grade standards. With a few exceptions, every step of the process consumes some form of fossil fuel. Most other renewable technologies are even more energy-intensive than EVs. Therefore, far from replacin...
Read more

All is flashing in 2023 for a good year

-
Image
All is flashing in 2023 for a good year The  Breakaway Momentum    indicator compares the number of advancing stocks to the number of declining stocks in the market over a 10-day period. And it’s triggered when the amount of advancing stocks outnumbers declining stocks by about 2-to-1. This is very rare and usually only happens when bear markets are ending and bull markets are starting.   The  Whaley Breadth Thrust  indicator is similar. It compares the number of advancing stocks to the number of declining stocks in the market over a five-day period. And it’s triggered when the amount of advancing stocks outnumbers declining stocks by about 3-to-1. This, too, is very rare and usually only happens when bear markets are ending and bull markets are starting.  The    Triple 70 Thrust  indicator was also triggered. This happens when the percentage of rising stocks in the market exceeds 70% for three consecutive days. This is also a rare ...
Read more

3D Printing

-
  3D Printing 3D printing saves time, Cost, and Waste while creating radically new parts.  3D printing is a form of additive manufacturing that builds objects layer-by-layer. 3D printing reduces the time between design and production, moves power to designers and reduce supply chain complexity and at a fraction of the cost of traditional manufacturing. 3D printing will revolutionise manufacturing, privacy, costs and timescales of creating a prototype. Applications include Medical Devices, Testing Devices, Training and Visualization aids, Personal Protective Equipment, Personal Accessories, Emergency Dwellings. 3D printing can be used for prototypes, molds and tools and End-Use Parts. Other 3D opportunities include Hobbies, toys and Games Semiconductors and Semiconductor equipment Die Sets, Jigs and Industrial Molds Foundries and Metal Products Footwear Plastic Products Healthcare equipment and supplies Machinery Automobiles and Auto Parts and Equipment Aerospace This is a mass...
Read more