The car makers scramble with the hedge funds to secure this key resource
Tuesday, 26 December 2017
By Terence Duffy
- The hot new metal
- The auto industry revolution
- One for the watchlist
Editor’s note: Kris Sayce, Bernd Struben and the staff at Port Phillip Publishing are taking a break for the holidays. We will be returning to our posts on 2 January, 2018. While we’re away, we’re bringing you some complimentary back-issues of Money Morning Trader.
Money Morning Trader is a daily paid service (Monday–Friday), brought to you by our expert chartist, Terence Duffy. Terence details how the day’s charts tell you everything you need to know about the economy and the stocks about to move. And they do it long before the mainstream financial media gets onto the story. Terence looks for stocks about to break higher, and to get on board for the run. As he says, the stock market itself tells you which stocks to buy! To understand what he means by that, you can find out more about Money Morning Trader here.
The following article was originally published on 3 August 2017.
Last year, it was lithium. But this year, the lesser known mineral component of batteries — cobalt — is having its year in the sun.
And there are a number of good reasons why, the main one being the future demand of electric vehicles.
With lithium-ion batteries, one of the major components is actually cobalt, more so than lithium. Cobalt makes an efficient electrode, and helps store power for longer, allowing electric cars to extend their range between charges.
The revolution going on in the auto industry right now is absolutely incredible.
For example, in March this year, Mercedes-Benz announced it was going to invest 10 billion euros to release a range of electric vehicles by 2022. That’s just short of $15 billion in Aussie dollar terms.
And all the other major car manufacturers are doing something similar.
They can see the writing on the wall. The world’s largest car market is leading the way when it comes to cleaner energy driving.
China is pursuing aggressive zero emission targets on all new cars, and spending billions to scale up production of plug-in vehicles, which seem to be gaining traction among drivers.
More electric cars are sold in China than in the rest of the world combined. And, by 2020, Beijing wants five million plug-in cars on its roads.
But the car makers are in competition with the hedge funds to secure this key resource.
Half a dozen funds, including Swiss-based Pala Investments and China’s Shanghai Chaos, have purchased and stored an estimated 6,000 tonnes of cobalt. The stockpile amassed by the funds equates to 17% of last year’s global production.
The other factor pushing up the price of cobalt is certain supply issues.
Most of the world’s cobalt presently comes from the politically unstable Congo, and there are a number of other issues there relating to working conditions and child labour.
A Washington Post investigation exposed an industry of child labour and deadly work conditions. This troubling trade was connected to a Chinese firm which supplies
After the revelations, Apple Inc. [NASDAQ:AAPL] stopped buying the cobalt while continuing to deal with these problems.
Cobalt buyers are looking for a clean, ethical supply of cobalt metal and they need it reliably.
One company which meets that criteria is ASX-listed Clean TeQ Holdings Ltd [ASX:CLQ].
The company has a mineral resource rich in nickel, cobalt and scandium, 350 kilometres west of Sydney.
Nickel and cobalt are both essential for batteries, while scandium is used in aluminum alloys for the next generation of lightweight aircrafts and automobiles.
The scandium component gets overlooked, but some analysts forecast enormous demand for scandium to produce a whole new family of high-performance aluminum materials.
Clean TeQ is also involved with water treatment, which is another revenue stream for the company.
The company released its half year result in February. That showed the company to be a loss-making operation, as it endeavours to progress the development of its nickel-cobalt project.
Let’s bring up the daily chart:
Click to enlarge
Note the big reversal bar, which marked the March top. I’ve touched on this subject before. A big reversal bar like that can often signal a change in trend. It did in this instance anyway.
The share price finally made a low in June and, since then, is starting to find higher support and resistance overhead around 86 cents.
Clean TeQ is one for the watchlist.
There’s still plenty of news to come from this company, including the results from the definitive feasibility study, and news of nickel-cobalt and scandium offtake agreements.
A break above 86 cents might suggest some of that news will be positive.
Let’s wait and see.
Editor, Money Morning Trader
I (Bernd) thought you might like to see how this one played out. Below you can see what the chart did tell you, as updated on 6 December:
Click to enlarge
A note on Money Morning Trader: The companies we profile are not active recommendations to buy or sell. There are other services at Port Phillip Publishing that provide firm recommendations and do this very well. Money Morning Trader is different.
Our service offers what we believe are useful trading ideas and company price charts that you can do your own study and risk analysis on. We’re looking for interesting opportunities before they happen.
Basically, it’s a behind the scenes look at how we pick our stocks. We’re showing you this not so that you can invest in the ones we show you here, but rather so that you can use this method to find your own.
We watch for stocks that look ready to break out and trend higher, and we share them with you. If we waited until after the breakout to tell you about the trade, it might already be too late.
Instead, we’ll introduce you to stocks that show signs of moving towards a breakout. Of course, not all of them will. In fact, many won’t.
That’s why we tell you to put them on your watchlist first. Then we wait for the stock market to confirm the analysis by pushing the stock higher, usually above a certain price point.
Our goal is simply to educate you on market movements, making you a better trader.
‘Give a man a fish and he’ll eat for a day. Teach him to fish and he’ll eat for a lifetime.’
We’ll also interpret for you what the stock market is telling us about the Australian economy and the different sectors within it.
If you’d like to trial Money Morning Trader, just click here.