(New Weekly E-Mail Structure - Link To Weekly Chartbook at the Bottom)
Digging Deeper into the Charts
Two weeks ago, we flagged our Tanker Equity Basket as a potentially interesting place to look for opportunities. The week after we flagged it, the basket bounced, presumably on events in the Middle East, and this week has given back most of those returns. The basket has now fallen below the 10-day moving average and is bouncing along the 200-day moving average.
Container ships and dry bulk have also declined; we would like to argue that this decline is related to the market perception of geopolitical risk as fading, but we find little quantitative evidence to support this claim. We may be looking at the wrong measures of geopolitical risk, but the most common measures in use explain little, if any, of the price action of our shipping baskets. That being said, we are not convinced fundamentals are steering the ship either.
Elsewhere in the world of listed real asset businesses, Lithium stocks rebound this week; we will have to see if the basket continues its trend of bouncing off the 50-day moving average to the downside.
Either way, Lithium stocks have a long way to go before they regain investor favor; they might break through the 50-day moving average this time and perhaps attempt to reverse the longer-term trend.
As gluttons for punishment (who also know there are some great companies in the lithium industry), we find the three-year chart very enticing. Diving in now is early (we dove in a long time ago), but it's hard to see how this situation will not improve over the coming years. As we highlighted in last week's chart book, we are currently 10 quarters into the latest decline in the lithium price, and at the current price, 4 of the nine largest publicly traded producers are losing money.
Lithium prices are down across week-to-date, month-to-date, quarter-to-date, year-to-date, and LTM time frames. Given the growth in EV demand out of China, we wonder how long this can go on for:
Public markets are the primary source of capital for the mining industry because of their ability to finance the sector's capital-intensive and lengthy development plans. Unfortunately, public markets do not look kindly on either capital-intensive businesses or lengthy development plans, which means that while you can only finance a mine through public markets, it is challenging to do so. The result, according to a recent BNEF report, is that public investment in the Battery metals sectors has shrunk by 35% since 2022. Meanwhile, the value of M&A transactions in energy transition metal sectors surged from $4.8 billion in 2022 to $11.9 billion in 2024. A persistent low-price environment for battery related and the companies that produce them has triggered a wave of consolidation across the industry.
Looking forward, continued supply gluts in battery metal markets point toward further M&A activity. We believe the Lithium sector remains an attractive area for M&A opportunities. On our radar for corporate action are Lithium Argentina, which has an operating mine, low costs, and a Chinese partner, and Ioneer, which is in desperate need of a partner with an interest in both Lithium and boric acid. Rio Tinto comes to mind as a potential partner for Ioneer, although it would be more effective for them to acquire the entire firm rather than form a partnership. Rio Tinto supplies 30% of the world's refined borates from a single mine in California, which is set to close in 2042. At least until recent management changes, it has been an ambitious acquirer of lithium assets.
We would be remiss if we did not share one final chart that continues to impress with each passing week:
The surge in US-bound shipments continues. The surge has caused the ex-US copper market to tighten, prompting fears of regional copper shortages despite the global market currently being well supplied. Ready-to-ship inventories on the LME have declined by about 80% this year to less than a day's global usage, prompting steep backwardation and a surge in exports by Chinese smelters. The White House directed the Commerce Department to investigate the need for import tariffs on Copper in February; this means we should see a report around November 22nd, giving this trend time to run.
Essential Real Asset Reading
Unblocking the copper pipeline
Copper is vital for a clean energy future but mining faces delays due to environmental and social concerns. Improving and integrating responsible mining standards into regulations can help unlock supply and reduce risks. Policymakers, miners, investors, and standard setters must work together to ensure sustainable and transparent mining practices.
Global Offshore
We are the last investors standing who still believe that offshore wind has a time and place in the energy system.
Offshore wind is growing fast but still not enough to meet global energy goals. Many countries, especially in Southeast Asia, are planning big offshore wind projects to meet future demand. To speed up growth, challenges like permits, financing, and grid connections must be solved.
From Silos to Systems
Energy systems must be managed as one connected whole to support clean, reliable, and affordable energy. Power grids need investment and smarter coordination to integrate renewable energy and new technologies. Successful energy transition requires teamwork across sectors, better planning, and flexible energy use.
The Hard-Tech Report
Hard tech innovations are key to solving environmental problems and boosting the economy. They improve energy use, cut emissions, and protect natural resources. These technologies also modernize industries like food and manufacturing for a sustainable future. This “Hard Tech” report comes from a VC firm focused investing in physical deeply technical innovation.
From Silos to Systmes
Batteries are now cheap and efficient enough to provide solar electricity every hour of every day in some sunny places. This makes 24-hour solar power affordable and even cheaper than coal and nuclear energy on some measures (not necessarily the most important measures). Using solar with batteries also cuts costs for expanding power grids and helps deliver clean energy all day long.
If you want to dig really deep into storage…
American Views on Economic Leadership
Excellent sentiment analysis from think tankers traveling around the country and listening.
Americans have mixed feelings about trade and want fair competition and local input in economic policies. Many worry about job losses, influence of special interests, and dependence on other countries. Clear communication about the benefits and costs of trade and aid is needed to build trust and support for U.S. global economic leadership.
Until next week,
