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"Metals Will Be The Oil Of The Future" by Alex Kimani

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EXCERPT - ...The energy transition is driving the next commodity supercycle, with immense prospects for technology manufacturers, energy traders, and investors. Indeed, new energy research provider BloombergNEF estimates that the global transition will require ~$173 trillion in energy supply and infrastructure investment over the next three decades, with renewable energy expected to provide 85% of our energy needs by 2050....


Metals Will Be The Oil Of The Future

By Alex Kimani - Nov 10, 2021, 7:00 PM CST

The energy transition is in full swing, with electric vehicles supplanting gas guzzlers and solar panels and wind turbines replacing coal and oil as the world’s leading energy sources. Scientists have warned that keeping temperature rises to 1.5C requires global emissions to be cut by 45% by 2030 and to zero overall by mid-century. In the ongoing COP26 climate summit, nations have promised to end deforestation, curb CO2 and methane emissions and also stop public investment in coal power. 

The energy transition is driving the next commodity supercycle, with immense prospects for technology manufacturers, energy traders, and investors. Indeed, new energy research provider BloombergNEF estimates that the global transition will require ~$173 trillion in energy supply and infrastructure investment over the next three decades, with renewable energy expected to provide 85% of our energy needs by 2050.

But nowhere is the outlook brighter than the metals industry.

Clean energy technologies require more metals than their fossil fuel-based counterparts. According to a recent Eurasia Review analysis,  prices for copper, nickel, cobalt, and lithium could reach historical peaks for an unprecedented, sustained period in a net-zero emissions scenario, with the total value of production rising more than four-fold for the period 2021-2040, and even rivaling the total value of crude oil production.

There’s a big negative for the fossil fuel sector--BNEF has forecast that electric and fuel cell vehicles will displace 21 million barrels per day in oil demand by 2050.


Source: Eurasia Review

In the net-zero emissions scenario, the metals demand boom could lead to a more than fourfold increase in the value of metals production–totaling $13 trillion accumulated over the next two decades for the four metals alone. This could rival the estimated value of oil production in a net-zero emissions scenario over that same period, making the four metals macro-relevant for inflation, trade, and output, and providing significant windfalls to commodity producers.     

Estimated cumulative real revenue for the global production of selected energy transition metals, 2021-40 (billions of 2020 US dollars)


Source: Eurasia Review

Here are the long-term outlooks for key commodities and clean energy sectors as per BNEF.

#1. Solar Panels

KEY METALS AND MATERIALS: Steel, Aluminum, Polysilicon, Copper, Silver

TOP ETF: Invesco Solar Portfolio ETF (NYSEARCA:TAN)

BNEF estimates that it takes 10,252 tons of aluminum, 3,380 tons of polysilicon and 18.5 tons of silver to manufacture solar panels with 1GW capacity. With global installed solar capacity expected to double by 2025 and quadruple to 3,000 GW by 2030, the solar industry is expected to become a significant consumer of these commodities over the next decade. 

An unexpected jump in demand for solar panels from late 2020 due to renewed carbon commitments by the Biden administration and China have led to a surge in the price of polysilicon and disrupted the decade-long falling costs of solar installations. According to a new report by the Solar Energy Industries Association and Wood Mackenzie, supply chain bottlenecks and rising raw materials costs have hit the U.S. solar industry, as solar prices rose Q/Q and Y/Y during Q2 across every U.S. market segment. This marks the first time that residential, commercial, and utility solar costs have increased together since Wood Mackenzie began tracking prices in 2014. The most significant cost pressures came from rising prices for raw materials, including steel and aluminum.

Several new polysilicon plants, mostly in China, are currently under development and are expected to bridge part of the supply gap. However, the current shortfall is a clear signal that a lot more needs to be done as the decarbonization and electrification drive accelerates.

Luckily, BNEF analyst Yali Jiang says fundamental shortages of polysilicon are unlikely to become a long-term problem since prices always drive more capacity. BNEF says it’s more concerned about other auxiliary materials in solar panel production and installation that use silver, aluminum, and steel, etc., since these metals are subject to the wider commodity world.

#2. Wind Turbines

KEY METALS AND MATERIALS: Concrete, Steel, Glass Fiber Reinforced Plastic, Electronic Scrap, Copper, Aluminum, Carbon Fiber Reinforced Polymers 

TOP ETF: First Trust Global Wind Energy ETF (NYSEARCA:FAN) 

It takes about 154,352 tons of steel, 2,866 tons of copper, and 387 tons of aluminum to construct wind turbines and infrastructure with the power capacity of a gigawatt as per BNEF estimates. The Global Wind Energy Outlook (GWEO) has forecast installed wind capacity to hit 2,110GW by 2030, representing a 185% growth over the timeframe.

Just like the solar sector, rising cost pressures are beginning to negatively impact the rollout of wind projects, which coupled with the expiry of key subsidies in China, is expected to lead to record capacity additions dropping, according to the Global Wind Energy Council.

In fact, Denmark’s Vestas Wind Systems A/S (OTCPK:VWDRY), one of the world’s biggest turbine producers with 31% share of the global market, recently cut its outlook for the rest of 2021, citing rising raw materials prices and disruptions to supply chains. In August, Vestas lowered its full-year revenue guidance to €15.5B-€16.5B from its previous forecast of €16B-€17B and expected EBIT margin to 5%-7% from its previous outlook of 6%-8%.

A big part of the rising costs can be pinned on steel, with steel prices having jumped in the U.S. this year and also advanced in China and Europe. 

But here again, the long-term outlook is bullish, with BNEF saying capacity additions will recover and reach an annual clip of 129 gigawatts by 2030.

Commodities inflation is here. Beyond the next 12 months, it is now about seeing both that the projects can and will be built, and also what’s the price?”Henrik Andersen, Vestas Wind’s chief executive officer, has posed.

#3. Lithium-Ion Batteries

KEY METALS AND MATERIALS: Copper, Aluminum, Lithium (LCE), Nickel, Cobalt, Manganese

TOP ETF: Global X Lithium & Battery Tech ETF (NYSEARCA:LIT)

The Li-ion battery sector outlook is probably the most bullish of all.

That’s the case because of the rapid adoption of EVs as well as utilities having doubled down on utility-scale battery storage units (one megawatt (MW) or greater power capacity) as battery costs continue falling across the board. A recent Pew Research Center survey found that 7% of U.S. adults currently have an electric or hybrid vehicle, and 39% say they are ‘very likely’ or ‘somewhat likely’ to seriously consider buying an EV when they next shop for a vehicle.

Lithium-ion battery pack prices fell 89% from 2010 to 2020, with the volume-weighted average hitting $137/kWh--$100/KWh is considered the Holy Grail where EVs will achieve cost parity with ICEs.

In 2019, NextEra Energy (NYSE:NEE) announced plans to build a 409-MW energy storage project in Florida that will be powered by utility-scale solar.

Xcel Energy (NASDAQ:XEL) has plans to replace its Comanche coal units with a $2.5-billion investment in renewables and battery storage, including 707 MW of solar PV, 1,131 megawatts (MW) of wind and 275 MW of battery storage in the State of Colorado.

Duke Energy (NYSE:DUK) announced plans to build an energy storage project at the Anderson Civic Center, Carolina, including investments to the tune of $500 million in battery storage projects for electricity generation capacity of 300 MW. 

According to the EIA, operating utility-scale battery storage power capacity in the United States more than quadrupled from 2014 (214 MW) through March 2019 (899 MW). The organization projects that utility-scale battery storage power capacity could exceed 2,500 MW by 2023, or a 180% increase, assuming currently planned additions are completed with no current operating capacity being retired.

UBS estimates that the United States energy storage market could grow to as much as $426 billion over the next decade.

A host of energy experts, including UBS, BloombergNEF, S&P Market Intelligence, and Wood Mackenzie, are extremely bullish about the prospects of the battery storage industry-- both over the near-and long-term--as the clean energy drive gains huge momentum.


Source: EIA

BNEF estimates that it takes 1,731 tons of copper, 1,202 tons of aluminum, and 729 tons of lithium to manufacture 1GWh Li-ion batteries.

In its June report, BNEF says the supply of lithium is likely to remain tight through 2022 as demand from the battery sector builds. But unlike solar and wind where key deficits are expected to be more ephemeral in nature, BNEF says that lithium hydroxide, the chemical favored for premium Li-ion cells, could see shortages by 2027.

To make the situation even more dicey, the limited availability of other battery materials is already threatening the battery sector’s ability to keep pace with the EV boom.  Lithium chemicals and copper foil are a particular concern, while all key battery metals have seen price spikes since mid-2020.

Kwasi Ampofo, head of metals and mining at BNEF, says battery ingredients nickel and manganese could see some of the most severe shortages later this decade thanks to a lack of capacity to process those metals into specialist chemicals.

Lei Zhang, chief executive officer of Envision Group, says the supply chain of batteries, especially on the raw material side, needs more investment, including in new lithium and nickel mines.

Price swings are a major concern in the battery sector because higher costs could have a negative effect on EV adoption.

#4. EV Chargers


TOP ETF: Global X Autonomous & Electric Vehicles ETF (NYSEARCA: DRIV)

The growth of the overall EV charging stations market is mainly hinged on factors such as rising demand for EV fast-charging infrastructure, government initiatives to drive the adoption of EVs and associated infrastructure, increasing deployment of EVs by shared mobility operators, and increasing prevalence of range anxiety.

A single fast, public electric vehicle charger typically needs 25 kilograms of copper, while a smaller charger to use at home needs around 2 kilograms of copper, according to BloombergNEF estimates. That might not seem like much, but it could be significant when you consider that global charge points are expected to increase from 1.3 million units in 2020 to 30.8 million units by 2027, good for a CAGR of nearly 50%.

U.S. President Biden has pledged to roll out 500,000 new charging stations in the country by 2030. China--home to the lion’s share of the world’s public connectors--is adding chargers at a breakneck pace while the likes of Tesla Inc.(NASDAQTSLA) and BP Plc (NYSE:BP) have made big commitments.

Installations of public chargers along highways, at fleet depots, and in grocery store parking lots jumped more than a third last year to bring the global total to 1.36 million units. BNEF sees charger installations increasing rapidly to reach 309 million connectors by 2040, when the sector’s annual investment will top $590 billion. 

Australia-based Tritium, the world’s second-largest producer of fast charging units, says charging stations are already experiencing price pressures in certain areas such as rising copper prices.

EV charging infrastructure is highly exposed to raw material shortages, and the rising cost of materials could impact rollouts.

By Alex Kimani for

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Commerce Department Rejects Tariff Request For Imported Solar Panels

By Charles Kennedy - Nov 11, 2021, 10:00 AM CST

  • American Solar Manufacturers Against Chinese Circumvention had their request for tariffs on Southeast Asian panels denied
  • If tariffs are imposed on imported panels, the U.S. solar industry will suffer a severe blow

The U.S. Commerce Department has rejected a request by a group of companies to impose tariffs on solar panels imported from Southeast Asia.

U.S. solar farm developers' dependence on cheap imported panels has burst into the spotlight amid supply chain disruptions and the continued tensions between Washington and Beijing. However, the sector has been vocal against the imposition of tariffs that would reduce their dependence on imports but expose them to the higher prices of locally produced panels.

The group of solar farm developers that asked for the tariffs—American Solar Manufacturers Against Chinese Circumvention—diverged from the industry line with the argument that panels imported from Vietnam, Malaysia, and Thailand were actually Chinese panels as Chinese manufacturers moved their production lines to these three countries to skirt U.S. tariffs on China-made panels introduced by the Trump administration.

The majority opinion, however, is that if tariffs are imposed on imported panels, the U.S. solar industry will suffer a severe blow. According to industry body Solar Energy Industries Association, if tariffs are imposed on imported panels, this would compromise the commercial viability of some 18 GW of new solar projects over the next two years.

Interestingly enough, it was not on industry-related grounds that the Commerce Department decided to reject the group's request. According to a Reuters report, the motive for the rejection was the American Solar Manufacturers Against Chinese Circumvention's unwillingness to identify its members, which, the department said, prevented it from evaluating the request adequately.

The group has said it fears the Chinese solar industry's reaction if it reveals the identities of its members.

The Solar Energy Industries Association said that the Commerce Department's decision on the tariff issue "provides a rush of certainty for companies to keep their investments moving, hire more workers and deploy more clean energy."

By Charles Kennedy for

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Breakthrough Green Tech Could Transform The Oil Industry

By Charles Kennedy - Nov 10, 2021, 6:00 PM CST

With both WTI and Brent crude hovering close to $85 per barrel, OPEC+ refusing to increase production and the American shale patch appeasing shareholders with extreme discipline, the world’s oil sands could start to become more attractive.

Except for two serious issues: They’re expensive to extract and far too dirty to consider as the pressure mounts to address climate change.

But one enterprising high-tech company has come up with a patented way to extract oil sands without leaving an environmental footprint for an average price of $25/barrel. They’ve already started doing it in Utah, and the success of the new technology has most recently led to a hostile takeover bid.

Petroteq Energy Inc (OTCMKTS: PQEFF), the company behind the new clean oil sands technology, has received an unsolicited takeover offer from Viston United Swiss AG for C$0.74 per share—a figure that represents a nearly 280% premium over share prices right before the takeover offer.

Since the $500-million takeover bid, Petroteq’s shares have experienced high volume trading, with share prices nearly doubling.

The hostile takeover bid is all about CORT, Petroteq’s proprietary “Clean Oil Recovery Technology” for turning locked oil sands into a viable source of high-quality crude oil while mitigating soil contamination.

How CORT Could Change Oil Sands Forever

Petroteq is first and foremost a remediation company, and CORT is groundbreaking technology.

Part of the attraction is CORT’s versatility. It can be applied to oil-wet deposits as easily as it can be applied to water-wet deposits. In both cases, it has proven to produce high-quality oil and clean sand. Presently, CORT is used for oil sands extraction, but it can also be used in remediation for other natural resources.

With climate change and clean energy the central focus points across industries right now, CORT is moving into the limelight rather quickly, as made clear by the hostile takeover bid.

Led by R.G. Bailey, a chemical engineer who served five years as President of Exxon in the Arabian Gulf region, CORT makes it possible to extract oil from oil sands without using water. That means no wastewater and no toxic trailing ponds, both of which have been severe environmental hurdles for oilsands. CORT operates as a closed-loop system, recovering over 95% of the solvents it uses in extraction and recycling them. The remaining 5% stays within the extracted oil.


Petroteq (OTCMKTS: PQEFF) is, first and foremost, an eco-friendly company with an underlying technology that fits today’s ESG investment climate.

Once the ore is washed of oil in with CORT technology, the sand has been remediated and it becomes environmentally clean soil. And the land itself is then viable for use rather than turned into a toxic trailing pond. The sand can remain or it can be moved and sold to generate additional revenue.

And CORT is not a speculative technology; it’s already proven and already up and running.

The COVID-19 pandemic did not keep Petroteq from advancing, despite difficulties through 2020 for the entire oil and gas industry.

During that time, Petroteq completed the construction of a 500/bpd oil extraction plant at Asphalt Ridge in Utah, a U.S. state with resources estimates of up to 32 billion barrels of oil-in-place comprised largely of “oil-wet” oil sands deposits.

This demonstration plant has 2500 acres under lease and an 87M bbl near-surface oil resource. By 2023, Petroteq plans to be producing 5,000 bpd, ramping up to 10,000 bpd in 2024.

The company has already received a FEED (Front End Engineering Design) study for a 5,000 bpd oil extraction plant, along with a third-party technical evaluation.

This isn’t just a unique growth opportunity straddling two sectors—E&P and technology—it’s also a highly attractive one in terms of numbers:

The facility’s CAPEX is estimated at $19,000-$2,000 per daily bbl, with production costs averaging $250$30 per barrel, depending on the scale of production. Netback margins come in between $23 and $28 per barrel.

Those netback margins, however, were compiled based on $70 WTI, rather than today’s much more attractive ~$84 WTI.

Beyond Extraction: Remediation Runs Deep

The narrative here isn’t just about clean oil sands extraction. Petroteq’s technology can be applied to other natural resources as well.

And this isn’t just about a plant in Utah, either. The patenting and licensing potential is what the hostile takeover is all about.

A U.S. patent and corresponding foreign patents in both Russia and Canada have been issued covering the key features of this system and process for extracting oil cleanly from oil sands.

Petroteq (OTCMKTS: PQEFF) has also sold its first commercial license for $2 million-plus a 5% continuing royalty to Greenfield Energy LLC.

There is a very attractive market opportunity here, especially with WTI trading near $85 per barrel.

Oil sands deposits around the world could benefit from Petroteq’s technology, and it is this opportunity that has led to the unsolicited takeover bid. The $2-million licensing deal with Greenfield Energy LLC is likely only just the beginning: Other groups with oilsands resources could seek to license the technology or engage in a JV deal to gain access to CORT.

The Calm Before the Takeover

The hostile takeover offer on Petroteq is a clear signal that this little-known company is on to something big.

Its patented technology, CORT, could unlock yet another American oil bonanza, but its applications are much further-reaching—and global.

And it’s all happening at a time of soaring oil prices and skyrocketing investor interest in clean solutions for the fossil fuels industry.

It’s not about Utah’s oil sands, though the attraction there is clear and the planned ramp-up of production should entice investors. This is a much bigger story about global licensing of a breakthrough technology that could transform oilsands from the dirtiest and most expensive form of crude oil … into a fossil fuel that suddenly becomes a much cleaner story in line with today’s climate change narrative.

Trillions of dollars in oil sands could benefit around the world, from Canada’s 100 billion boe to China, Venezuela, and even the American West.

Investors have until February to make their move on Petroteq (OTCMKTS: PQEFF) before the hostile takeover is concluded.

Other oil companies to watch as the sector continues to heat up:

Continental Resources (NYSE:CLR), the shale driller owned by one of the richest and most prominent shale wildcatters, Harold Hamm, has reported strong Q3 numbers that, nevertheless, failed to meet Wall Street's expectations.

Continental Resources has reported Q3 revenue of $1.34B, good for 93.5% Y/Y growth but $70M below the Wall Street consensus. Adjusted net income clocked in at $437.2 MM while GAAP EPS of $1.01 missed by $0.20.

With oil prices consolidating above $80 per barrel, the majority of shale producers are solidly profitable, and many are returning excess cash to shareholders in the form of hiked dividends. Continental Resources has followed suit by hiking its dividend 33% to $0.20, but has also gone off the beaten path–the company is finally taking a stake in North America's biggest oil field.

Continental has announced plans to acquire 92,000 net acres in the Permian Basin from Pioneer Natural Resources Co. for $3.25 billion. The company will pay cash for the assets in the Delaware Basin, a subregion of the massive Permian.

Devon Energy Devon Energy (NYSE:DVN) has returned its Q3 scorecard that easily beat on both top-and bottom-line expectations. The Oklahoma-based shale producer reported revenue of $3.47B (+224.3% Y/Y), $1.08B higher than the consensus, while net earnings of $838M represented a vast improvement from the $92M loss the company reported for last year's corresponding quarter. Meanwhile, the company reported Q3 GAAP EPS of $1.24 vs.($0.25), beating by $0.31.

Q3 production soared 87% Y/Y to 608K boe/day, with production expenses declining 1% to $9.91/unit driven by operational efficiency gains and the benefits of scalable production growth in the Delaware Basin.

The company expects Q4 output of 583K-601K boe/day and expects to maintain FY 2022 production of 570K-600K boe/day, with $1.9B-$2.2B in capital spending on its upstream operations.

Devon's free cash flow generation increased 8-fold from the fourth quarter of 2020 to $1.1B, while the balance sheet strengthened with cash balances increasing by $782 million to a total of $2.3 billion.

ConocoPhillips (NYSE:COP) was founded by two oil pioneers in 1917, and has since grown to be one of the largest energy companies in the world. They are committed to delivering a diverse range of products that meet society's needs for food, transportation, power generation, home heating oil and more.  

ConocoPhillips is dedicated to working with others in industry and government to provide responsible development of resources while minimizing environmental impact.   ConocoPhillips also strives to make sure their employees feel valued as they work towards success together.

A couple of months ago, Bank of America upgraded ConocoPhillips shares to Buy from Neutral with a $67 price target, calling the company a "cash machine" with the potential for accelerated returns.v According to BofA analyst Doug Leggate, ConocoPhillips looks "poised to accelerate cash returns at an earlier and more significant pace than any 'pure-play' E&P or oil major." 

Leggate ConocoPhillips shares have pulled back to more attractive levels "but with a different macro outlook from when [Brent] oil peaked close to $70." Best of all, the BofA analyst believes COP is highly exposed to a longer-term oil recovery. But BofA is not the only Wall Street punter that's gushing about ConocoPhillips.

Diamondback Energy (NASDAQ:FANG) has posted Q3 revenue of $1.91B (+165.3% Y/Y) beating Wall Street's consensus by $430M while GAAP EPS of $3.56 beat by $0.73.

The company's Q3 2021 average production clocked in at 239.8 MBO/d (404.3 MBOE/d), with Q3 2021 Permian Basin production averaging 223.0 MBO/d (374.3 MBOE/d).

Q3 2021 cash flow from operating activities came in at $1,199 million; Operating Cash Flow was $1,131 million while Free Cash Flow was $740 million.

Diamondback has announced a commitment to return 50% of free cash flow to stockholders beginning in Q4 2021. To this end, the company raised its dividend 11% to $0.50 per share, marking the second consecutive quarterly increase after hiking by 12% in the second quarter. The company's board has also authorized a $2 billion share repurchase program as part of this commitment.

EOG Resources (NYSE:EOG) has reported Q3 revenue of $4.78B (+103.4% Y/Y), beating by $430M while net income of $1,095M represented a big jump from a $42M loss recorded in Q3 2020. Meanwhile, GAAP EPS of $1.88 narrowly missed by $0.01 but was a big improvement from last year's $0.07 loss.

EOG generated $1.4 billion of free cash flow and announced that capital expenditures came near the low end of guidance range driven by sustainable cost reductions.

EOG said total company crude oil production of 449,500 Bopd was above the high end of the guidance range due to better well productivity. 

EOG Resources has declared a $0.75/share quarterly dividend, good for an 81.8% increase from prior dividend of $0.41. The company also declared a special dividend of $2.00 per share, payable on December 30; for stockholders of record on December 15.

Occidental Petroleum (NYSE:OXY) has become the latest shale patch producer to post an easy earnings beat on the strength of high oil and gas prices. The Texas company–which eschews wildcatting in favor of an oil recovery model–reported Q3 Non-GAAP EPS of $0.87 beats by $0.20 while GAAP EPS of $0.65 was in-line with expectations. 

OXY reported that cash flow from continuing operations clocked in at $2.9 billion, capital spending was $656 million, while free cash flow excluding working capital came in at over $2.3 billion.

The company exceeded production guidance midpoint by 15 Mboed, despite the impact of Hurricane Ida, with production of 1,160 Mboed from continuing operations. Meanwhile, OxyChem generated record earnings and increased total year pre-tax guidance to $1.45 billion

Occidental also announced that it had completed its large-scale divestiture program with the sale of Ghana in October; repaid $4.3 billion of long-term debt and retired $750 million of interest rate swaps.

By Charles Kennedy

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