Posted by & filed under Daily Intelligence Briefing.

lithium-mine-atacama-56
MRP   MCALINDEN RESEARCH PARTNERS  | DIBS  
SITE 
MAIL
INFO 
DATA ECON POL FIN REAL LABOR MFG TECH ENERGY END

We bring you our Daily Intelligence Briefing courtesy of McAlinden Research Partners. The report is provided to Hedge Connection members for free. Below is snapshot, login to view the full report. Not a member? Join today.

McAlinden Research Partners is currently offering a complimentary full month subscription of the DIB. Activate yours today – http://www.mcalindenresearchpartners.com/hc-trial.html

Daily Intelligence Briefing – October 2, 2017

FEATURED TOPIC: MRP ADDS LONG LITHIUM AS A NEW INVESTMENT THEME

Lithium has been the central catalyst of the battery revolution of the last decade. It already plays a large part in our daily lives through our smartphones, laptops, and almost all other rechargeable electronics. The market for lithium-ion batteries alone was $31 billion in 2016 and is expected to generate revenues of $67 billion by end of 2022. Analysts estimate that by 2030, global lithium demand could possibly triple, and investment in new mines could range from $350 billion to $750 billion. Here’s why:

ELECTRIC CARS: Lithium-ion batteries are the fuel source of choice for all the major automakers’ electric ambitions. Since lithium is the world’s lightest solid element, and the design of all EVs are predicated on being as lightweight as possible, this should not change any time soon. Various governments have announced that they intend to ban the sale of diesel and gas cars in the future: The Netherlands (by 2025), Norway (by 2025), India (by 2030), France (by 2040), Britain (by 2040), Scotland(by 2032), China (no date announced yet), Germany (under consideration), California (under consideration). Supported by these policies, electric car production is expected to increase more than thirty-fold by 2030. 

ELECTRIC UTILITIES: Electric power generation companies are increasingly using batteries to store solar energy during daylight hours. These energy-storage sites consist of large lithium-ion batteries. California’s AES Energy Storage recently developed the world’s largest lithium-ion battery for utility company San Diego Gas & Electric (SDG&E). The giant grid-scale battery can discharge up to 30 megawatts – roughly equivalent to powering 20,000 homes – and sustain that level for up to four hours. Combining several grid-scale batteries can now produce about 100 MW of electricity that can be turned on immediately in the event of an outage or if the main grid falls short of demand.

WATER UTILITES: Even water utilities are playing a part in the lithium-ion battery market as they increasingly utilize them for automatic meter reading (AMR) applications. The implementation of AMR has grown consistently by more than 20% annually among water utilities nationwide.

IMPROVING BATTERY TECHNOLOGY: Lithium ion batteries are the most energy dense and efficient batteries on the planet, even in their current state. But innovation does not end here. Along with efficiency gains, whole new types of lithium batteries are being developed. Lithium-sulfur (Li-S) batteries, for example, could reach about two to three times the energy density compared to today’s lithium ion batteries while weighing less and requiring cheaper materials. However, the much more transformative opportunity which lies in lithium is known as lithium-air (Li-air) which can theoretically hold more than 40 times the charge as a lithium ion battery the same weight.

Though lithium carbonate spot prices have risen more than 20% over the past year, battery costs continue to fall. The cost of lithium batteries dropped from $1000 per kilowatt hour (kWh) in 2010 to $230 per kWh in 2016. This year, large orders for mainstream lithium batteries have fallen to as low as $139 per kWh. This is because lithium is one of the smallest cost components of the battery pack itself. 

There are concerns relating to supply. Nobody is sure just how much lithium there is and the range estimates vary by a factor of 10, meaning that deposits could provide lithium for a further 100 million cars — about 10 percent of the global auto fleet — to 10 billion or more. A shortage could drive prices sky high, although even if the price of lithium were to soar 300%, battery pack costs would rise only by about 2%. Meanwhile, investment is flowing into alternative procurement methods, aside from mining, such as wastewater & oil that could alleviate a full-on materials shortage.

NEW MRP INVESTMENT THEME – LONG LITHIUM: For all the reasons listed above, MRP is bullish on lithium and adding it to our list of active investment themes. We will be tracking this theme via the Global X Lithium & Battery Tech ETF (LIT). The ETF has been on a tear lately, but given the secular trends in the automotive and battery industries, MRP believes there are more gains ahead.

HERE in the meantime are the latest articles on lithium (the stories are summarized in the COMMODITIES Section)

  • Lithium – Panasonic steps up lithium-ion battery production amid electric-vehicle boom
  • Lithium – Great Wall Invests in Australian Miner Amid Electric Push
  • Lithium – Russia’s State-Owned Nuclear Company Is Taking Aim At Lithium & Batteries

CHART: LITHIUM PRICES & LITHIUM ETF


OTHER STORIES HIGHLIGHTED IN TODAY’S DIBS:

  • Markets: 
    • Cryptocurrency – South Korea Joins Cryptocurrency Crackdown 
  • Economics and Trade: 
    • U.S. Inflation – Inflation Is No Mystery to the Bond Market 
    • U.S. Tax Plan – Winners and Losers Under the Trump Tax Plan
    • U.S. Wealth – The typical US family was richer in 1998 
  • Politics and Policy: 
    • KRG Blockade – Iraq closes Kurdish airspace as it raises pressure on KRG 
  • Finance: 
    • Insurance – Puerto Rico power outage set to hurt global reinsurers 
  • Services: 
    • Retail / Private Label Wars – AmazonBasics is crushing other private brands  
    • Retail / Private Label Wars – Wal-Mart Tries to Take Jet.com Upscale  
    • Retail – ‘Amazon Effect’ Leads Investors to Sour on Global Retail
  • Commodities: 
    • Sugar – Sugar prices set to fall as EU abolishes quota 
    • Commodities – Commodities markets swell in size despite price slide 
  • Energy & Environment: 
    • Renewables – Solar, Batteries and LNG Emerge as Competitors to Oil in Island Markets
  • Endnote: 
    • CHART: The Massive Impact of EVs on Commodities in One Chart

JOE MAC’S MARKET VIEWPOINT

CURRENT MRP THEMES

  CAPEX  (L)

  Cybersecurity  (L)

  Defense  (L)

  Emerging Markets  (L)

  France  (L)

  Gaming  (L)

  Gold  (L)

  Homebuilders  (L)

  India  (L)

  Oil Services & Equipment  (L)

  Oil & U.S. Energy  (L)

  Steel  (L)

  TIPS  (L)

  Long Dated Treasuries  (S)

  Robotics & Automation (L)

  U.S. Financials  (L)

  U.S. Regional Banks  (L)

  Value over Growth  (L)


About the DIBs: MRP focuses on identifying transformational change in the global economy and offering an investment thesis whenever an opportunity arises that has not yet been recognized by the market. The DIBs are MRP’s compilation of articles and data from multiple sources on subjects reflecting disruptive change that have potential investment implications for an industry or group of securities. We share these with our clients who may already have or may be considering exposure in the industries affected. The subjects change daily and constitute an excellent update on featured topics. 

 MAJOR DATA POINTS

Top   

  • United States, Baker-Hughes Rig Count, WoW, wk9/29: 940 from prior 935
  • United States, Personal Income and Outlays, MoM, AUG: 0.2% from prior 0.3%
  • United States, Consumer Sentiment, MoM, SEP: 95.1 from prior 95.3
  • Hungary, PPI, YoY, AUG: 2.4% from prior 1.2%
  • Germany, Unemployment Rate, MoM, SEP: 5.6% from prior 5.7%
  • Uganda, Inflation Rate, YoY, SEP: 5.3% from prior 5.2%
  • Slovakia, Inflation Rate, YoY, SEP: 1.4% from prior 1.2%
  • Greece, PPI, YoY, AUG: 4.1% from prior 3%
  • Italy, Inflation Rate, 1.1% from prior 1.2%

   MARKETS

Top   

Cryptocurrency – South Korea Joins Cryptocurrency Crackdown 

South Korea will step up inspections of virtual-currency exchanges and has banned so-called initial coin offerings, joining in a widespread cryptocurrency crackdown. Trading volume on South Korea’s bitcoin exchanges increased substantially during the summer as the price of the virtual currency more than quintupled to around $5,000 before falling sharply. Bitcoin last traded down 3.5% at $4,051 on Bitstamp.

The South Korean won is the third-most-used currency for bitcoin purchases after the Japanese yen and the U.S. dollar, according to market monitor CryptoCompare. A year ago, it ranked sixth. WSJ

   ECONOMICS AND TRADE

Top   

U.S. Inflation – Inflation Is No Mystery to the Bond Market 

Although inflation looks sluggish, there’s evidence that pressures are building beneath the surface. This is can be seen in energy prices, general consumer prices in China and the U.K, and even in the New York Federal Reserve’s Underlying Inflation Gauge, which has risen to 2.7 percent, its highest reading since 2007. The UIG incorporates dozens of additional variables outside of prices, including the unemployment rate, stock prices, bond yields and purchasing managers’ indexes, according to Bloomberg News.

At her press conference last week, Yellen dismissed the importance of trend inflation as measured by the UIG because the overall “inflation miss” remains unexplained. More than 25 percent of the components that make up the Consumer Price Index are in a protracted deflationary trend. But the U.S. economy may soon see a period of reflation simply because the prolonged bout of inflation “misses” could lead to more instances where the data registers higher readings as it’s being measured against a lower base.

Bond markets have begun to anticipate at least some reflation in a more meaningful way. Long-term real yields have fallen on average by 40 basis points since the start of the year, driven by flows into inflation-linked bond ETFs from investors seeking protection from higher consumer prices. B

*

U.S. Tax Plan – Winners and Losers Under the Trump Tax Plan 

Business owners who live in low-tax states, people who don’t take deductions, and heirs of very large estates are likely to benefit from President Donald Trump’s tax framework for individuals. Salaried workers in high-tax states and people with large medical expenses, such as those in nursing homes, aren’t. Some people in both of those groups could owe more in taxes than they do today. For families with children, the outcome is unclear. 

The tax overhaul unveiled Wednesday by Mr. Trump leaves crucial details to Congress, including the level of income at which each tax rate kicks in or changes to the capital-gains tax. Lawmakers will struggle to fill in these blanks because of budget pressures and the tax code’s complexity. WSJ

*

U.S. Wealth – The typical US family was richer in 1998 

Income gains were widely, if not evenly, shared across every measured economic, age, educational, and racial and ethnic category in the three years to the end of 2016, according to the triennial Survey of Consumer Finances released Wednesday by the Federal Reserve.

This was a hugely welcome development. The previous edition of the survey had shown that median incomes and median wealth had actually declined from 2010 to 2013.  Still, higher-income families still enjoyed more of the income gains in the last three years. 

The median American family was richer in 1998 than it is now, and it also has about 30 per cent less wealth than at its peak in 2007. That measurement was obviously inflated by the housing price bubble, but even so the decline can nonetheless be understood as a massive shock to the value, real and perceived, of the typical household’s collateral. FT

 

There is much more to this report! McAlinden Research Partners offers Hedge Connection members weekly access to the Daily Intelligence Briefing research for free – click here to view. (You must be logged in first). Not a member? Join today.

McAlinden Research Partners is currently offering a complimentary full month subscription of the DIB. Activate yours today – http://www.mcalindenresearchpartners.com/hc-trial.html

 

Leave a Reply

Your email address will not be published. Required fields are marked *

This blog is kept spam free by WP-SpamFree.