Mat-Chem Notes for the Week Ended July 17, 2022



KEY HIGHLIGHTS
  • WTR-CMI last week. While both broad market indexes declined last week, with the S&P 500 and the Russell 2000 down 0.9% and 1.4%, respectively, our WTR-CMI index of 30 chemicals and materials technology stocks underperformed on a relative basis, declining 1.5%. BofA’s downgrade didn’t prevent SHW from appreciating 3.1%, followed by RPM’s 3.0% and AVNT’s 2.8% improvement, as consumer spending remained strong. Volatile lithium stocks contributed to our index’s decline, with PLL’s 11% drop continuing the erosion of that stock on lack of rezoning and permitting progress at its North Carolina plant/mine. LTHM saw its stock drop 9% and EAF delivered a 7.7% decline, likely on reports of weaker Y/Y steel production volumes.
  • Ag economy is doing its part for the environment. A new report by the USDA indicates the US farm economy reduced its carbon footprint from 699M mt of CO2 in 2019 to 670M mt in 2020. With growing use of blue and green ammonia lowering the fertilizer industry’s contribution to CO2 generation and with greater use of bio-based pesticides, the carbon footprint of the industry should continue to trend down, helping the US meet the administration’s carbon emissions 2030 goal.
  • Automotive market may be bottoming. June new car registrations fell 14% in the EU, but increased 24% Y/Y in China, after that country’s easing of COVID lockdowns and an infusion of consumer incentives. However, industry participants don’t see the market recovering until 2024, as indicated by the Chinese market’s downward revision for 2022 growth from 5.4% to 3%, although there is growing optimism that 2H22 will be better than the previous six months. With PPG and AXTA well off their end of 2021 highs, prospects of stabilization in auto production may be seen as good news.
  • EV market struggles with battery materials. As the EV revolution continues, with China’s NEV market up 123% YTD, securing sufficient battery materials to ensure continued growth of the EV industry is still a major concern. Current geopolitics are only adding fuel to the fire, with reduced supply of nickel and other critical metals from Russia. While graphite did not make the list of concerns, it is this material, largely underappreciated by the investors, that may provide the best investment vehicle and we encourage investors to explore WWR, as well as its NA graphite development peers.
WTR-CMI WEEKLY PERFORMANCE

WTR-CMI last week. While both broad market indexes declined last week, with the S&P 500 and the Russell 2000 down 0.9% and 1.4%, respectively, our WTR-CMI index of 30 chemicals and materials technology stocks underperformed on a relative basis, declining 1.5%. BofA’s downgrade didn’t prevent SHW from appreciating 3.1%, followed by RPM’s 3.0% and AVNT’s 2.8% improvement, as consumer spending remained strong. Volatile lithium stocks contributed to our index’s decline, with PLL’s 11% drop continuing the erosion of that stock on lack of rezoning and permitting progress at its North Carolina plant/mine. LTHM saw its stock drop 9% and EAF delivered a 7.7% decline, likely on reports of weaker Y/Y steel production volumes.

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