Mat-Chem Notes for the Week Ended July 24, 2022



KEY HIGHLIGHTS
  • WTR-CMI last week. In what was a week of recovery for the market, the S&P 500 and Russell 2000 advanced 2.5% and 3.6%, respectively. Our WTR-CMI index of 30 chemicals and materials technology stocks outperformed the broader indexes by delivering a 6.1% bounce last week. The WTR-CMI’s performance was led by EAF’s 14.4% rebound from previous weeks’ losses and regained investor enthusiasm for lithium following Elon Musk’s remarks, which saw LTHM, PLL, LAC, and ALB deliver double-digit gains for the week. PKE and AVD were the only stocks in our index to finish the week in the red.
  • NEVs are not immune from market forces. An ACEA summary of the EU’s 2Q22 auto sales by fuel type showed that while the share of new energy vehicles (NEVs) of new car sales has increased Y/Y, it was more a function of declining sales volumes of conventional fueled vehicles as growth, as Y/Y sales of BEVs increased a relatively modest 11%. Furthermore, hybrid vehicle (HEV) and plug-in hybrid vehicle (PHEV) sales declined. This suggests that a deepening and spreading economic recession may slow the pace of NEV sales versus expectations and, by extent, affect growth forecasts for key material.
  • ASH provides positive outlook. Citing lower exposure to pet-chem-driven RM inflation and stable end-markets, ASH pre-announced stronger F3Q22 (Jun-Q) results and raised guidance for its Sep-Q by 3% for revenue and 4% for EBITDA, helping the stock keep up with the WTR-CMI index last week. Similar RM and end-market exposure may benefit ECL, SXT, and NGVT.
  • Keeping an eye on the future. Even as recession concerns grow, EV manufacturers are looking to ensure sufficient supply of critical materials for lithium batteries, casting their nets wide. Thus, CMP announced a signing of a non-binding memorandum of understanding with Ford to potentially supply the company or its battery partners with battery-grade lithium from CMP’s yet-to-be designed lithium extraction and conversion facility.
  • A new trend continues to emerge in ag. Indoor farming, or controlled environment agriculture (CEA) continues to evolve in order to overcome the expected land shortage and address consumer demands. We believe innovations around this sector will disproportionately benefit bio-ag companies such as BIOX and BHIL, as their products also address similar concerns.
WTR-CMI WEEKLY PERFORMANCE

Source: YCharts; July 22 close

WTR-CMI last week. In what was a week of recovery for the market, the S&P 500 and Russell 2000 advanced 2.5% and 3.6%, respectively. Our WTR-CMI index of 30 chemicals and materials technology stocks outperformed the broader indexes by delivering a 6.1% bounce last week. The WTR-CMI’s performance was led by EAF’s 14.4% rebound from previous weeks’ losses and regained investor enthusiasm for lithium following Elon Musk’s remarks, which saw LTHM, PLL, LAC, and ALB deliver double-digit gains for the week. PKE and AVD were the only stocks in our index to finish the week in the red.

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