Summary: Our Quarterly Outlook highlighted our significantly bullish view on industrial metals such as copper, aluminium and lithium. We highlight potential stocks to watch ahead, given many of the major metal companies including Albemarle, BHP, Rio Tinto and Pilbara Minerals report financial results and their outlooks in the coming weeks. We believe a theme might be to expect higher commodity prices this year.
When picking investments, remember markets are forward looking
When assessing sectors and stocks to watch, it’s important to note markets are forward looking.
As we are at Saxo - we’re thinking about what markets could look in six to 12 month.
With that in mind, and reflecting on Saxo’s quarterly outlook; we wanted to share five stocks to watch; as featured in our Equity baskets and focusing on our bullish view of the commodity sector.
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Saxo is bullish on copper, aluminium and lithium
At Saxo, as mentioned in our quarterly outlook, we’re significantly bullish on copper, aluminium and lithium; underpinned by demand from the global green transformation and with hundreds of billions to be invested to achieve climate and car makers goals. Here are three considerations
- Firstly; The International Energy Agency or IEA – made of 31 countries, including, Australia, the UK, Denmark, the United States and Japan vowed to be emission free by 2050. Some nations plan to end the sale of fuel powered engines by 2035. Meaning - demand for green metals will only increase - while supply is not expected to keep up. This means the trend toward higher commodity prices is likely here to stay.
- Secondl; consider how much copper, aluminium and lithium goes into an average EV - 10 kilograms of lithium, 83 kilograms of copper. 250 kilograms of aluminium. But metals are also needed for other battery cells and for building materials as well.
- Thirdly; consider; investment managers have been increasing their positions into such, metals, given the likes of Tesla, Ford, BMW, Merc, and VW will need to buy more raw materials such as these, to ramping up EVs production.
Five stocks to watch; across copper, aluminium and lithium- Albemarle, BHP, Rio, Southern Copper Corp and Pilbara Minerals
These stocks are featured in Saxo equity baskets, to find more click here.
Albemarle (ALB) is the world’s biggest lithium producing company by market size with a US$31.3 billion valuation. It has one the broadest customer groups, selling to Toyota, Ford, Mercedes-Benz, Tesla and GM, and Panasonic. Albemarle is due to report financial results on February 16 as well as its outlook, which will be very telling for the lithium industry. For more on Albemarle head to Saxo’s Lithium or green transformation equity theme baskets.
BHP (BHP) is the biggest mining company in the world by market size, with an AUD$243 billion valuation. BHP has historically generated some of strongest cashflows across the globe. Given this – it’s also been able to pay some of the highest dividends in the world, consistently. Consensus expects BHP to pay a full-year gross dividend yield of 14%. For the last reporting period BHP made about 48.7% of its revenue from iron ore, 26.7% from copper and 24.6% from coal. BHP is also attempting to take over copper giant, Oz Minerals, while also moving into fertilisers – with plans to be the biggest fertiliser company in the world. BHP reports full year financial results on February 21 as well as its outlook. Which will give us a further glimpse into future demand for copper, as well as iron ore. For more on BHP- head to Saxo’s Commodity or Australian Resources basket.
Rio Tinto (RIO) is the second biggest diversified miner in the world, with an $178 billion valuation. Last reporting year Rio made 58.1% of its revenue from iron ore, 21.5% from aluminium and 10.9% from copper, and the remainder from other metals. Rio is expected to pay a full-year gross dividend yield of about 11% this year. Rio reports full year financial results on February 22 and its outlook for 2023, which will be interesting given it’s a major aluminium producer. For more on Rio head to Saxo’s Commodity or Australian Resources basket.
Southern Copper Corp (SSCO) is another large copper miner. It’s not a large as BHP or RIO in size but it’s market cap size is US$57.3 billion. Last reporting year it made most of revenue from copper. The market expects Southern Copper to pay a full yea gross dividend yield of 5.3% this year. For more on Southern Copper head to Saxo’s Commodity equity basket.
Pilbara Minerals (PLS) is Australia largest lithium miner. It has a market value of AU$14 billion. Pilbara’s customers include LG Chem, and China’s Great Wall Motor Company. And believe it or not, one of Pilbara Minerals customers is actually China’s Genfeng Lithium Corp, which is China’s largest lithium company. Pilbara is due to report financial results on February 22.
For more, read Saxo’s quarterly outlook at analysis.Saxo.
To find out more on the stocks mentioned above, refer to our equity baskets under Research, Stocks.
