FREE

Mat-Chem Notes

WTR-CMI last week. As the markets continue to recover from the 2022 doldrums, both the S&P 500 and the Russell 2000 posted weekly gains of 3.1% and 0.5%, respectively. Our WTR-CMI index of 30 chemicals and materials technology stocks appreciated 1.4% over the last week. YTD, our index is up 8.1%, above the Russell 2000’s 7.3% appreciation, but below the large-cap S&P 500’s 15.3% recovery. Ag market outlook weakened. FMC, AVD, and even CTVA posted negative returns last week and all three are down YTD, as strong demand and higher selling prices seen last year are showing signs of weakness in 2023. The Purdue University/CME Group Ag Economy Barometer declined 19 points to a reading of 104 in May, as farmers expressed concerns over still high input costs, lower commodity grain prices, and the high interest rate environment, among other things. China auto market still under pressure. Despite improving 28% Y/Y in May, M/M growth in China’s new vehicle registrations was below expectations, prompting the government to look at programs to incentivize new and used purchases. Meanwhile, the country’s EV producer, NIO, is implementing a program of its own, cutting prices for its vehicles across the board. LAC takes the first step to production. The company announced that as part of its plant commissioning in Argentina, it produced its first batch of non-battery grade lithium carbonate at the Caucharí-Olaroz plant. As additional equipment allowing for purification to battery-grade standards is installed in 2H23, the company may be in a position to produce at the annual design rate of 40K mt of li-carbonate in 2024. Construction prices remain elevated. Despite a modest decline in May, which extended the streak of lower prices to three months, driven by lower energy, steel, and softwood lumber prices, construction costs remain elevated compared with pre-pandemic levels. Costs are expected to remain high for the foreseeable future, driven by higher energy costs and higher labor costs, as well as continuing labor shortages, just as demand is increasing due to numerous public and private megaprojects under development in the United States. Norway’s plan for undersea mining. As the ISA gets ready to reconvene in July to work on developing an international deep-sea mining code, individual nations, including Norway, are looking to open their territorial waters to metal mining, which may accelerate the ISA’s decision-making process, which is a positive for TMC.