ICG Sustainability Update – December 2020

The ICG Sustainability Update is our monthly published comment focused on energy-, waste-, raw material-, emission- and water-efficiency.

 

Resource Efficiency

Energy efficiency has struggled to keep its momentum during a global pandemic and an economic recession, however some countries still prioritize energy efficiency as an important resource to help reduce household and business energy bills, create jobs, and reduce emissions. Researchers concluded that adding insulation or installing a new heating system can lower costs but also reduce stress on the grid at times of peak demand. Looking into the New Year, the new president-elect has vowed to re-join the Paris climate accord on his first day at the office, and convene a climate summit of world leaders. He has insisted that he will create a more ambitious national target for cutting emissions that would put the country on a sustainable path to achieve net-zero emissions no later than 2050. At the same time, Biden plans to start a new round of negotiations between the federal government, the US auto industry and California officials to significantly improve the fuel efficiency of cars, pickup trucks and sport-utility vehicles – the largest source of the nation’s emissions. He will expedite federal permits for offshore wind projects planned and seek to stop the expansion of drilling on public land. Also, he has promised to invest around 40% of clean energy funding in historically disadvantaged communities and ensure wider access to everything from safe drinking water to sustainable jobs in neighbourhoods that have long lacked both. On another note, in September last year, China’s president, Xi Jinping, announced that China wants net carbon emissions to peak before 2030 and to be carbon-neutral before 2060. Japan and South Korea followed with their own ambitious commitments. Net-zero pledges now cover almost 60% of the world’s emissions. As a big source of carbon emissions, the various net-zero pledges place coal squarely in their crosshairs. While the commitments are bold, getting to carbon neutrality will be a challenge, especially in China, the world’s largest emitter of carbon. Even with China’s rapid deployment of renewables in recent years and improvements in energy efficiency, it’s still heavily dependent on the burning of coal. About 90% of China’s emissions come from electricity and heat production, industry and transport. With so many details still to be released in terms of how China plans to achieve carbon neutrality, many questions linger over coal’s future in a country where it still accounts for more than 60% of its electricity generation mix. According to analysts, coal demand in China is already flat. It’s likely to remain at a plateau for some years. The country aims to continue quite fast GDP growth in the next three decades, so it means it wants to be richer but also at the same time cleaner, greener and lower-carbon. China needs to decouple GDP growth with its energy demand and its carbon emissions and that will require a very significant transition in its growth engines as well as its energy supply structure.

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ICG Commodity Update – December 2020

The ICG Commodity Update is our monthly published comment on energy, industrial metals and precious metals market.

 

Energy

At the end of 2020 Brent crude prices topped $50/bl for the first time since early March. The latest milestone in a remarkable oil-market recovery fuelled by supply curtailments and drivers returning to the road. Its recent rally shows how hopes for coronavirus-vaccine distribution and economic-stimulus programs are helping to heal global energy markets. Indeed, the oil sector has been hit harder than almost any other by the pandemic. Crude prices fell from near $70/bl at the beginning of 2020 to below $20/bl in April as lockdown slashed fuel demand. The crisis reached its crescendo in April, when the US oil price WTI briefly turned negative. After a short but damaging price war, OPEC and Russia enacted record supply cuts to stabilise markets. Companies were forced to rip up investment plans while European energy majors began to look to a greener future. Oil and gas companies wrote down +$150bn combined in the first three quarters of 2020, the most for that nine-month period since at least 2010. Defaults by US oil and gas producers are set to outstrip all other sectors again in 2021 according to Fitch. There are, however, signs of a nascent recovery after the turbulence of 2020. Crude has crept back above $50/bl and some investors are betting that the cycle is turning, even as expectations for peak demand loom over the horizon. On the demand side, oil consumption is expected to rise by the most on record in 2021. The IEA expects demand to rise by almost 6mboe/d but will average 96.9mboe/d, still below the pre-pandemic record of 100mboe/d in 2019. On the supply side, the outlook is more complex. US shale stabilised in the 2H 2020 but the days of gangbuster growth are behind it. Some estimate oil project investment will never fully recover to pre-virus levels. The industry will continue to consolidate to reduce costs and assure investor returns. Finally, most analysts expect the oil market to stay in deficit during 2021. However, the market rebalancing remains heavily dependent upon the output management of OPEC+ and OPEC’s decision to assess the market on a monthly basis will undoubtedly drive volatility. Nevertheless, we are persuaded that investors are still looking to rotate into cyclical commodities such as oil and natural resource equities. Valuations continue to look very attractive with a P/CF of 3.9x and a healthy FCF yield of +10% this year. We think that the reduced cost structures and promised capital restraint should set the sector up well to finally deliver on long-awaited capital return growth in 2021+, and as a result, should drive a further catch-up move in the broader sector.

 

Industrial Metals

According to analysts, commodities are predicted to enter a long-term bull market and draw comparison to the last super cycle that started in the early 2000s on a China-driven demand boom. Especially copper, considered an economic barometer, is essential for decarbonization. Electric vehicles use up to four times more of the metal than internal combustion engines, while renewable energy uses at least three times more copper and as much as 15 times more than traditional power production. Copper has posted nine straight monthly gains, the longest run since 1994. Prices have surged about 80% from a low in March, helped by China’s appetite for commodities and supply snags early on in the Covid-19 pandemic. Analysts expect further gains amid a possible production deficit, weaker dollar and the metal’s role in green technology – interest in copper investment increased on the back of the “green revolution” recently, Credit Suisse for example stated the metal is one of their favorite ESG themes and states that mining is one of their strategists’ top three overweight’s. They see demand drivers to remain robust or accelerate for the whole sector into 2021. When looking at commodities demand, there is no way around China. Chinese commodity demand ended the year on some very high notes marking a stunning recovery from the hammer blow of the pandemic that landed in February. Roaring demand and supply constraints in the world’s biggest consumer are feeding a broader turnaround in global prices. Another good example is iron ore, where the market is tight, and the price increased from $86/t at the start of 2020 to >$150/t by year-end. Key indicators in China such as land purchases, infrastructure bond issuances and stimulus for vehicles / white goods provide support for Chinese steel demand, coming from the infrastructure, real estate and manufacturing sectors. Analysts expect Chinese steel production to grow again in 2021, after an already very strong 2020. Analyst expect the iron ore market to stay in deficit during 2021. On top of that, other important iron ore consuming regions like South East Asia and Europe are likely to recover in 2021, given fiscal stimuli and economic normalization post COVID-19. Overall, industrial metals prices are making a buoyant start to the New Year on vaccine rollouts worldwide which brightens outlook for the economy and with that, the demand for metals. All this results in Mining companies having for 2021 record dividend yields (IMC at 3%), record FCF yields (IMC at 8%) and this still with an attractive valuation (EV/EBITDA at 6.2x for the IMC).

 

Precious Metals

Gold lost -5.4% in November as investors bolting out of precious metal exchange traded funds in anticipation of the COVID-19 vaccines have outweighed the impact of a record volume of bonds trading at negative yields. Gold’s current weakness is accompanied by a depreciating dollar, which normally has an inverse price correlation with the yellow metal. Gold has had a stellar year, rising 16% year-to-date. However, the recent fall has been fast and furious but not without precedent. In 2H11, a short-lived revival in US real interest rates, linked to policy uncertainties as well as communication missteps by the Federal Reserve, triggered profit-taking from its then record high. This time, gold prices have sold off on earlier-than-expected COVID-19 vaccine progress. Uncertainty about the Fed’s next steps and improving macro data also played a part. On both occasions, there was one common theme – outflows from exchanged-traded funds, which is a frequent reaction to diminished appetite for safe havens. Also, according to Goldman Sachs, COVID has led to a massive rise in government spending, particularly in the US where the dollar was already facing headwinds. Although the dollar got a boost from a flight to safety at the beginning of the crisis, this support is likely to fade in 2021 and beyond, creating a positive feedback loop similar to what it did during the 1970s and 2000s when oil and gold reached historical highs. In addition, inflation tails risks are greater than at any other time since the 1970s. Similar to after the global financial crisis, gold markets will likely be pulled higher as reflation concerns grow with the recovery and investors look to buy the currency of last resort. Economists believe near-term breakeven inflation has further room to run, supporting higher prices for precious metals and commodities in general. Gold miners suffered this month but we think the investment case remains intact. We had several “virtual” conferences with CEOs und industry experts that agree that the vaccine news should be positive for the economy, the companies and of course for the humans in general. Back to normality also is positive for the precious metals sector. Indeed, most companies still generate record high free cash flow and are distributing decent dividends. This has been visible on the last earning season and we expect the PMC portfolio to generate a dividend yield at least twice the universe going forward.

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ICG Commodity Update – November 2020

The ICG Commodity Update is our monthly published comment on energy, industrial metals and precious metals market.

 

Energy

We see a light at the end of the tunnel. Crude oil prices are trading at their highest levels since early March, supported by positive market sentiment as a result of vaccine news and strong oil demand in Asia. Meanwhile, oil markets moved from oversupplied to undersupplied in 3Q 2020. The recent wave of COVID infections sweeping Europe and US has surprised by its intensity, leading to renewed lockdowns. Importantly, this is only a speed bump in the general expectation of a sharp tightening of oil fundamentals through 2021, driven by a recovery in demand boosted by vaccines and rapid testing as well as by the collapse in upstream investment and change in the shale reaction function. The winter COVID wave will delay but not derail the oil market rebalancing. Most analyst expect the market to stay undersupplied during 2021. Further to that, we think that most people underestimate the difficulties to increase the oil market supply chain after years of under-investment. Especially this year and in response to COVID, ESG issues have further reduced investment in the old economy. Goldman Sachs even thinks, that that this recovery in commodity prices will actually be the beginning of a much longer structural bull market. COVID is already ushering in a new era of policies aimed at social need instead of financial stability. This will likely create cyclically stronger, more commodity-intensive economic growth that should create the elusive cyclical upswing in demand. COVID has led to a massive rise in government spending, particularly in the US where the dollar was already facing headwinds. Although the dollar got a boost from a flight to safety at the beginning of the crisis, this support is likely to fade in 2021 and beyond, creating a positive feedback loop similar to what it did during 1970s and 200s when oil and gold reached historical highs. In addition, inflation tail risks are greater than at any other time since 1970s. Looking at the 2020s, Goldman believes that similar structural forces to those which drove commodities in the 2000s could be at play. Energy companies had a superlative month. The S&P 500 energy sector had its best month on record. This lagging YTD performance is driving the “catch up” trade as investors seek out laggard sectors which have not participated in this year’s equity rally. We think the rally may continue into 2021 as most analysts are. Nevertheless, is still a long way to “pre-COVID” levels, but we are persuaded that the whole oil and gas industry will come out much stronger. The oil and gas business has always been full of booms and busts. But this time companies have adapted very fast to the new price environment and there have been also several M&A showing efforts to consolidate and improve operations. Further to that, several oil and gas majors, mainly European, have started to improve its ESG perception and this is also very important and positive.

 

Industrial Metals

Copper extended a rally after capping the longest stretch of monthly advances in almost a decade, as China’s recovery continues and supply risks stack up. Caixin’s China November manufacturing purchasing managers’ index rose to the highest in a decade. That’s the latest indicator highlighting the economic strength in the top metals consumer, after the official PMI beat market expectations and showed the nation’s economic rebound is gathering pace. According to analysts, this year’s rally is starting to resemble the spike in prices seen in the early 2000s as a surge in Chinese orders ushered in the start of the commodities supercycle. Metals surged on a wave of bullish drivers including a weaker dollar, vaccine optimism, and a global move toward low-carbon power sources. Risks of supply disruptions in key mining countries also tightened the market, with analysts warning of unmanageable global deficits in the coming years. According to Goldman Sachs, the streak of poor commodity returns has reached an end in the aftermath of the Covid crisis. The bank believes that this recovery in commodity prices will actually be the beginning of a much long structural bull market driven by three key themes. 1) Under-investment in the old economy due to a decade of poor returns, especially in energy where ESG issues have further reduced investment, was accelerated during 2020 due to COVID, leaving inadequate production capacity to meet a V-shaped vaccine driven demand recovery. 2) COVID is already ushering in a new era of policies aimed at social need instead of financial stability. This will likely create cyclically stronger, more commodity-intensive economic growth that should create the elusive cyclical upswing in demand. Three global initiatives have the potential to REV the global demand for commodities: Redistributional policies, Environmental policies and Versatile supply chain initiatives. 3) COVID has led to a massive rise in government spending, particularly in the US where the dollar was already facing headwinds. Although the dollar got a boost from a flight to safety at the beginning of the crisis, this support is likely to fade in 2021 and beyond, creating a positive feedback loop similar to what it did during 1970s and 200s when oil and gold reached historical highs. In addition, inflation tail risks are greater than at any other time since 1970s due to the REV policies above. Looking at the 2020s, Goldman believes that similar structural forces to those which drove commodities in the 2000s could be at play. Not only can the green capex increase be as big as BRIC’s investment 20 years ago, but the redistributive push in DMs, and in China this time, is likely to lead to a large boost to consumer spending, comparable to the lending-fueled consumption increase in the 2000s. Finally, similar to 2000s, there is structural under-investment in supply of almost all commodities.

 

Precious Metals

Gold lost -5.4% in November as investors bolting out of precious metal exchange traded funds in anticipation of the COVID-19 vaccines have outweighed the impact of a record volume of bonds trading at negative yields. Gold’s current weakness is accompanied by a depreciating dollar, which normally has an inverse price correlation with the yellow metal. Gold has had a stellar year, rising 16% year-to-date. However, the recent fall has been fast and furious but not without precedent. In 2H11, a short-lived revival in US real interest rates, linked to policy uncertainties as well as communication missteps by the Federal Reserve, triggered profit-taking from its then record high. This time, gold prices have sold off on earlier-than-expected COVID-19 vaccine progress. Uncertainty about the Fed’s next steps and improving macro data also played a part. On both occasions, there was one common theme – outflows from exchanged-traded funds, which is a frequent reaction to diminished appetite for safe havens. Also, according to Goldman Sachs, COVID has led to a massive rise in government spending, particularly in the US where the dollar was already facing headwinds. Although the dollar got a boost from a flight to safety at the beginning of the crisis, this support is likely to fade in 2021 and beyond, creating a positive feedback loop similar to what it did during the 1970s and 2000s when oil and gold reached historical highs. In addition, inflation tails risks are greater than at any other time since the 1970s. Similar to after the global financial crisis, gold markets will likely be pulled higher as reflation concerns grow with the recovery and investors look to buy the currency of last resort. Economists believe near-term breakeven inflation has further room to run, supporting higher prices for precious metals and commodities in general. Gold miners suffered this month but we think the investment case remains intact. We had several “virtual” conferences with CEOs und industry experts that agree that the vaccine news should be positive for the economy, the companies and of course for the humans in general. Back to normality also is positive for the precious metals sector. Indeed, most companies still generate record high free cash flow and are distributing decent dividends. This has been visible on the last earning season and we expect the PMC portfolio to generate a dividend yield at least twice the universe going forward.

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ICG Systematic Equity Fund CH Update – November 2020

Das ICG Systematic Equity Fund CH Update ist ein monatlich erscheinender Kommentar über den Schweizer Markt und zum Fonds

 

• Die globalen Aktienmärkte setzen ihren Wahnsinnslauf seit dem Ausbruch der Corona-Krise fort. Der SPI erzielt die zwölftbeste Monatsperformance seit 1987
• Der Durchbruch bei der Suche nach einem Corona-Impfstoff führt zu heftigen Sektor- und Stilrotationen: Zykliker mit starken Preisausschlägen und günstigen Bewertungen sehen sich einer schlagartig zunehmenden Nachfrage gegenüber
• Das fundamentale Umfeld spricht weiterhin klar für Aktienanlagen – Positiver Aufwärtstrend in der Realwirtschaft wird unterstützt von einer rekordhohen Risikoprämie
• Auch Marktpsychologie gibt Aktien Rückenwind, Signale, die vor einem übertriebenen Optimismus der Marktteilnehmer warnen, nehmen aber zu
• Die im Oktober gesenkte Aktienquote wird bis am 13. November wieder auf 100% erhöht
• Stilmodelle mit aggressiver Ausrichtung – überdurchschnittliches Exposure ggü. Aktien mit hoher Volatilität und günstiger Bewertung
• Übergewicht in Aktien aus dem Industriegüterbereich wird ausgebaut
• Die unterdurchschnittliche Aktienquote zu Beginn des Berichtsmonats wirkt der guten Titelselektion entgegen und bremst die November-Performance des Systematic Equity Fund CH im Vergleich zum SPI

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ICG Commodity Update – October 2020

The ICG Commodity Update is our monthly published comment on energy, industrial metals and precious metals market.

 

Energy

Oil prices slid 10% last week, their largest weekly drop since April and have fallen to their lowest level in 5 months. Analysts worry that slumping demand will combine with higher production to again oversupply the market, prompting outsize moves in both directions. Indeed, the European measures are set to shave ~2mboe/d of oil demand in Nov-Dec, said GoldmanSachs. That equates to 2% of pre-coronavirus global demand and would take European oil demand back to levels last seen in May, when much of the continent was emerging from lockdown. On the other side, supporting much of the surge in EM Asia’s nominal GDP growth has been China’s strong recovery, as the IMF noted. This partly explains China’s surge in crude oil imports during the COVID-19 pandemic, which, given their parabolic trajectory, exceed pre-COVID-19 levels. China’s crude imports for 1Q-3Q20 are up 13% YoY, and average 11.1mboe/d. Turning to the supply side, most analysts continue to expect that OPEC will do whatever it takes to ensure prices resume their upward trend as demand picks up in 2021. Therefore expectations increase for a delay to quota easing in Jan 2021 by 3 months. Therefore to sum up, the oil market is in a delicate balance. Prices are being pulled up by the strong oil demand recovery in China and India, high compliance by OPEC and its allies, and hurricane disruptions to US Gulf of Mexico production, and pulled down by regional restrictions across Europe and recovering oil production in Libya. However, the long awaited oil and gas consolidation wave has finally arrived on the oil patch! The 6 largest US producers now account for half of Permian production, up from just 35% in early 2020 and the highest level of concentration since 2002. Indeed, low commodity prices and tightening financing conditions have historically led to consolidation and market repair in the oil and gas sector, with the late-1990s a good example. History is starting to repeat itself, with 4 material M&A transactions announced over the past 3 months (the ECF participated in two of them). However, this time the M&A drivers are different but the outcome will be similar: consolidation driven by cost-cutting and capital efficiency, repairing the sector’s damaged returns from a 50-year low and rebuilding investor confidence. 3Q20 results may start this healing process as the group should generate post-dividend FCF, which hasn’t been achieved on an annual basis since 2005, while holding oil production flat. In general, the valuation of oil companies and the overall market sentiment versus the oil industry is at its lowest point in decades. However, the oil business has always been full of booms and busts. Nevertheless, we think the oil age is far from over. It may be in decline, and for the long-term health of our planet that may not be a bad thing, but oil as a commodity will be needed for the foreseeable future – as an absolutely necessary part of providing energy to the world.

 

Industrial Metals

Copper stayed relatively flat in October as fresh lockdowns in Europe cast doubt over the economic recovery and the upcoming US election fueled uncertainty in broader markets. Large swathes of Europe are entering lockdown as governments conclude tougher action is needed to counter the coronavirus. Concern that economic growth will be hampered by further restrictions dragged crude prices and commodity currencies lower. The virus concerns are overshadowing a brightening outlook from manufacturing activities in China. Both private and official Chinese gauges beat estimates to show the country’s economic recovery is going strong. Especially in focus is iron ore as data on China’s economy and the nation’s mammoth steel industry pointed to a brighter outlook. Steel companies from China expecting robust demand for steel and steel products to last, underpinned by the auto and home-appliances sector. According to investment bankers, lots of conversation about takeovers are going on in the mining space. Miners are engaging in plenty of takeover talks despite a tepid year for acquisitions, but few deals will get done without greater clarity on the economy and an ebbing of Covid-19. For years, mining executives have been saying that consolidation in the industry is inevitable given the abundance of companies and increasing difficulty of finding new high-grade deposits. Mining companies have been involved in about $52 billion of acquisitions this year, according to Bloomberg data. That’s less than half the value of deals seen during industry consolidation in the mid-2000s and following the end of the financial crisis. The inability of companies to undertake due diligence amid Covid-19 restrictions and huge price volatility in the metal markets have hampered this year’s activity, Barclay said. According to the Bank, if an economic recovery takes hold and strengthens demand for commodities, a very busy year is anticipated. On another note, industrial metals are poised to rally mid- to long-term, as the world enters the age of “critical metals”. Mining has a key role to play in decarbonizing tomorrow’s world. The green electrification sector has received a material boost from new policy developments so far in 2020. A combination of Europe’s Green Deal, China’s 2060 neutrality goal and Biden’s clean energy plan (if elected) will all require significant investments in both the renewable energy (solar, wind,etc.) and EV-related sectors (charging infrastructure, cars) – all these sectors rely heavily on industrial metals. Independent Capital Group has published an extensive fundamental analysis about this megatrend on it’s blog, which can be accessed via www.independent-capital.com/die-bedeutung-der-energiewende-fur-die-nachfrage-nach-industriemetallen-ein-unterschatzter-megatrend

 

Precious Metals

Gold has given up ground during the presidential race’s closing stages, dropping for a third straight month in October, the longest losing run for the traditional haven since April 2019. Still, while prices have pulled back from the record set in August, holdings in bullion-backed exchange-traded funds remain close to an all-time high as investors track the US contest, the course of the coronavirus pandemic, and central bank action. According to analysts, the risk of prolonged political uncertainty following the US presidential vote this week could likely benefit gold if there is no clear winner announced on election night. On the company side, AngloGold joins other gold miners in increasing dividends. The company will double its dividend pay-out ratio after gold prices surged this year and the company’s borrowings fell to the lowest in nearly a decade. AngloGold, the world’s third-largest gold producer said it will now return 20% of free cash flow before growth capital to shareholders. Newmont, the world’s largest gold miner, increased its dividend by 60%. The company is planning to pay out 50% to 60% of its incremental free cash flow generated from gold prices above $1’200 an ounce. It’s current dividend yield stands at 2.7%, which is above the S&P 500’s yield of about 1.7%. The club of dividend increasing gold companies is also joined by Yamana Gold, which hikes dividend by 50% before listing on London Stock Exchange, Agnico Eagle Mines with an increase of 75% and Kirkland, which increases its quarterly dividend by 50%. It often has been hard for gold mining companies to appeal beyond a dedicated group of commodity-oriented investors because of the perception that they are wasting assets with mediocre management and poor capital discipline – this perception should slowly change over time as gold companies prove that they are cash-flow generating and dividend paying. Analysts expect that a growing gold price presents significant upside to dividends and the first hikes could be one of many to come.

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ICG Systematic Equity Fund CH Update – Oktober 2020

Das ICG Systematic Equity Fund CH Update ist ein monatlich erscheinender Kommentar über den Schweizer Markt und zum Fonds

 

• Die anziehenden Corona-Fälle in der westlichen Hemisphäre, Uneinigkeit in Washington bezüglich neuer konjunktureller Stimulierungspakete sowie die bevorstehenden Präsidentschaftswahlen versetzen den Aktienmärkten gegen Ende Oktober einen Dämpfer
• Heftige Sektor- und Stilrotationen zeugen von steigender Nervosität unter den Anlegern
• Aus fundamentaler Sicht führt nach wie vor kein Weg an Aktien vorbei – auf unabsehbare Zeit tief bleibende Zinsen sowie der anhaltende Aufwärtstrend bei Industrie und Konsum geben Aktien Rückenwind
• Technisches Bild ist gemischt – während mittelfristige Indikatoren weiterhin für Aktien sprechen, mahnen dynamischere Tagesmodelle zur Vorsicht
• Reduzierte Aktienquote trägt dem höheren Marktrisiko Rechnung
• Stilmodelle mit defensiver Ausrichtung – Präferenz für Qualitätswerte mit stabilem Ertragsgang und hoher relativer Stärke
• Übergewicht in Aktien aus dem Industriegüterbereich wird beibehalten – Werte zeichnen sich aber durch eine unterdurchschnittliche Zyklizität aus
• Der Systematic Equity Fund CH schlägt den SPI im Oktober dank einer guten Titelselektion und Aktienquotensteuerung um 1.17% – Outperformance in 3 der letzten 4 Monate

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Die Bedeutung der Energiewende für die Nachfrage nach Industriemetallen – ein unterschätzter Megatrend

Lesedauer: ca. 8 Minuten

 

Key-Points

 

• Die Welt befindet sich in der Übergangsphase zu erneuerbaren Energien, die nicht nur viel Zeit und Investitionen verlangt, sondern auch bedeutende Mengen an Rohstoffen, insbesondere Metalle, erfordert.

 

• Der Anteil von erneuerbarer Energie im globalen Energiemix wird von heute 36% auf über 70% im Jahre 2040 steigen.

 

• Die Nachfrage nach Materialien und Metallen, die für erneuerbare Energielieferanten und -träger verwendet werden, wird in den nächsten Jahrzenten dramatisch steigen.

 

• Die in diesem Zusammenhang oft erwähnten Rohstoffe, wie Lithium, Kobalt und seltene Erden, sind sicherlich von grosser Bedeutung, unterschätzt werden jedoch nach wie vor die klassischen Metalle wie Kupfer und Aluminium.

 

• Die Nachfrage nach neuen Elektrofahrzeugen geht Hand in Hand mit der Nachfrage nach Batterien und den entsprechenden Materialien, die dafür benötigt werden.

 

• Erneuerbare Energien sind für eine nachhaltigere Wirtschaft von entscheidender Bedeutung. Der effektive Übergang zu umweltfreundlicherer Energie erfordert jedoch auch eine Kreislaufwirtschaft für kritische Metalle.

 

• Mit einem Investment in den Industrial Metals Champions Fund investiert ein Anleger in ein diversifiziertes, aktiv geführtes Portfolio aus führenden Unternehmen aus dem Industriemetall-Sektor.

 

Beginn des Umdenkens

An der UN-Klimakonferenz in Paris im Dezember 2015 einigten sich 197 Staaten auf ein gemeinsames, globales Klimaschutzabkommen. Das Ziel dieses Abkommens ist die Begrenzung des Anstiegs der globalen Durchschnittstemperatur auf deutlich unter 2 Grad über dem vorindustriellen Niveau. Dadurch sollen die Risiken und Auswirkungen des Klimawandels deutlich reduziert werden. Der Schlüssel für den Erfolg liegt in der oft thematisierten Energiewende und die Verschiebung von fossilen Energiequellen zu erneuerbaren Technologien wie Solar- oder Windenergie.  In den letzten Jahren hat ein allgemeines Umdenken stattgefunden. Grosse Unternehmungen haben sich dazu entschieden, enorme Investitionen in den erneuerbaren Energiesektor zu tätigen und tragen dazu bei, den Klimawandel einzudämmen. Nicht nur Technologiefirmen wie Google und Amazon, Elektroautohersteller Tesla oder traditionelle Fahrzeughersteller wie VW und BMW haben sich dem Klimawandel angenommen – auch Energiefirmen wie z.B. Royal Dutch Shell, deren Geschäfte Jahrzehnte lang auf fossilen Energieträgern beruhte, beginnen damit, in neue, saubere Technologien zu investieren. Natürlich kommen diese grundlegenden Veränderungen nicht von heute auf morgen – die Welt befindet sich in dieser Übergangsphase, die nicht nur viel Zeit und Investitionen verlangt, sondern auch bedeutende Mengen an Rohstoffen, insbesondere Metallen, erfordert.

 

Neue Energiequellen

Die folgenden Grafiken verdeutlichen die Auswirkungen der Bestrebungen auf den zukünftigen Energiemix. Die Daten beruhen auf Untersuchungen der International Energy Agency (IEA), welche jährlich ihren World Energy Outlook publiziert.

 

 

• Gemäss IEA wird der Anteil von erneuerbarer Energie im Energiemix der Welt von heute 36% auf über 70% im Jahre 2040 steigen – Wind- und Solarenergie tragen den grössten Teil dazu bei.

 

• Die kumulierte Zunahme in Gigawatt zwischen 2020 und 2040 für Wind und Solar summiert sich auf rund 8‘465 GW (ca. 68% der gesamten Zunahme aller Energiequellen)

 

• Die elektrische Kapazität der erneuerbaren Energiequellen wächst im selben Zeitraum jährlich um 7.2% durchschnittlich

 

 

Während Investitionen beispielsweise in Kohle gegen Null gehen, wächst der Anteil von erneuerbarer Energie und Batterien stetig. Ausserdem erfolgen immense Investitionen ins Stromnetz, das besonders kupferintensiv ist. Das Umdenken gewinnt in Politik und Wirtschaft und in der ganzen Gesellschaft an Momentum. Allgemein wird aber unterschätzt, welch immensen Ressourcen benötigten werden, um diese hochgesteckten Ziele zur Bekämpfung des Klimawandels zu erreichen.

 

Dies bedeutet, dass die Zeit des Übergangs zu erneuerbaren Technologien im Zeichen der „kritischen Metalle“ – also Metalle die kritisch für die Technologien der erneuerbaren Energien sind – steht. Sofern die Gesellschaft diese Ziele erreichen möchte, braucht es entsprechend genügend Rohstoffe, insbesondere Metalle.

 

Kritisch für saubere Energien – Industriemetalle

 

Die Nachfrage nach Materialien und Metallen die für erneuerbare Energielieferanten und -träger verwendet werden, wird in den nächsten Jahrzenten dramatisch steigen. Die World Bank berechnet, dass die Nachfrage für Materialien, welche vor allem für Solarpanels benötigt werden – also z.B. Kupfer, Eisenerz, Blei, Molybdän, Nickel und Zink –  bis ins Jahr 2050 um über 300% steigen wird. Diese Verdreifachung der Nachfrage lässt sämtliche anderen Sektoren, in denen diese Rohstoffe benützt werden, ausser Acht. Allgemein schätzt die World Bank, dass in den nächsten 30 Jahren mehr als 3 Milliarden Tonnen Rohmaterialien geschürft werden müssen, um genügen Rohstoffe für die Produktion von erneuerbarer Energiequellen und Speicherung bereitstellen zu könne – dies nur um den Base Case des Pariser Abkommen zu erreichen.

 

Neben den klassischen Metallen (Kupfer, Zink, etc.) brauchen die neuen Technologien vermehrt auch Rohstoffe wie Lithium, Kobalt oder seltene Erden, welche oft mit geopolitischen und ökologischen Problemen behaftet sind. Auf Grund ihrer besonderen Bedeutung für die Elektromobilität stuft die World Bank diese Rohstoffe als „high-impact“-Materialien ein. Andere Metalle, wie Kupfer, Nickel und Molybdän hingegen gehören zu den „cross-cutting“-Materialien, also Metalle die unabhängig von Technologie dringend für die Energiewende benötigt werden.

 

Gemäss Analysten müsste der Kupfersektor bis 2030 jährlich um 5.7% wachsen um die zusätzliche Nachfrage der erneuerbaren Technologien bedienen zu können – historisch gesehen konnte der Kupfersektor zwischen 2000 und 2018 jedoch nur um 2.6% wachsen. Die Kupferproduktion müsste also mehr als doppelt so schnell wachsen wie zu Beginn dieses Millenniums. Zum Vergleich, der grösste Kupferproduzent der Welt, Codelco, produzierte im Jahre 2019 1.7 Millionen Tonnen Kupfer pro Jahr. Kupfer hat also den grössten Bezug zur grünen Energiewelle, wenn man die absoluten Mengen betrachtet.

 

Der Molybdänmarkt ist eine Nische und im Vergleich zu Kupfer sehr klein. Pro Jahr werden ca. 300‘000 Tonnen des Materials produziert. Obwohl nur gerade 0.15% einer Windturbine aus Molybdän besteht, bedarf die Nachfrage nach Wind und Geothermie bis ins Jahr 2050 ein zusätzliches Angebot von knapp 800‘000 Tonnen – also mehr als doppelt so viel wie heute. Um zu veranschaulichen, wie wichtig Industriemetalle für erneuerbare Energietechnologien sind, bedienen wir uns zweier Grafiken der World Bank, die den Anteil der Rohstoffnachfrage, respektive der Zusammensetzung nach Material für Solar- und Windenergie grafisch darstellt.

 

 

Bedeutung der Elektromobilität

 

Die Elektromobilität erfreut sich zunehmender Beliebtheit. Die Regierungen subventionieren die Technologie, aber auch Hersteller versuchen mit neuen, günstigen Modellen die Popularität zu steigern. Die IEA erwartet bis ins Jahr 2040 mehr als 280 Millionen Elektro- und Hybridfahrzeuge auf den Strassen – Bloomberg New Energy erwartet sogar über 500 Millionen. Die Nachfrage nach neuen Elektrofahrzeugen geht Hand in Hand mit der Nachfrage nach Batterien und den entsprechenden Materialien, die dafür gebraucht werden – Ein Elektroauto braucht beispielsweise doppelt so viel Kupfer wie ein Auto mit klassischem Verbrennungsmotor.

 

Eine zentrale Rolle in der Produktion spielt ausserdem Nickel, dessen Nachfrage für Elektrofahrzeuge von 128‘000 Tonnen im Jahr 2019 auf über 265‘000 im 2025 und 1.23 Millionen Tonnen im 2040 steigen soll – dies entspricht fast einer Verzehnfachung. BHP, einer der grössten Minenfirmen der Welt, geht sogar davon aus, dass sich die Nachfrage nach Nickel für Batterien bis ins Jahr 2030 verdreizehnfacht. In diesem Zeitraum wird der Anteil der Nachfrage von Elektrofahrzeugen von 4% auf über 31% steigen. Als Vergleich, im 2019 wurden insgesamt 2.7 Millionen Tonnen Nickel produziert, wobei Indonesien, der grösste Nickelproduzent, ca. 800‘000 Tonnen dazu beigesteuert hat.

 

Ebenfalls zentral und oft thematisiert ist das Material Lithium. Der Rohstoff ist zwar reichlich in der Erdkruste vorhanden, viele Vorkommen sind jedoch aus Kostensicht schwierig abbaubar. Gemäss Analysten wird sich die Nachfrage nach Lithium bis 2025 vervierfachen. Ein Tesla Model S braucht rund 80 Kilogramm Lithium, zum Vergleich, ein Smartphone braucht ca. 3 Gramm – sprich, ein Tesla Model S braucht die gleiche Menge Lithium wie ca. 26‘000 Smartphones. Auch Kobalt gehört zu den zwingend Notwendigen Metallen für die Elektromobilität. Der Akku eines Elektroautos enthält ca. 3000-mal mehr Kobalt als dieser eines Smartphones. Die aktuelle Kobalt-Jahresproduktion reicht nicht einmal für halb so viele Autos, wie die Industrie sie schon bald jedes Jahr bauen will.

 

 

Herausforderungen der Minenindustrie – Grosse Nachfrage, kaum Investoren

 

Wir haben festgestellt, dass die Energiewende den nächsten Megatrend für Industriemetalle einläutet. Oft in diesem Zusammenhang erwähnte Rohstoffe wie Lithium, Kobalt und seltene Erden sind von grosser Bedeutung, unterschätzt werden jedoch nach wie vor die klassischen Metalle wie Kupfer und Aluminium. Eine kohlenstofffreie Wirtschaft stellt die Minenindustrie vor grosse Herausforderungen. Das heutige Angebot an Rohstoffen, die für die Energiewende benötigt wird, ist mehr als unzureichend – Minenfirmen müssen also in zukünftige Kapazität investieren – und dies in einem Umfeld, in dem der Rohstoffsektor von Investoren gescheut wird und die Finanzierung knapp ist. Ausserdem können die Explorationsbemühungen der Unternehmungen kaum mit der Zunahme der Nachfrage mithalten. Es muss beachtet werden, dass die Zeit zwischen Entdeckung eines Vorkommens und der Produktion bis zu 10 Jahre beträgt – zusätzlich wird es immer schwieriger sowie kostenintensiver qualitativ hochwertige Vorkommen überhaupt zu finden.

 

Die Wertschöpfungskette von Rohstoffen ist enorm komplex. Nicht alle theoretischen Reserven sind aus wirtschaftlicher oder technologischer Sicht abbaubar. Darüber hinaus ist der Bergbau häufig mit erheblichen ökologischen und sozialen Kosten verbunden, was uns zum nächsten Problem führt. Der Abbau der benötigten Rohstoffe erfolgt in einigen ausgewählten Ländern. Geopolitische Mächte werden sich von öldominierten Ländern zu kritischen metalldominierten Ländern verlagern. In Ländern mit politischer Instabilität, in denen die Regulierung für den Rohstoffsektor schwach ist, kann die Gewinnung dieser Mineralien mit Gewalt, Konflikten und Menschenrechtsverletzungen verbunden sein. Der Kobaltabbau in der Demokratischen Republik Kongo, wo sich über 50% der weltweiten Reserven konzentrieren, wurde zum Beispiel so oft mit Gewalt in Verbindung gebracht, dass der Rohstoff von verschiedenen Nachrichtenagenturen als „Blutdiamanten dieses Jahrzehnts“ bezeichnet wurde.

 

Es ist also schwierig, einen raschen Anstieg der globalen Nachfrage mit einem vergleichbaren Anstieg des Angebots zu bewältigen. Minenfirmen benötigen eine langfristige Investitionssicherung, um neue Bergbau- und Raffinerieaktivitäten finanzieren zu können. Bei der Neugestaltung von Systemen zur Eindämmung des Klimawandels haben wir die Möglichkeit, die Art und Weise, wie wir mit den natürlichen Ressourcen insgesamt umgehen, zu überdenken und Systeme zu priorisieren, die die Lebensqualität des Menschen verbessern. Erneuerbare Energien sind für eine nachhaltigere Wirtschaft von entscheidender Bedeutung. Der effektive Übergang zu umweltfreundlicherer Energie erfordert jedoch auch eine Kreislaufwirtschaft für kritische Metalle.

 

Industrial Metals Champions Fund (IMC)

 

Die Independet Capital Group (ICG) fokussiert sich seit über 20 Jahre auf Rohstoff und Rohstoffaktien Investments. Unsere Anlagelösung, der Industrial Metals Champions Fund (IMC), setzt auf den Megatrend Energiewende und probiert anhand eines systematischen Investmentansatz die best-in-class Minenfirmen auszuwählen, die von der steigenden Nachfrage nach Industriemetallen profitieren können. Der IMC ist der weltweit einzige Minenfonds der sich auf Industriemetalle fokusiert. Das Portfolio des IMC setzt sich aus 25 Aktien des Industriemetall-Sektors zusammen und bietet rohstoffspezifische aber auch länderspezifische Diversifikation. Unser Investmentprozess basiert auf einem quantitativen Ansatz und versucht mittels eigens entwickelter Scorecard emotionale Entscheide konsequent auszublenden. Die Scorecard beruht auf standardisierten Daten um Firmen im Rohstoff-Universum einordnen und vergleichen zu können, wobei sie anhand von verschiedenen finanziellen, unternehmensspezifischen aber auch operativen Kennzahlen verglichen werden. Die ICG Alpha Scorecard stützt sich auf 6 Säulen – Asset Quality, Value, Sustainability (ESG), Dividends, Balance Sheet und Behavioral Finance.

 

 

Questions & Answers

 

Ist die Minenindustrie nicht eine der grössten Klimasünder?

 

Wie jede maschinenintensive Industrie verursachen auch Minenfirmen CO2 und Treibhausgase. Sustainability Kriterien fliessen jedoch zusätzlich zu finanziellen und operativen Kennzahlen in unseren Investmentprozess mit ein und werden laufend überprüft. Der Industrial Metals Champions Fund weist bedeutend bessere Kennzahlen (Bsp.: CO2-Ausstoss pro produzierte Tonne, Treibstoffverbrauch, Treibhausausgasausstoss pro produzierter Tonne, etc.) aus als gängige Minenindices und andere Minenfonds. Ausserdem, neben ökologischen Kennzahlen fliessen auch solche aus Sicht der Governance (Unternehmungsführung) ein – beispielsweise untersuchen wir den prozentualen Anteil von Frauen im Management einer Firma und favorisieren diese, welche eine gesunde Balance ausweisen.

 

In welche Rohstoffe investiere ich mit dem Industrial Metals Champions Fund?

 

Aufgrund unserer genauen Analyse der Firmen im Portfolio können wir genau aufzeigen, wie viel Prozent des Portfolios dem entsprechenden Rohstoff zugeordnet werden kann.

 

 

Wieso investiert der IMC momentan nicht mehr in Lithium oder Kobalt?

 

Unser eigens entwickelter Risikofaktor berücksichtigt jeden Rohstoff und stuft ihn auf seine momentane Attraktivität ein. Vereinfacht gesagt, dieser Faktor hilft uns dabei, den richtigen Einstiegszeitpunkt für den entsprechend Rohstoff zu finden. Sowohl der Lithium- als auch der Kobaltmarkt ist momentan in einem Überschuss – zum jetzigen Zeitpunkt gibt es attraktivere Alternativen um von der Energiewende zu profitieren. Kurz- bis mittelfristig werden sich die fundamentalen Daten dieser Märkte erholen und entsprechend wieder attraktiv als Investment. Wir haben sämtliche Lithium, Kobalt und Rare Earth Firmen in unserer Scorecard und prüfen diese regelmässig.

 

In welchen Ländern sind die Firmen des Fonds aktiv?

 

Wir untersuchen nicht nur welche Metalle die Firmen produzieren, sondern auch wo. So können wir einerseits auf politische Ereignisse reagieren, aber auch Investitionen in politisch unstabile Länder reduzieren oder ggf. vermeiden.

 

 

Wie kann ich investieren?

 

Der Industrial Metals Champions Fund ist ein Liechtensteiner UCITS contractual fund. Der Fonds verfügt über eine USD-Klasse (Valor: 38215435, ISIN: LI0382154354) und eine CHF-Klasse (Valor: 38215469, ISIN: LI0382154693) – beide Klassen sind täglich handelbar. Eine Institutionelle Klasse wird bald für Investoren verfügbar sein.

 

Wieviel muss ich mindestens investieren?

 

Zeichnen kann man ab einem Anteil. Der Preis eines Anteils kann täglich via Bloomberg und Swiss Fund Data abgefragt werden. Die Institutionelle Klasse ist ab einer Investition von USD 1 Million zugänglich.

 

Wie kann ich weiterhin auf dem Laufenden bleiben?

 

Das Investment-Team der Independent Capital Group veröffentlicht jeweils zum Beginn des Monats einen Newsletter, welcher neben einem aktuellen Marktkommentar auch sämtliche Informationen zum Fonds beinhaltet. Gerne können Sie sich für diesen Newsletter anmelden oder eine Präsentation zu unserem Fonds anfordern.

 

 

 

Sämtliche Daten und Kennzahlen sind per 20.10.2020

Sources: International Energy Agency – World Energy Outlook 2020; World Bank – Minerals for Climate Action: The Mineral Intensity of the Clean Energy Transition (2020), The Geopolitics of the Global Energy Transition – Minerals and the Metals for the Energy Transition: Exploring the Conflict Implications for Mineral-Rich, Fragil States (Author Clare Church, 2020), Global metal flows in the renewable energy transition: Exploring the effects of substitutes, technological mix and development (author: André Manberger; Björn Stenqvist, 2018), Bloomberg, Reuters, mining.com, Goldman Sachs, JPMorgan, Credit Suisse, UBS, BMO, Independent Capital Group Database

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ICG Commodity Update – September 2020

The ICG Commodity Update is our monthly published comment on energy, industrial metals and precious metals market.

Energy

Crude oil was plagued by both supply concerns (Libya restarting, OPEC+ restlessness) and demand worries (C-19 flare up in Europe and parts of the US). As the number of global Covid-19 infections continue to rise, the return of restrictions that could reduce the number of cars on the road and overall economic activity is leading to market pessimism that oil demand will take a long time to recover. While the easiest gains on the oil demand recovery are behind us, most analysts still expect demand to continue to rise at a slower pace over the coming months. However, falling oil inventories across the globe suggest that the oil market remains undersupplied. Indeed, crude production of OPEC+ was likely stable in September vs August. Instead the US is now generating fewer than 11mboe/d, down from 13mboe/d early this year, EIA data show. Two-thirds of oil-and-gas executives who responded to a recent survey said they think US oil production will never fully recover. According to Deloitte 107’000 jobs were slashed in the US oil, gas and petrochemicals sector between March and August and seven out of 10 jobs lost will not be reinstated. Energy equities continued to struggle during the last few weeks. Lousy oil-and-gas earnings this year have turned off many investors, who remain unenthusiastic about the sector despite a modest rebound in crude prices from the historic lows of this spring. Indeed, Exxon and Shell recently said that key parts of their business continued to struggle through the summer and early fall, which will weigh down the third quarter results they are set to report in coming weeks. That is combining with longer-term concerns about future competition from renewable energy and electric vehicles to drag down the value of many oil-and-gas companies to decade lows. Share prices of Royal Dutch Shell and BP hit fresh 25-year-lows. Last week NextEra Energy, the large utility/renewable energy owner, nearly reached market cap parity with ExxonMobil. Actually, smaller, independent players continue to face a struggle for survival. A total of 36 producers filed for bankruptcy in North America in the first eight months of the year, according to Haynes & Boone, with combined debt loads of about $51bn. Rystad expects ~150 additional North American oil and gas producers to file for bankruptcy by the end of 2022 if crude prices remain $40/bl. The industry has lost some investors over concerns about the energy transition, even though the world will need large amounts of oil and gas for decades to come. The recent near-death experience for some oil producers is a good reminder that investors should focus on companies with strong balance sheets, ample liquidity, robust cost structures, and low sustaining capital requirements like we focus for the ECF. Despite the current challenges ECF companies should generate attractive cash flows going forward and come back even stronger (Div yield at 4.4% and FCF yield at 9% growing to 17% by 2022E).

 

Industrial Metals

Commodities, as well as financial markets, have been hit by fears that parts of Europe may enter a broad lockdown. Heightened US political uncertainty and rising tensions between the US and China have also contributed to the risk-off move. Before this, sentiment was already starting to weaken due to less positive surprises on economic data releases versus market expectations in the US and Europe and signs that central banks have become hesitant about stepping up their already highly accommodative monetary policies. But as potential new restrictions will likely be more localized, analysts don’t expect Europe to enter into a broad lockdown again. Hence, it’s not believed the latest pullback in commodity prices marks the beginning of a trend reversal. Copper, this year’s best-performing industrial metal, tumbled by the end of the month as traders were forced to liquidate speculative long positions in the face of an oversupplied market. But the long-term case remains constructive, with the global shift away from fossil fuels and well-defined resources laying the groundwork for a multi-year advance.  The “green-wave” relies heavily on base metals, especially copper. An electric vehicle for example contains about 3.5 times more of the metal than a comparable gasoline-driven one. Wind and solar require 2 to 15 times as much copper per unit of output as fossil fuel generation. In fact, no one wants mining, but they want the product. Mining companies capex and growth is slowing significantly on strict capital return of most investors. On the supply side, new resources will be tough to find. The world has valued and hunted copper for hundreds of years, suggesting that many of the major ore bodies have already been discovered and exploited. Also, short-term supply disruption due to COVID has been an important offset to demand weakness during the outbreak – secondary outbreaks, as seen worldwide, or additional mobility restrictions in key producing countries remain a threat to supply, while demand is recovering, mainly due to China. Overall the sector looks relatively well positioned albeit vulnerable if the broader market sells off due to slowing global growth, new Covid-19 waves or geopolitical tensions. Meanwhile, members of Union No.2 representing supervisors at the Escondida, the world’s largest copper mine, have voted to strike, according to reports. The decision to strike followed unsuccessful labour negotiations with management, with the latest offer rejected by >98% of the union.

 

Precious Metals

After hitting year-to-date highs, commodity indexes have dropped in September, while precious metals and energy have led the decline. With a fall of more than 17%, silver prices have plunged the most across the entire commodity complex. Precious metals, in particular gold, are waiting for the next leg in fiscal and monetary support or the next step down in negative real interest rate expectations. Analysts see a high likelihood that governments and central banks will step up their game to support growth again. This should add favourably to higher precious metal prices. Furthermore, the build-up of uncertainties ahead of the US election and the chance of a contested outcome boost the yellow metal’s attractiveness as a diversifier in a portfolio context. Silver prices should follow gold, but with considerably more volatility. Also, even as gold prices struggled in September, Investors are keeping their faith. Holdings in bullion-backed exchange-traded funds are wrapping up an 8^th quarter of expansion, the longest run in almost a decade. So far in 2020 they’ve surged about 860 tons, dwarfing any prior full-year inflow, and are near a record. Overall, the gold mining industry is still in a sweet spot. With gold prices near record highs combined with a relative low capex, gold mining companies producing record high free cash flows. Also, the industry is expected to be net debt negative by 2021, which should further spur pay-outs in form of dividends as well as share buy-backs. Gold-equivalent cash costs of gold producing companies fell already from $765/oz in FY2018 to $690/oz in FY2019 (PMC weighted average at $585/oz) – the gold industry is currently more profitable than at any point in recent history.

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ICG Systematic Equity Fund CH Update – September 2020

Das ICG Systematic Equity Fund CH Update ist ein monatlich erscheinender Kommentar über den Schweizer Markt und zum Fonds

 

• Nach ihrem kräftigen Rebound seit März verlieren die Aktienbörsen im September an Schwung – wieder anziehende Corona-Fälle sowie die vor der Tür stehenden US-Präsidentschaftswahlen führen zu tieferer Riskobereitschaft unter den Anlegern
• Angesichts einer anhaltenden Erholung der Realwirtschaft, welche die Erwartungen der Marktteilnehmer in der Summe übertrifft, setzen konjunktursensitive Sektoren ihre Outperformance gegenüber defensiven Branchen fort
• Aktien bleiben aus fundamentaler Sicht ein klarer Kauf – die Flutung mit billigem Geld sowie positivere Konjunktursignale geben Aktien Rückenwind
• Technisches Bild liefert Aktienanlagen breite Unterstützung – Überhitzungstendenzen bauen sich während der Konsolidierungsphase der Aktienbörsen ab
• Maximale Aktienquote von 100% per Ende September
• Stilmodelle werden defensiver – Präferenz für Aktien mit tiefer Volatilität und starkem Preismomentum
• Übergewicht in Aktien aus dem Industriegüterbereich auf Kosten von defensiven Branchen
• Der Systematic Equity Fund CH verliert im September leicht (-0.94%) – einer guten Titelselektion stehen Verluste aus Absicherungsgeschäften gegenüber

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ICG Commodity Update – August 2020

The ICG Commodity Update is our monthly published comment on energy, industrial metals and precious metals market.

Energy

Crude oil capped a 4th monthly gain in August but has struggled to hold >$43 as increasing coronavirus infections raise concerns about the sustainability of the demand recovery. Following a year of unprecedented shocks, uncertainties over oil fundamentals has never been higher. Even at the latest OPEC+ meeting, the group announced a very high compliance rate of 97% but the statement, while positive in tone, offered also cautious guidance for the coming months. Indeed, the oil market flipped into undersupplied territory in July. However, the fragility of the oil market was also highlighted, along with the significant uncertainties associated with oil demand, and all members were called on to be vigilant in the coming months. Only China, that had a stronger-than-expected PMI with its early recovery and robust fiscal/monetary support resulted in an oil demand level above last year’s. On the equity side, the 2nd quarter of 2020 will go down in history as one of the worst for the energy industry. A collapse in demand, a collapse in drilling activity, and a collapse in oil prices took their toll without exception. Company results were a sea of red. However, investor expectations were low, so generally speaking energy stock prices were unfazed by dismal results. Rather, investors scrutinized how management teams are planning to position their companies to ensure greater resilience to future oil price cycles. Many companies also used the opportunity to reset their stated long-term energy price expectations, resulting in big asset write-downs. Finally, a couple of companies adjusted their dividends lower and made them more flexible. Therefore, we think the exceptional situation was used by many to lower the bar and this should accelerate the earnings recovery from here. Dedicated energy investors are increasingly comfortable with the positive rate of change thesis on oil, especially the supply side. The thesis is grounded in the upstream commitment to focus on debt reduction, return of incremental dollars to shareholders, and staying disciplined on re-investment. Finally, the announcement of Exxon Mobil’s exit from the DJI Index has been widely seen as emblematic of the decline in importance of Big Oil as the wider sector’s importance dwindles (now <2.5% of the S&P). The current disparity is probably generated by a combination of the cyclical/structural and thematic/sentiment. Nevertheless, investor legend Warren Buffett increased his investments in commodity related companies (Dominion Energy, Barrick Gold, Japan’s 5 biggest trading companies) this year showing increasing interest in the commodity sector that was out-of-favour for too long and may become a big opportunity going forward, he probably thinks. ICG is looking also for the companies with the strongest moat on different variables and offer an attractive well diversified portfolio of best-in-class companies that will strongly recover with the increasing focus of general investors in commodities.

 

Industrial Metals

In August, copper climbed to the highest since mid-2018 after data showed China’s recovery is on track. Chinese economic activity continued to rebound in August. Signs of tight supply and a stronger-than-expected rebound in metals usage in China have driven prices higher since mid-March. Also, there are concerns about a shortfall in global copper output, with inventories on the LME dropping to their lowest since 2005 by the end of August. Treatment fees for copper concentrate extended declines this year, dropping below $50 a ton, according to data from SMM, another signal for a tight market. According to analysts, industrial metals continue to strengthen in general amid continued USD weakness, as supply disruptions dominate the narrative along with a persistent decline in LME inventories. COVID-19-related disruptions and risks to output continue to impact major mining operations globally. Bolivia’s largest mine for example has suspended operations indefinitely for the second time this year due to an uptick in infections across the country. Bolivia is a major producer of zinc and silver. Further to that, investors have also started to buy raw materials that they think will fare well if the Federal Reserve’s efforts to revive the economy stoke inflation. Market measures of inflation expectations, such as inflation breakevens, have risen during the summer. A 2015 paper for the Yale International Center for Finance found commodities were positively correlated with inflation between 1959 and 2014. In contrast, stock and bond prices tended to post small declines when inflation accelerated. On the company side, Zambia said Glencore and First Quantum Minerals are willing to sell their combined 90% stake in Mopani Copper Mines to state-owned investment group. Zambia has had an uneasy relationship with mining investors, clashing with Glencore earlier this year over the company’s plan to mothball Mopani’s operations after the pandemic hit copper prices. Also, Warren Buffett’s Berkshire Hathaway lifted the veil on stakes in five major Japanese commodity traders that dominate the nation’s energy and raw materials industries. That move will intensify a focus on the outlook for raw materials just as prices hit the highest since 2018. Berkshire’s stakes amount to a little more than 5%, but Buffett made clear that they could be increased. While the quintet operate in different areas, they derive much of their revenue from energy, metals and other commodities, supplying resource-poor Japan with essentials.

 

Precious Metals

Precious metal prices pulled back recently as long-dated interest rates rebounded, hitting silver and gold in particular. By the end of the month, gold stood at close to USD 1970 per ounce, while silver closed august at USD 28.1 per ounce. However, analysts expect prices to recover to their previous highs as real US rates can go more negative, USD weakness should continue, and growth and policy uncertainties linger. On the company side, gold miners continue to find themselves in a perfect storm scenario of rising revenues and falling costs due to low oil prices and efficiency gains. Barrick and Newmont for example, two of the largest gold miners, use $65/barrel and $60/barrel respectively for budgeting and guidance purposes. This implies significant free cash flow generation and downside to future costs vs. guidance. Analysts expect the theme will persist through 2021 as low real interest rates drive investor support for the metal and mining managements continue to focus on cost discipline. Also, gold miners are widening their investment appeal as dividends are boosted. According to Gold Fields CEO, more generalist investors search for yield amid low bond-market returns. The sector, which once largely drew attention of specialist funds, is no attracting a broader base of investors who previously considered gold miners too leveraged and high-risk. A sign for that is Warren Buffett’s recent move with adding Barrick Gold to Berkshire Hathaway’s investment portfolio after shunning gold producers for years. The buy comes as a bit of a surprise, Buffett has been critical of gold, saying it isn’t as good of an investment as businesses, farms, and real estate because the metal is not productive. While the stake in Barrick Gold is small for Berkshire Hathaway, Buffett’s company is now one of the miner’s top shareholders with a stake of close to 21 million shares. In general, Berkshire’s investment in Barrick is considered good for the whole mining industry.

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