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21 April 2021


Video commentary for April 20th 2021


Eoin Treacy’s view

A link to today’s video commentary may be of interest to subscribers. 

Some of the topics covered include: stock markets pausing, lumber downside key reversal, risk appetite waning, agriculture commodities remain firm, bonds and gold firming, India rupee weak


Priced for Perfection

Eoin Treacy’s view

The stock market has rallied impressively over the last couple of months on enthusiasm about reopening and the growing conviction that the Federal Reserve is serious about not raising interest rates any time soon.


Oatly Reveals Growing Losses, Revenue in U.S. IPO Filing

This article by Crystal Tse for Bloomberg may be of interest to subscribers. Here is a section:

Oatly Group AB, the vegan food and drink maker, has filed for a U.S. initial public offering.
The Malmo, Sweden-based company, in a filing Monday with the U.S. Securities and Exchange Commission, listed an IPO size of $100 million, a placeholder that will likely change.

Oatly reported a $60 million loss on $421 million revenue in 2020, compared with a loss of $36 million on revenue of $204 million a year earlier.

The company counts Chinese conglomerate China Resources Co., Swedish private equity firm Verlinvest and Blackstone Group Inc. among its biggest shareholders, the filing showed. Morgan Stanley, JPMorgan Chase & Co. and Credit Suisse Group AG are leading the offering. Oatly plans to list on Nasdaq Global Select Market under the symbol OTLY.


Eoin Treacy’s view

Oatly has spent a great deal of money already on getting into supermarkets and cafes. That begs the question where the additional money from an IPO will be spent? Perhaps it will simply compensate the initial backers as they transfer ownership before it eventually goes bust. There is certainly an increasingly active health food market but Oatly does not own a patent on producing oat milk. Competition is inevitable and will be expensive to fend off.


Trafigura Bets on Green-Nickel Squeeze in Defiance of China Cure

This article by Yvonne Yue Li and Andy Hoffman for Bloomberg may be of interest to subscribers. Here is a section:


Nickel is already one of the most carbon-intensive metals to produce. Now Tsingshan has come up with a way of using a type of low-grade ferronickel called nickel pig iron in its plants in Indonesia to produce metal suitable for batteries, offsetting the carbon intensity with renewable energy. Some analysts and investors, including Trafigura, have questioned whether the process will be accepted by increasingly eco-conscious automakers.

“The technology is definitely real, but does not meet ESG standards,” said Jon Lamb, portfolio manager at metals and mining investment firm Orion Resource Partners. “As consumers are focused on the lifecycle carbon intensity of their supply chains it is difficult to see how this production would earn a spot in these supply chains.”

But for Matt Fifield, managing partner at Pacific Road Capital, Tsingshan’s announcement means more players in the game.

“The game itself is actually how do we put nickel units into a growing nickel market,” he said. “There will be more Tsingshans, there’ll be more people with breakthrough technology that will be able to create battery-grade nickel feed.”

According to mining magnate Robert Friedland, there are a lot of “fantasies” about where battery-grade nickel is going to come from.

“The automobile industry is not going to nuke hundreds of thousands of acres of tropical jungle in Indonesia and dump the tailings in the ocean and try to convert ferronickel into batteries,” he said during an industry event last week. “That’s disinformation or whistling in the dark.”


Eoin Treacy’s view

Carbon hurdles are only going to grow higher for European businesses. The nickel market is a prime example. European automakers will be held to account for the carbon intensity of the materials they use. That’s particularly true as Germany’s Green Party looks set to benefit from a pandemic electoral upset for the CDU. It is very questionable whether Chinese producers will be held to the same high standard. That creates a significant cost of production disparity and particularly since China is the world’s largest car market. 


Chemical Maker Elementis Rejects Third Deal Offer in Five Months

This article by Craig Trudell for Bloomberg may be of interest to subscribers. Here it is in full:

U.K. specialty-chemical company Elementis Plc turned down a third acquisition offer in five months, a move that risks further irritating investors who have missed out on potential deals.

Rival Innospec Inc. said Tuesday it is no longer considering an acquisition of Elementis after the latter company’s board rejected a 160 pence per share offer made late last month. Elementis shares pared a gain of as much as 22% to trade up just 1% at 137 pence.

Elementis rebuffed two earlier offers that another U.S. foe, Minerals Technologies Inc., made in November of last year. J O Hambro Capital Management Ltd., a top investor in Elementis at the time, told Bloomberg News it had concerns about management’s strategy and the board’s refusal to enter into discussions with Minerals Technologies. Sky News first reported on Monday that Elementis had
received takeover interest from Innospec.


Eoin Treacy’s view

Refusing three takeover offers in the space of a year raises big questions for the current management team at Elementis. They are either going to have to come up with a plan to realise the value these suitors see or fire the CEO and accept an offer. Either way, significant corporate changes lie ahead.


Eoin’s personal portfolio: futures long opened March 30th

Eoin Treacy’s view

One of the most commonly asked questions by subscribers is how to find details of my open traders. To make it easier I will simply repost the latest summary daily until there is a change.


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