Why the Shine Has Come Off Clean-Energy Stocks — Commodities Roundup

MARKET MOVEMENTS:

-- Brent crude oil is down 0.1% at $87.08 a barrel.

-- European benchmark gas is up 0.1% to EUR49.34 a megawatt-hour.

-- Gold futures are down 0.1% at $1,984.60 a troy ounce.

-- LME three-month copper futures are down 0.7% at $8,024.50 a metric ton.

-- Wheat futures are up 0.4% to $5.83 a bushel.

TOP STORY:

Why the Shine Has Come Off Clean-Energy Stocks

Clean-energy stocks have fallen out of favor, with pressures created by rising interest rates outweighing supportive government policies.

The iShares Global Clean Energy ETF reached its lowest level since July 2020 this week. The exchange-traded fund invests in renewable-energy companies and utilities in line with a benchmark compiled by S&P Dow Jones Indices, including First Solar and Plug Power. It has plunged 33% this year.

Some stocks have fallen even harder. U.S.-listed Enphase Energy has shed 64% in 2023, while competitor SolarEdge Technologies has sunk more than 70%. Excluding stocks that have been ejected from the S&P 500, SolarEdge ranks as the index's worst performer this year.

Supply-chain problems and waning demand have added to the challenges created by higher borrowing costs. The result: a stock-market selloff despite commitments by the U.S. and other large economies to foster sustainable power generation.

OTHER STORIES:

Exxon, Chevron Look to the West in an Increasingly Uncertain World

As the world becomes more dangerous, the two largest Western crude producers are focusing their investments closer to home.

Chevron on Monday announced that it was acquiring Hess in a $53 billion deal that gives it access to one of this century's biggest oil finds in the South American country of Guyana and allows it to double down on shale by expanding its presence to North Dakota. Both regions are established oil producers with limited geopolitical tensions, affording Chevron new reserves with fewer risks.

The deal follows a megadeal in the U.S. shale patch by Exxon Mobil, which this month acquired Pioneer Natural Resources in a $60 billion merger that anchors its future to the prolific Permian Basin of West Texas and New Mexico.

The back-to-back acquisitions signal that the oil majors are increasingly turning their attention to the Western Hemisphere as international investments are complicated by the threat of expanding regional conflicts, from Ukraine to the Middle East.

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Sibanye-Stillwater Says More Than 4,000 Workers Could Be Affected by Restructuring

Sibanye-Stillwater said that more than 4,000 employees and contractors could potentially be affected by the proposed restructuring of four shafts at its South Africa platinum group metal operations, and that it will consult with unions and non-unionized employees.

The Johannesburg-listed precious metals miner said one of the shafts ceased production in 2022 and that one other was at the end of its operating life, adding that the remaining two required restructuring so as to achieve sustainable production.

As an alternative to closure, it is proposing reducing the workforce at two of the shafts, the company said.

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Global Fossil-Fuel Demand to Hit New Record in 2024, Report Says

Global demand for fossil fuels is likely to hit a new record next year, amid surging demand from Asia, according to a new report.

The Economist Intelligence Unit report said global demand for coal, oil and gas is set to reach new heights in 2024, with high commodity prices likely to spur investment into the sector.

Global energy consumption is likely to rise by 1.8% on year in 2024, with oil demand alone rising 1.7%. Much of this will be spurred by demand from Asia, Latin America and the Middle East, despite surging prices for energy, the EIU said Wednesday.

MARKET TALKS:

Fresnillo Drops After 3Q Output Falls, Costs Weigh

1017 GMT - Fresnillo shares drop nearly 2% after the Mexican precious-metal miner reported lower third-quarter silver and gold production, but stuck to its full-year guidance. Lower mining grades in the quarter across the company's flagship silver mines drove most of the production downturn, Citigroup says. Given the run rate for the first nine months of 2023, full-year production is most likely to be at the lower end of Fresnillo's guidance for both silver and gold, Citi says. "The company has also flagged that cost headwinds from inflation and currency headwinds are likely to impact earnings in 2H23, implying limited room for softening in the rate of cost increase," Citi analysts say in a note. (philip.waller@wsj.com)

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Palm Oil Rises in Possible Technical Rebound

1015 GMT - Palm oil ended higher, reversing earlier losses in a possible technical rebound after prices fell to their lowest in more than a week earlier in the session. Prices seem to have been supported near MYR3,650/ton after retreating from the MYR3,700/ton level, based on technical analysis, Lim Tai An, an analyst at Phillip Nova, says in a commentary. The Bursa Malaysia Derivatives contract for January delivery closed MYR15 higher at MYR3,682 a ton. (ronnie.harui@wsj.com)

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SSAB's Solid Earnings Should be Well Received

0854 GMT - SSAB's solid earnings and cash flow delivery with in-line guidance should be well received by the market, and could be a catalyst for small positive revisions to full-year 2023 consensus estimates, Citi analyst Krishan Agarwal says in a note. SSAB delivered a solid set of 3Q results with reported Ebitda 13% ahead of Visible Alpha consensus, driven by steel pricing, and a large beat on free cash flow, he says. SSAB also announced a SEK2.5 billion share buy back program, highlighting the continued strength in its earnings and cash flow while 4Q guidance is largely in line with current market expectations. "We expect shares to respond positively to the strong print." SSAB B shares are last up 7.4%. (dominic.chopping@wsj.com)

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Metals Mixed as China Demand Remains Soft

0753 GMT - Metal prices are mixed in early trading in London, with worries over demand keeping prices range-bound. Three-month copper is down 0.4% at $8,045 a metric ton while aluminum is up 0.1% at $2,208 a ton. Gold, meanwhile, is down 0.2% at $1,982.90 a troy ounce. Sucden Financial notes that Chinese support for the economy has stepped up, after the government issued additional sovereign debt and raised the budget deficit ratio. "We expect that while these announcements are not game changers for the market, the cumulative impact of policy support, especially in the form of housing market aid, will help stabilize the demand for steel in Q4 2023 before a slight recovery next year," Sucden says. (yusuf.khan@wsj.com)

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Oil Continues Slide as Investors Eye Middle East Conflict

0736 GMT - Oil prices are continuing to slide, amid worries that the wider Middle Eastern region could become embroiled in the current conflict in Israel. Brent crude is down 0.5% to $86.74 a barrel while WTI is 0.6% lower at $83.24 a barrel. "Although there was no further escalation in the Israel-Hamas conflict yesterday, the market remains on edge and the focus continues to be on any further developments within the region," ING says in a note, adding that markets should remain volatile due to the conflict. (yusuf.khan@wsj.com)

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Lynas's Extended License Smooths Pathway for Growth

0332 GMT - An extension to Lynas's Malaysian license takes the pressure off the ramp-up of its new Kalgoorlie rare-earths plant in Australia and opens the door to new growth opportunities, Macquarie analysts say in a note. Lynas could upgrade the remaining two trains at solvent extraction and product finishing, and lift the processing capacity to 12,500 metric tons, or it could unlock capacity at its Mt. Weld operation by changing its mining schedule, the analysts say. "The excess cracking and leaching capacity could also open opportunities to process concentrates from other rare-earths miners in Australia," they add. They lift their target on the stock by 3% to A$7.70 and keep an outperform rating. Lynas is up 4.6% at A$7.13. (rhiannon.hoyle@wsj.com; @RhiannonHoyle)

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Lynas License Extension Seen Giving Production Boost

2344 GMT - The extension of Lynas's Malaysian license to 2026 should result in higher output of neodymium-praseodymium, or NdPr, in FY 2025-26 than was anticipated before, Citi analyst Paul McTaggart says in a note. "We've increased our NdPr production forecasts 16%/8% in FY25/26 as we incorporate importing/processing lanthanide concentrate in Malaysia until March 2026," McTaggart says. Higher expected rare-earths production results in a 14% and 6% increase in earnings estimates for fiscal years 2025 and 2026 respectively, and a slight lift in Citi's target on Lynas to A$7.20 from A$7.15, he says. Lynas is up 3.7% at A$7.07.(rhiannon.hoyle@wsj.com; @RhiannonHoyle)

Write to Barcelona Editors at barcelonaeditors@dowjones.com

(END) Dow Jones Newswires

October 25, 2023 07:38 ET (11:38 GMT)

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