Markets Week Ahead: Afterpay to headline ASX tech sector results
Tech stocks will be among those attracting the most volume this week as some of the sector’s heavyweight names report their latest results.
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Renewable energy is in the spotlight and the battery technology supply chain is key to the transition.
Wind and solar energy are forecast to supply around 48% of world electricity needs by 2050. According to BloombergNEF, it is anticipated that battery technology, gas peakers (turbines or engines that burn natural gas) and dynamic demand could drive market penetration of solar and wind by more than 80%.
The same report also suggests the costs of renewable energy will undercut coal and gas in most parts of the world by 2030, serving as a compelling reason for countries to focus on it.
While investors may be well aware of Tesla’s credentials in battery storage, the supply chain for battery technology extends far beyond one company and covers mining companies, battery storage manufacturers and storage technology providers.
Here are 5 companies fuelling the transition towards renewable energy.
1. SolarEdge Technologies Inc (NASDAQ: SEDQ)
SolarEdge is a US-domiciled manufacturer of energy technologies, including power optimisers, solar inverters and monitoring systems for photovoltaic arrays, which are solar cells that convert light to electricity.
While the company has a global customer base, in the US it has a majority market share, with 60% of the residential solar inverter market. SolarEdge has also ventured into the electric vehicle (EV) market by producing the world’s first EV-charging inverter, which has the ability to charge EVs up to 2.5 times faster than current models.
2. NGK Insulators (TYO: 5333)
NGK Insulators is a Japanese ceramics company responsible for battery systems, insulators and equipment.
The company was responsible for the world’s first commercialised battery storage system capable of megawatt level electrical power storage. This system is in use in more than 200 locations worldwide.
NGK produces lithium-ion rechargeable batteries with high heat-resistance and the company is also researching and developing an alternative in the form of zinc rechargeable batteries.
3. LG Chem (KRX: 051910)
LG Chem is a Korean chemical company with a portfolio across petrochemicals, advanced materials and life sciences. It was the first company to mass produce lithium-ion batteries in Korea and has the leading market share in automobile batteries.
Furthermore, LG Chem also produces carbon nanotube (CNT), which is used for lithium-ion battery cathodes. It supplies some of the world’s major car manufacturers such as Renault and Volkswagen, as well as supplying battery materials to companies like Hitachi.
4. Galaxy Resources (ASX: GXY)
A familiar sight to ASX investors, Galaxy Resources is an Australian mining company focused on lithium. It has mines in Australia, Canada and Argentina. The mine is Argentina has the potential to be the lowest-cost producer of lithium in the world through oil brine extraction.
Lithium accounts for 85% of commissioned utility scale battery storage and Galaxy Resources is likely to benefit from the continuing demand for lithium to support battery storage.
5. EnerSys (NYSE: ENS)
EnerSys is a US-based manufacturer of power storage solutions for industrial applications and has 21% worldwide market share in this field. Its products include batteries, charging and power modules, monitoring and fleet management, plus energy systems used in industries such as telecommunications and transportation.
Investing in battery technology
Investors can access battery technology exposure in a range of ways looking across the battery technology value chain.
This may mean focusing on components such as lithium by investing in mining companies like Galaxy Resources or looking at battery manufacturers like EnerSys.
Investors could also look at companies with more diversified capabilities not purely restricted to battery technology such as Tesla (NASDAQ: TSLA) or Panasonic (TYO: 6752).
However, direct investing means that you are concentrating your risk exposure to one or more stocks. In addition, certain stocks, particularly those in Asian markets, are not necessarily easy to directly invest in.
With this in mind, another option that investors may want to consider is to focus on managed options, whether this is active funds or alternatively, exchange-traded funds like the ETFS Battery Tech & Lithium ETF (ASX: ACDC). This ETF provides investors with broad exposure across the global battery technology supply chain and it includes all the companies referenced in this article.
Interested in learning more about investing in battery technology? Contact ETF Securities to find out more about ETFS Battery Tech & Lithium ETF (ASX: ACDC).
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