Rounding out the trilogy is green hydrogen, the supposed oil and coal killer, which has been about as successful as an investing in shares of the Zeppelin Company (maker of the hydrogen-powered Hindenburg).
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Even our ever-optimistic green hydrogen evangelist Andrew “Twiggy” Forrest has been forced to check his ambitions, as spending shareholder cash on green hydrogen dreams also proves bad for the investor relations environment.
“I think we’re more likely to see a perpetual motion machine built before green hydrogen lives up to its hype,” says Ricciardo.
Global exchange-traded funds (ETFs) that track baskets of companies in lithium, hydrogen and solar sectors are all down more than 25 per this year whilst the global uranium ETF is off a more modest 3 per cent. Still, ETFs of the S&P500 are up 20 per cent, and Nvidia, a stock with a good story and has a commodity – semiconductors – in high demand, is up 160 per cent.
It’s a worldwide theme: despite the utopian rhetoric around green energy, the supply of these commodities still overwhelms demand. Ironically, the “dirty” commodity, old king coal, reigns supreme with global demand continuing to climb, unlike lithium, uranium and hydrogen.
That’s quite the counter-narrative.
Ironically, coal investments have been performing strongly.Credit: Glenn Hunt
“It’s important for investors to recognise that green investment themes are not necessarily correlated, and hence it’s important to select exposures carefully,” says Emanuel Datt, managing director at Datt Capital, a Melbourne-based fund that has made good returns investing in niche green commodities.
“We expect green commodities with truly constrained supply scarcity such as niobium and tin to outperform relative to more abundant green commodities such as lithium and nickel.”
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It might be one of those lessons that investors can only learn the hard way. I know I’m not the only one to have a few “legacy” lithium shares in the bottom drawer that haunt me every day.
“Whilst mistakes are unavoidable, holding on to mistakes can detract from recognising great investment opportunities that may present themselves. Every loss taken represents an opportunity to improve one’s investing into the future,” reminds Datt.
“Medium-term, it’s looking grim for lithium stocks,” adds Ricciardo. “Supply curtailment usually marks the bottom of commodity cycles, but lithium production has continued to increase.”
Some in the industry remain hopeful that lithium prices are close to nearing a cyclical bottom, with telltale signs of a cycle reversing with mine closures, mergers, and acquisitions spreading across the sector.
There will be a time when green commodity stocks make for good investments; the mere publication of this article means that time will likely be soon – we in the media are good contrarian indicators.
However, the lessons on the dangers of “falling in love” with an investment narrative remain, because love can blind you, including from a falling share price.
Will Bennett is a freelance business journalist and day trader.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
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