2H23 Outlook
The author is an analyst for NH Investment & Securities. He can be reached at jaekwang.rhee@nhqv.com -- Ed.
Moving ahead, the driving force for metal demand will likely be energy transition policies. Whereas Chinese economic growth (the previous main catalyst behind metal demand since 2000) has slowed, major economies are beefing up their measures to achieve carbon neutrality.
In particular, the protagonists of the energy transition era are expected to be lithium, nickel, and copper. In terms of price, we view copper as deserving special attention among the three. While the current prices for lithium and nickel are sufficiently high to lure in new entrants into the market, copper prices are not there yet. We believe copper supply will expand only after supply shortage stemming from greater energy transition-related demand leads to sharp price hikes.
We suggest Poongsan and POSCO Holdings as our sector top picks. Poongsan is to enjoy sound earnings growth at both its defense division (on rising demand for ammunition) and its copper business (alongside an anticipated uptrend in copper prices). Meanwhile, at POSCO Holdings, lithium and nickel should emerge as its main mid/long-term earnings growth drivers.