Research from Water Tower Research, Water Tower Research

Water Tower Research

Research from Water Tower Research

Water Tower Research is a leading equity research firm that provides research on micro, small and mid cap companies.

Water Tower Research was founded by Wall Street veterans after witnessing a fundamental shift in the investment research industry with the result being a declining knowledge base among investors, a lack of awareness and a shrinking pool of fundamental research being conducted on companies across the small-cap and micro-cap spectrum. The same issues are now increasingly occurring in the mid-cap space. This sea change within the investment community is impacting not only the companies themselves but also current shareholders and potential investors. With significantly less active sell-side sponsorship by Wall Street, a substantial information gap has developed between companies and various constituents in the financial community. The net result is fewer channels for insight and information to flow between companies and investors.

Equity Research Firm

Thematic (Sector/Industry)

<h3>KEY HIGHLIGHTS</h3>
<div></div>
<ul>
<li>WTR-CMI last week.&nbsp;In another down week for the market, the S&amp;P 500 retreated 3.3%, while the Russell 2000 lost 4.7% of its value. Our WTR-CMI index of 30 chemicals and materials technology stocks underperformed the broader market, declining 5.5% for the week. All the stocks in our index finished the week in the red, with large cap coating names—AXTA, SHW, and PPG—posting the lowest declines, along with CTVA, which may have benefited from its&nbsp;announcement of a joint development of a new soybean seed with BASF. Prior week’s leader ALB was the worst performer last week, losing 9.8% of its value, as investors may have been disappointed with the&nbsp;company’s decision to keep the Catalysts business.</li>
<li>Damn the torpedoes, part 2.&nbsp;Going full-speed ahead with the development of its Ghana and Quebec mine reserves, while awaiting permitting for its NC mine,&nbsp;PLL announced plans to construct&nbsp;the country’s largest lithium hydroxide production plant in Tennessee, with production targeted for 2025.</li>
<li>US farmers appear to survive 2022 rollercoaster.&nbsp;Despite record high fertilizer, seed, and pesticide costs, not to mention supply disruptions, weather, and fuel costs,&nbsp;the USDA forecasts that US farmers will enjoy record cash incomes&nbsp;in 2022, although net farm income is expected to decline 3.3% from 2021, despite high crop prices due to aforementioned cost headwinds. With input costs continuing to go up (diesel moving north of $5/gal average again) and a slightly dented pocketbook heading into the 2022-23 season, US farmers’ ability to withstand another year of similar shocks remains under question.</li>
<li>Auto sales finally begin to recover.&nbsp;New car registrations in&nbsp;France&nbsp;and&nbsp;the US&nbsp;rose 4% Y/Y in August, albeit coming against increasingly easy year-ago comps. Still, the news is encouraging for Tier 1 auto suppliers such as PPG and AXTA in our index.</li>
<li>Builder confidence sinks.&nbsp;August was the eighth straight month of US&nbsp;builders’ confidence declining, with the August reading of 49 falling below the neutral outlook level for the first time since May 2020. We see this as a broad negative for our sector, especially for SHW, RPM, NGVT, and FULL, for whom the building &amp; construction industry represents a major end- market.</li>
</ul>
<h3>WTR-CMI WEEKLY PERFORMANCE</h3>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/296/883/original/image_18510131561662594923949.png?1662594926" class="editor-image img-responsive" data-smartkarma-image-id="296883"></figure>
<h2>Ag-Tech and Bio-Ag</h2>
<p>LATAM markets take center stage.&nbsp;With everything but the shouting over in the North American ag market for the 2021-22 season, attention is shifting to LATAM’s 2022-23 ag market forecasts. According to the Brazilian National Supply Company (CONAB), both&nbsp;soybean and corn planted acres are expected to grow in Brazil&nbsp;in 2022-23 compared with 2021-22, with more than 100 million acres of soybean being planted in the country for the first time. Still, while acres and yields are expected to grow, farms’ operating margins are forecast to decline versus this year, due primarily to higher input costs that are more than offsetting strong commodity prices and favorable currency exchange rates.</p>
<p>Higher planted acres expected in the region as well as higher use of fertilizers and pesticides are expected to benefit ag input companies. As recent research indicated,&nbsp;large multinationals are outperforming their local peers&nbsp;in this regard when it comes to LATAM markets in general, and Brazil, the region’s largest, in particular. We see this as a positive for companies like CTVA and FMC, given their strong positions in the region. Coming off a solid North American and European season, it appears ag majors are well positioned to continue their positive growth trajectory as sales shift to LATAM and we see current stock prices for both FMS and CTV as attractive entry points for investors looking to benefit from strong demand and pricing dynamics in the ag-input industry.</p>
<p>Ag majors aren’t the only ones likely to benefit from solid market conditions in LATAM. According to the Brazilian Ministry of Agriculture, Livestock and Supply (MAPA),&nbsp;there were 92 biological or low-impact pesticides approved in 2021, down slightly from the 95 approved in 2020. However, continuing expansion of bio-based pesticides, whose review and approvals are given priority by the agency, is a positive for both farmers, who will have more alternatives and solutions should synthetic chemical inputs’ cost and availability remain an issue in 2022-23, and for emerging bio-ag players, such as BIOX and BHIL, among others, who are rapidly developing bio-based alternatives to traditional synthetic pesticides.</p>
<h2>Battery Materials &amp; Energy Transformation</h2>
<p>Government regulations working at cross purposes to government intentions when it comes to electrification.&nbsp;Even as realization spreads that virtually everywhere one looks, there is a pending shortage of battery-critical materials essential for the electrification revolution to realize its full potential and growing concerns of overreliance on China for such materials already, ramping up local supply of these materials remains problematic. One consistent obstacle is government regulations around mining—the key element in domesticating the battery supply chain and reducing reliance on China and other less-than-friendly regimes. Sweden, home to many materials that could be mined to supply the burgeoning EV battery demand in EU,&nbsp;has been called out recently&nbsp;for its slow regulatory process when it comes to approving new mines in the country. In the US, there is an&nbsp;industry push to shorten and streamline&nbsp;the US mine permit review process. As companies who are looking to develop domestic supply of everything from lithium, to graphite, to rare earths and more prosaic metals such as nickel and copper, continue to bleed red ink due to permitting delays of their major projects, government regulations continue to erect barriers and raise the cost of developing such projects, which appear contrary to many governments’ stated goals and deadlines for sufficiently reducing, if not outright eliminating, dependence on fossil fuels as the basis for the economy. As the saying goes, something’s gotta give.</p>
<p>More investments and intentions announced.&nbsp;Toyota, long viewed as a laggard in EV transition race, announced it will invest close to&nbsp;$5.6 billion into making more EV batteries in the US and Japan, with the goal of raising its production capacity by 40 GWh. The company announced that $2.5 billion of that will go toward its investments into the&nbsp;North Carolina battery plant&nbsp;that will supply batteries for both hybrid as well as fully electric vehicles. Initial production is expected in 2025.</p>
<p>Meanwhile, American Manganese Inc. (OTC: AMYZF) announced that its RecycLiCo Battery Materials arm, in partnership with Kemetco Research Inc., has successfully run a bench test whereby&nbsp;the patented process recovered more than 99% of the lithium&nbsp;contained in lithium-iron-phosphate (LFP) battery cathode materials, extending the process ability, previously demonstrated for nickel-rich, manganese-rich and cobalt-rich cathode chemistries. As we highlighted in our previous issue, work continues on other, non-battery-based energy alternatives, such as hydrogen fuel cells. Recently, German&nbsp;Bosch announced plans to invest $200 million&nbsp;in its US capacity to produce said fuel cells at its South Carolina plant.</p>
<h2>Automotive &amp; Transportation</h2>
<p>We’re not out of the woods yet.&nbsp;Although new car sales comps are beginning to turn positive, as we mentioned above, we note that August improvements (and we expect the remainder of the year to follow suit) came against record low production levels seen in 2H21 and the global industry remains materially below 2019 production levels. Many issues that have plagued the industry over the last three years remain. Thus,&nbsp;Volvo will temporarily close its plant in the Chinese city&nbsp;of Chengdu due to local coronavirus restrictions.&nbsp;Stellantis halted its Sevel van-making plant&nbsp;in central Italy due to a shortage in supplies of parts.&nbsp;Toyota announced that its global output sank&nbsp;for the fourth straight month in July, as a shortage of semiconductors and supply chain disruptions caused by COVID lockdowns in China hurt production. With the world possibly entering a recession, big ticket items such as new cars may continue to see an uneven recovery in demand, even off the 2021-22 lows. While Y/Y growth in new vehicle registrations is encouraging, ongoing issues with semiconductor and other parts supplies, logistical snags, and on-again-off-again production in China as rolling COVID lockdowns continue, the industry still seems some way off from regaining its footing.</p>
<h2>Chemicals and Materials Technology in the News</h2>
<p>Architectural coatings market growth intact.&nbsp;A report by&nbsp;Research and Markets forecasts that global demand for architectural coatings&nbsp;will continue to grow at above GDP rates, driven by residential construction and remodeling, as well as commercial and infrastructure projects. The global market for architectural coatings estimated at $64.2 billion in 2022 is projected to grow at a 4.9% CAGR through 2026, reaching $79.5 billion by 2026. While this is a positive for PPG, Masco (NYSE: MAS), which supplies Behr and Kilz brand paints to Home Depot (NYSE: HD), and Berkshire Hathaway’s Benjamin Moore paint, it is particularly impactful for SHW, which dominates the paint market in the US and is one of the leading global suppliers of architectural coatings. Furthermore, with the Do It For Me&nbsp;(DIFM) trend growing once more in the US&nbsp;in the wake of COVID lockdowns, SHW may benefit disproportionately, given its extensive company-owned contractor paint stores across the country and in Canada.</p>
<h2>Recent WTR Publications and Upcoming Events</h2>
<p>Management Series Report – Loop Industries Founder and CEO Daniel Solomita (NASDAQ: LOOP)</p>
<p>Management Series Report and 2Q22 Update for Westwater Resources (NYSE: WWR)</p>
<p>Fireside Chat with Management of Loop Industries (NASDAQ: LOOP)</p>
<p>Fireside Chat with Management of Westwater Resources (NYSE: WWR)</p>
<p>Initiation of Coverage – Westwater Resources (NYSE: WWR)</p>
<h3>DISCLOSURES</h3>
<div></div>
<p>Water Tower Research (“WTR”) is a professional publisher of investment research reports on public companies and, to a lesser extent, private firms (“the Companies”). WTR provides investor-focused content and digital distribution strategies designed to help companies communicate with investors.<br><br>WTR is not a registered investment adviser or a broker/dealer nor does WTR provide investment banking services. WTR operates as an exempt investment adviser under the so called “publishers’ exemption” from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940. WTR does not provide investment ratings / recommendations or price targets on the companies it reports on. Readers are advised that the research reports are published and provided solely for informational purposes and should not be construed as an offer to sell or the solicitation of an offer to buy securities or the rendering of investment advice. The information provided in this report should not be construed in any manner whatsoever as personalized advice. All users and readers of WTR’s reports are cautioned to consult their own independent financial, tax and legal advisors prior to purchasing or selling securities.<br><br>Dmitry Silversteyn, who is the writer of this report, covers the BioEconomy and Chemicals &amp; Materials Technology sectors for WTR. Mr. Silversteyn and members of his household have no personal or business-related relationship to the subject company other than providing digital content and any ancillary services WTR may offer.<br><br>Unless otherwise indicated, WTR intends to provide continuing coverage of the covered companies. WTR will notify its readers through website postings or other appropriate means if WTR determines to terminate coverage of any of the companies covered.<br><br>WTR is being compensated for its research by the company which is the subject of this report. WTR receives no more than a maximum of $10,500 per month from a given client and is required to have at least a 6-month commitment. None of the earned fees are contingent on, and WTR’s client agreements are not cancellable for the content of its reports. WTR does not accept any compensation in the form of warrants or stock options or other equity instruments that could increase in value based on positive coverage in its reports.<br><br>WTR or an affiliate may seek to receive compensation for non-research services to covered companies, such as charges for presenting at sponsored investor conferences, distributing press releases, advising on investor relations and broader corporate communications and public relations strategies as well as performing certain other related services (“Ancillary Services”). The companies that WTR covers in our research are not required to purchase or use Ancillary Services that WTR or an affiliate might offer to clients.<br><br>The manner of WTR’s research compensation and Ancillary Services to covered companies raise actual and perceived conflicts of interest. WTR is committed to manage those conflicts to protect its reputation and the objectivity of employees/analysts by adhering to strictly-written compliance guidelines.<br><br>The views and analyses included in our research reports are based on current public information that we consider to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness, timeliness, or correctness. Neither we nor our analysts, directors, officers, employees, representatives, independent contractors, agents or affiliate shall be liable for any omissions, errors or inaccuracies, regardless of cause, foreseeability or the lack of timeliness of, or any delay or interruptions in the transmission of our reports to content users. This lack of liability extends to direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, losses, lost income, lost profit or opportunity costs.<br><br>All investment information contained herein should be independently verified by the reader or user of this report. For additional information, all readers of this report are encouraged to visit WTR’s website www.watertowerresearch.com.</p>

KEY HIGHLIGHTS


WTR-CMI last week.&nbsp;In another down week for the market, the S&amp;P 500 retreated 3.3%, while the Russell 2000 lost 4.7% of its value. Our WTR-CMI index of 30 chemicals and materials technology stocks underperformed the broader market, declining 5.5% for the week. All the stocks in our index finished the week in the red, with large cap coating names—AXTA, SHW, and PPG—posting the lowest declines, along with CTVA, which may have benefited from its&nbsp;announcement of a joint development of a new soybean seed with BASF. Prior week’s leader ALB was the worst performer last week, losing 9.8% of its value, as investors may have been disappointed with the&nbsp;company’s decision to keep the Catalysts business.
Damn the torpedoes, part 2.&nbsp;Going full-speed ahead with the development of its Ghana and Quebec mine reserves, while awaiting permitting for its NC mine,&nbsp;PLL announced plans to construct&nbsp;the country’s largest lithium hydroxide production plant in Tennessee, with production targeted for 2025.
US farmers appear to survive 2022 rollercoaster.&nbsp;Despite record high fertilizer, seed, and pesticide costs, not to mention supply disruptions, weather, and fuel costs,&nbsp;the USDA forecasts that US farmers will enjoy record cash incomes&nbsp;in 2022, although net farm income is expected to decline 3.3% from 2021, despite high crop prices due to aforementioned cost headwinds. With input costs continuing to go up (diesel moving north of $5/gal average again) and a slightly dented pocketbook heading into the 2022-23 season, US farmers’ ability to withstand another year of similar shocks remains under question.
Auto sales finally begin to recover.&nbsp;New car registrations in&nbsp;France&nbsp;and&nbsp;the US&nbsp;rose 4% Y/Y in August, albeit coming against increasingly easy year-ago comps. Still, the news is encouraging for Tier 1 auto suppliers such as PPG and AXTA in our index.
Builder confidence sinks.&nbsp;August was the eighth straight month of US&nbsp;builders’ confidence declining, with the August reading of 49 falling below the neutral outlook level for the first time since May 2020. We see this as a broad negative for our sector, especially for SHW, RPM, NGVT, and FULL, for whom the building &amp; construction industry represents a major end- market.

WTR-CMI WEEKLY PERFORMANCE

Ag-Tech and Bio-Ag
LATAM markets take center stage.&nbsp;With everything but the shouting over in the North American ag market for the 2021-22 season, attention is shifting to LATAM’s 2022-23 ag market forecasts. According to the Brazilian National Supply Company (CONAB), both&nbsp;soybean and corn planted acres are expected to grow in Brazil&nbsp;in 2022-23 compared with 2021-22, with more than 100 million acres of soybean being planted in the country for the first time. Still, while acres and yields are expected to grow, farms’ operating margins are forecast to decline versus this year, due primarily to higher input costs that are more than offsetting strong commodity prices and favorable currency exchange rates.
Higher planted acres expected in the region as well as higher use of fertilizers and pesticides are expected to benefit ag input companies. As recent research indicated,&nbsp;large multinationals are outperforming their local peers&nbsp;in this regard when it comes to LATAM markets in general, and Brazil, the region’s largest, in particular. We see this as a positive for companies like CTVA and FMC, given their strong positions in the region. Coming off a solid North American and European season, it appears ag majors are well positioned to continue their positive growth trajectory as sales shift to LATAM and we see current stock prices for both FMS and CTV as attractive entry points for investors looking to benefit from strong demand and pricing dynamics in the ag-input industry.
Ag majors aren’t the only ones likely to benefit from solid market conditions in LATAM. According to the Brazilian Ministry of Agriculture, Livestock and Supply (MAPA),&nbsp;there were 92 biological or low-impact pesticides approved in 2021, down slightly from the 95 approved in 2020. However, continuing expansion of bio-based pesticides, whose review and approvals are given priority by the agency, is a positive for both farmers, who will have more alternatives and solutions should synthetic chemical inputs’ cost and availability remain an issue in 2022-23, and for emerging bio-ag players, such as BIOX and BHIL, among others, who are rapidly developing bio-based alternatives to traditional synthetic pesticides.
Battery Materials &amp; Energy Transformation
Government regulations working at cross purposes to government intentions when it comes to electrification.&nbsp;Even as realization spreads that virtually everywhere one looks, there is a pending shortage of battery-critical materials essential for the electrification revolution to realize its full potential and growing concerns of overreliance on China for such materials already, ramping up local supply of these materials remains problematic. One consistent obstacle is government regulations around mining—the key element in domesticating the battery supply chain and reducing reliance on China and other less-than-friendly regimes. Sweden, home to many materials that could be mined to supply the burgeoning EV battery demand in EU,&nbsp;has been called out recently&nbsp;for its slow regulatory process when it comes to approving new mines in the country. In the US, there is an&nbsp;industry push to shorten and streamline&nbsp;the US mine permit review process. As companies who are looking to develop domestic supply of everything from lithium, to graphite, to rare earths and more prosaic metals such as nickel and copper, continue to bleed red ink due to permitting delays of their major projects, government regulations continue to erect barriers and raise the cost of developing such projects, which appear contrary to many governments’ stated goals and deadlines for sufficiently reducing, if not outright eliminating, dependence on fossil fuels as the basis for the economy. As the saying goes, something’s gotta give.
More investments and intentions announced.&nbsp;Toyota, long viewed as a laggard in EV transition race, announced it will invest close to&nbsp;$5.6 billion into making more EV batteries in the US and Japan, with the goal of raising its production capacity by 40 GWh. The company announced that $2.5 billion of that will go toward its investments into the&nbsp;North Carolina battery plant&nbsp;that will supply batteries for both hybrid as well as fully electric vehicles. Initial production is expected in 2025.
Meanwhile, American Manganese Inc. (OTC: AMYZF) announced that its RecycLiCo Battery Materials arm, in partnership with Kemetco Research Inc., has successfully run a bench test whereby&nbsp;the patented process recovered more than 99% of the lithium&nbsp;contained in lithium-iron-phosphate (LFP) battery cathode materials, extending the process ability, previously demonstrated for nickel-rich, manganese-rich and cobalt-rich cathode chemistries. As we highlighted in our previous issue, work continues on other, non-battery-based energy alternatives, such as hydrogen fuel cells. Recently, German&nbsp;Bosch announced plans to invest $200 million&nbsp;in its US capacity to produce said fuel cells at its South Carolina plant.
Automotive &amp; Transportation
We’re not out of the woods yet.&nbsp;Although new car sales comps are beginning to turn positive, as we mentioned above, we note that August improvements (and we expect the remainder of the year to follow suit) came against record low production levels seen in 2H21 and the global industry remains materially below 2019 production levels. Many issues that have plagued the industry over the last three years remain. Thus,&nbsp;Volvo will temporarily close its plant in the Chinese city&nbsp;of Chengdu due to local coronavirus restrictions.&nbsp;Stellantis halted its Sevel van-making plant&nbsp;in central Italy due to a shortage in supplies of parts.&nbsp;Toyota announced that its global output sank&nbsp;for the fourth straight month in July, as a shortage of semiconductors and supply chain disruptions caused by COVID lockdowns in China hurt production. With the world possibly entering a recession, big ticket items such as new cars may continue to see an uneven recovery in demand, even off the 2021-22 lows. While Y/Y growth in new vehicle registrations is encouraging, ongoing issues with semiconductor and other parts supplies, logistical snags, and on-again-off-again production in China as rolling COVID lockdowns continue, the industry still seems some way off from regaining its footing.
Chemicals and Materials Technology in the News
Architectural coatings market growth intact.&nbsp;A report by&nbsp;Research and Markets forecasts that global demand for architectural coatings&nbsp;will continue to grow at above GDP rates, driven by residential construction and remodeling, as well as commercial and infrastructure projects. The global market for architectural coatings estimated at $64.2 billion in 2022 is projected to grow at a 4.9% CAGR through 2026, reaching $79.5 billion by 2026. While this is a positive for PPG, Masco (NYSE: MAS), which supplies Behr and Kilz brand paints to Home Depot (NYSE: HD), and Berkshire Hathaway’s Benjamin Moore paint, it is particularly impactful for SHW, which dominates the paint market in the US and is one of the leading global suppliers of architectural coatings. Furthermore, with the Do It For Me&nbsp;(DIFM) trend growing once more in the US&nbsp;in the wake of COVID lockdowns, SHW may benefit disproportionately, given its extensive company-owned contractor paint stores across the country and in Canada.
Recent WTR Publications and Upcoming Events
Management Series Report – Loop Industries Founder and CEO Daniel Solomita (NASDAQ: LOOP)
Management Series Report and 2Q22 Update for Westwater Resources (NYSE: WWR)
Fireside Chat with Management of Loop Industries (NASDAQ: LOOP)
Fireside Chat with Management of Westwater Resources (NYSE: WWR)
Initiation of Coverage – Westwater Resources (NYSE: WWR)
DISCLOSURES

Water Tower Research (“WTR”) is a professional publisher of investment research reports on public companies and, to a lesser extent, private firms (“the Companies”). WTR provides investor-focused content and digital distribution strategies designed to help companies communicate with investors.  WTR is not a registered investment adviser or a broker/dealer nor does WTR provide investment banking services. WTR operates as an exempt investment adviser under the so called “publishers’ exemption” from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940. WTR does not provide investment ratings / recommendations or price targets on the companies it reports on. Readers are advised that the research reports are published and provided solely for informational purposes and should not be construed as an offer to sell or the solicitation of an offer to buy securities or the rendering of investment advice. The information provided in this report should not be construed in any manner whatsoever as personalized advice. All users and readers of WTR’s reports are cautioned to consult their own independent financial, tax and legal advisors prior to purchasing or selling securities.  Dmitry Silversteyn, who is the writer of this report, covers the BioEconomy and Chemicals &amp; Materials Technology sectors for WTR. Mr. Silversteyn and members of his household have no personal or business-related relationship to the subject company other than providing digital content and any ancillary services WTR may offer.  Unless otherwise indicated, WTR intends to provide continuing coverage of the covered companies. WTR will notify its readers through website postings or other appropriate means if WTR determines to terminate coverage of any of the companies covered.  WTR is being compensated for its research by the company which is the subject of this report. WTR receives no more than a maximum of $10,500 per month from a given client and is required to have at least a 6-month commitment. None of the earned fees are contingent on, and WTR’s client agreements are not cancellable for the content of its reports. WTR does not accept any compensation in the form of warrants or stock options or other equity instruments that could increase in value based on positive coverage in its reports.  WTR or an affiliate may seek to receive compensation for non-research services to covered companies, such as charges for presenting at sponsored investor conferences, distributing press releases, advising on investor relations and broader corporate communications and public relations strategies as well as performing certain other related services (“Ancillary Services”). The companies that WTR covers in our research are not required to purchase or use Ancillary Services that WTR or an affiliate might offer to clients.  The manner of WTR’s research compensation and Ancillary Services to covered companies raise actual and perceived conflicts of interest. WTR is committed to manage those conflicts to protect its reputation and the objectivity of employees/analysts by adhering to strictly-written compliance guidelines.  The views and analyses included in our research reports are based on current public information that we consider to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness, timeliness, or correctness. Neither we nor our analysts, directors, officers, employees, representatives, independent contractors, agents or affiliate shall be liable for any omissions, errors or inaccuracies, regardless of cause, foreseeability or the lack of timeliness of, or any delay or interruptions in the transmission of our reports to content users. This lack of liability extends to direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, losses, lost income, lost profit or opportunity costs.  All investment information contained herein should be independently verified by the reader or user of this report. For additional information, all readers of this report are encouraged to visit WTR’s website www.watertowerresearch.com.

Mat-Chem Notes for the Week Ended September 4 2022

KEY HIGHLIGHTS


WTR-CMI last week.&nbsp;Our WTR-CMI index of 30 chemicals and materials technology stocks couldn’t keep up with the broader market last week, slipping 0.4% versus the prior week, while the S&amp;P 500 posted a 0.4% appreciation and the Russell 2000 rallied 1.9% for the week. Strong 2Q22 results and a strong outlook drove KWR stock up 15.3% and contributed to MTRN’s 8.6% appreciation, with LAC’s 7.7% improvement rounding out the top performers for the week. ECVT’s larger&nbsp;secondary offering priced at $8.75&nbsp;resulted in a 12.9% pullback for the stock, while VVV declined 11% despite announcing the&nbsp;sale of its Global Products business to Aramco, as investors remained concerned about margin pressures and longer-term prospects for a company still largely focused on ICE vehicle maintenance. EAF’s (9.6%) weekly performance also came courtesy of the outlook it provided on its 2Q22 earnings call, which highlighted slowing steel production and elevated costs.
Economic anxiety growing.&nbsp;Concerns over the&nbsp;impact of reduced gas supply from Russia&nbsp;and its impact on industrial production in the country were recently voiced as a reason for the cautious outlook for the balance of 2022 and into 2023, according to Covestro Germany. In yet another sign of a growing economic slowdown, domestic&nbsp;organic produce volumes declined 2.8%&nbsp;Y/Y in 2Q22, as prices went up 6.7%, indicating that consumers are becoming more price conscious as inflationary pressures heat up. This would not be good news for consumer-centric companies such as SHW, PPG, RPM, and VVV, as customer trade-downs may add mix pressures to the volume and FX headwinds.
Chip crunch prompts greater OEM involvement.&nbsp;As the chip shortage for the automotive industry&nbsp;continues to take a bite out of global production, OEMs are being looked to as reliable funding partners for future semiconductor fabs, as&nbsp;chip manufacturers look to offload some of the funding burden&nbsp;onto the ultimate customer in order to ensure the situation does not repeat once the current crunch is over,&nbsp;sometime in 2023.
LTHM gets prepayment from GM.&nbsp;In the last issue, we highlighted GM’s supply agreement with LTHM and last week we learned that the&nbsp;auto OEM is prepaying LTHM $198 million&nbsp;to ensure a six-year contractual supply—another indication of growing material availability concerns in the EV industry.

WTR-CMI WEEKLY PERFORMANCE


Source: YCharts; August 5 close

Ag-Tech and Bio-Ag
Farmland acres grow globally but shrink in the US.&nbsp;According to a recent article,&nbsp;global farm acreage has increased&nbsp;in 2000’s after the flattish 1980-2000 period, with most of the growth coming from LATAM, India, and former CIS regions, with oilseed crops, particularly soybeans, accounting for most of the increase. Conversely,&nbsp;domestic farm acres shrank&nbsp;over the past two decades, as succession decisions and urban and suburban development are removing 2,000 acres per day from domestic farming and grazing lands. We mentioned this trend in our previous reports and see this as a driver of adoption of newer ag technologies, including precision farming, seed treatment, and bio-based pesticide and fertilizer alternatives, which are all designed to improve yields and minimize environmental impact in order to produce more without needing more farmland. Companies such as BHIL and BIOX, as well as FMC, CTVA, and AVD, stand to benefit as use of inputs/acre grows, with BIOX and FMC being particularly well positioned given their strong LATAM presence and FMC’s over-representation in soybean and rapeseed markets.
As concerns over food scarcity grow, government regulators turn a deaf ear.&nbsp;While the Ukraine/Russia agreement that allowed exports of Ukrainian grain to resume is encouraging, concerns are rising over the 2022-23 Ukrainian crop season.&nbsp;According to the USDA, Ukrainian production of sunflower seeds is expected to decline 37% versus this year, with Ukraine being the number one producer of sunflower seeds. The report also predicts a 35% Y/Y decline in wheat production in the 2022-23 season (Ukraine is the ninth-largest wheat producer in the world) and a whopping 54% drop in the country’s corn production (Ukraine is the sixth-largest corn producer in the world). And that’s if the war’s impact on Ukraine’s farming heartland doesn’t get worse! As a major exporter of grain and ag products, Ukraine’s limited ability to export foodstuff this year and uncertainty over supply next season is raising concerns among major importing regions such as India, Africa, and Asia as to their ability to provide sufficient food for their populace.
It would seem that in this environment, governments would be doing all they could to ensure the adequate supply of ag products to the global market, or at least their own. However, that may not be the case. As we highlighted in the last issue, Netherlands regulators are putting environmental regulations in place that would raise the cost (if not make it outright impossible) for smaller Dutch farmers to continue to produce, which has led to widespread farmer demonstrations across the country. Holland may not be alone in this drive to reduce farming’s impact on the environment at any cost. Its example&nbsp;may be followed by Canada and Ireland&nbsp;and there is concern that similar environmental rules, which seem to be specifically aimed at farming, may come to the US, given the green agenda of the current administration. Tone deaf does not begin to describe these initiatives and efforts, in our opinion.
Automotive &amp; Transportation
July picks up where June left off.&nbsp;The top three economies in Europe are reporting another Y/Y decline in July new car registrations.&nbsp;Germany saw a 13% drop, while&nbsp;the UK posted a slightly less onerous 9% Y/Y&nbsp;decline in new car registrations last month.&nbsp;French registrations&nbsp;also declined, but at a slightly slower 7% pace. And while the impact of chip shortages is waning on a Y/Y basis as we mentioned previously and the Y/Y declines in registrations may also show better comps in 2H22, a recovery in demand still lies beyond the line of sight, as new obstacles replace the old concerns. Gas rationing in Europe due to Russia’s influence over gas supply to the region, higher model prices as OEMs work to preserve margins in&nbsp;a rising cost environment, and slowing the economy’s impact on consumer confidence&nbsp;are likely to continue to weigh on auto production and sales well into 2023. BMW for example, while looking for a recovery in 2H22, had to reduce its full-year 2022 outlook&nbsp;given the slower 1H22 and uncertainty and volatility of economic and geopolitical factors that make more optimistic predictions difficult at this time.
We continue to see risk for companies in our index with high exposure to the automotive and transportation sectors, including PPG, AXTA, and to a lesser extent, AVNT, FUL, and HXL.
Battery Materials &amp; EV Transformation
Technology, methods, and supply chain continue to evolve.&nbsp;Global&nbsp;automotive manufacturers and their suppliers are looking to invest half a trillion dollars&nbsp;over the next several years in order to prepare the industry to transition to an EV architecture more fully. The investments range from new EV factories, battery cell and battery plants, new and expanded mining and conversion plant infrastructure for critical materials, and the growing realization of the need to reduce the industry’s dependence on China as the primary source EV-related supply. The recent&nbsp;decision by CATL to delay&nbsp;finalizing its plans for a North American battery plant underscores those concerns. It can therefore be seen as a sign of desperate times that&nbsp;Tesla felt it necessary to sign supply agreements with two Chinese cobalt processors&nbsp;in an effort to ensure it has adequate access to that important battery metal. Can one blame it given&nbsp;the outlook for cobalt?
Looking high and low for critical materials.&nbsp;Almost every long-term projection of EV growth and corresponding growth in critical metals needed for EV batteries includes a widening disparity between expected demand and available, highly probable, and even somewhat probable supply for most of these materials—lithium first and foremost. It is not surprising then that both auto OEMs and battery companies are looking to sign supply deals with existing and even speculative suppliers. Case in point is the recent announcement of a&nbsp;supply agreement between Prime Planet Energy &amp; Solutions, the battery joint venture of Toyota and Panasonic, and Ioneer Ltd.&nbsp;(OTC: GSCCF), a development-stage company whose lithium production plant isn’t expected to commence construction until 4Q22, with an uncertain timeline to commercial production. Another source of critical materials for batteries is end-of-life EV batteries themselves. In the spirit of environmental responsibility and a circular economy,&nbsp;Ascend Elements has announced plans to invest up to $1 billion&nbsp;in a factory in Kentucky for the production of battery cathode materials for EVs. The plant will use black mass from recycled batteries to directly produce cathode materials for the EV market. Production is scheduled to start at the end of 2023, with capacity to produce enough cathode materials for 250,000 EVs annually. Similarly, British battery developer&nbsp;Nexeon secured more than $200 million in funding&nbsp;to develop its battery materials manufacturing operations for the production of silicone-based anode materials for EV batteries, showing that it’s not just the cathode-side metals, such as lithium and cobalt, that are subject to supply concerns and therefore provide opportunities for funding and growth. We also note that one of the companies in our WTR-CMI index, namely&nbsp;NGVT, took part in this round of funding&nbsp;for Nexeon.
Graphite market update.&nbsp;Speaking of anode materials, an often overlooked part of an EV battery is the graphite that goes into the battery anode. As with other critical battery materials, a severe shortage of supply versus projected demand is envisioned for the graphite market. However, until now, this pending imbalance appears to be getting little attention from investors. As the realization that the EV industry is 100% dependent on China for&nbsp;battery-grade graphite spreads, we believe this lack of attention will be addressed. One company that is looking to launch domestic production of battery-grade graphite materials is Westwater Resources (NYSE: WWR). We recently hosted a fireside chat with WWR management to discuss this apparent lack of investor understanding of the supply-demand imbalance and overreliance on China (see link below). The company will update investors on its progress Thursday, August 11 at 11:00 am EDT when management will host its 2Q22 call.
Chemicals and Materials Technology in the News
NGVT.&nbsp;In addition to making an aforementioned investment in Nexeon, the company also announced the&nbsp;acquisition of privately owned Ozark Materials, LLC and Ozark Logistics, LLC (“Ozark Materials”)&nbsp;for $325 million. The acquisition is expected to close by early 4Q22. The acquired business is on pace for annual revenues of approximately $150 million, with a ~20% EBITDA margin in FY23.
MTRN.&nbsp;The company announced that it has established a new facility in Milwaukee, Wisconsin to accelerate the growth of advanced chemical solutions for the semiconductor and EV battery markets. The new 150,000-square-foot facility expands the company’s capacity to produce Atomic Layer Deposition (ALD) materials for the most sophisticated semiconductor chips and provide advanced chemicals for the development of next-generation battery technology for EVs.
Circular Economy.&nbsp;Green Dot Bioplastics, a developer and supplier of bioplastic materials for innovative, sustainable end-uses,&nbsp;announced an addition of nine new grades of bioplastics&nbsp;aimed at single-use and plastic packaging markets, as the industry looks to adjust to increasingly strict government mandates and regulations related to single-use plastics. In an effort to support similar conversions, in this case to post-consumer recycled plastics,&nbsp;AVNT announced its post-consumer recycled (PCR) Color Prediction Service&nbsp;for polyolefins and polyethylene terephthalate (PET) resins as well as its new polyolefin antioxidants, Cesa Nox A4R Additives for recycled plastics, thereby lowering adoption obstacles for consumers looking to incorporate post-consumer recycled plastic into their product designs.
EAF.&nbsp;While GrafTech’s 2Q22 results and guidance for the balance of 2022 left analysts and investors unimpressed with the company’s near-term margin and volume headwinds, investors may be missing the longer-term prospects for the company as its graphite electrodes going into electric ark furnaces (EAF) are enabling a transition from high carbon-producing coal furnaces to less environmentally impactful EAF technologies, which also use steel scrap, rather than iron ore, as a raw material.&nbsp;A recent study confirming the lower carbon-generating benefits of EAF&nbsp;versus conventional smelters underscores the environmental tailwind investors may be missing in evaluating EAF’s current volume issues in an environment of declining steel production globally.
Rating and Price Target Changes
ALB –&nbsp;UBS raised its price target (PT) to $265 from $218 but maintained its Neutral rating; Oppenheimer raised its PT to $440 from $368 and reiterated its Outperform rating.
CTVA –&nbsp;Credit Suisse raised its PT to $72 from $68 and reiterated its Outperform rating; UBS raised its PT to $66 from $64 and reiterated its Buy recommendation; CFRA lowered its PT to $61 from $65 and maintained its Hold rating.
EMN –&nbsp;CFRA reiterated its Buy rating and $125 PT; Citigroup downgraded the stock to Neutral from Buy; KeyBank raised its PT to $125 from $124 and reiterated its Overweight rating; Deutsche Bank lowered its PT to $115 from $125 and reiterated its Buy rating; Stifel Nicolaus lowered its PT to $134 from $155 and reiterated its Buy rating; Barclays lowered its PT to $110 from $120 and maintained its Equal Weight rating; Wells Fargo lowered its PT to $110 from $115 and reiterated its Overweight rating; RBC raised its PT to $97 from $94 and maintained its Sector Perform rating.
FMC –&nbsp;Credit Suisse lowered its PT to $105 from $109 and reiterated its Underperform rating; CFRA lowered its PT to $120 from $126 and maintained its Hold rating; Mizuho Securities lowered its PT to $144 from $149 and reiterated its Buy rating.
FUL –&nbsp;Berenberg Bank lowered its PT to $82 from $85 and reiterated its Buy recommendation.
HXL –&nbsp;BMO raised its PT to $66 from $57 and maintained its Market Perform rating.
LTHM –&nbsp;CFRA lowered its PT to $28 from $36 and reiterated its Buy rating; Mizuho Securities lowered its PT to $30 from $34 and maintained its Neutral rating; Deutsche Bank raised its PT to $26 from $24 and maintained its Hold rating.
VVV –&nbsp;CFRA downgraded the stock to Hold from Buy and maintained its $34 PT.
Recent WTR Publications and Upcoming Events
Fireside Chat with Management of Westwater Resources, Inc.
Initiation of Coverage – Westwater Resources, Inc.
Management Series Report – Marrone Bio Innovations Inc. CEO Kevin Helash
Management Series Report – Westwater Resources, Inc. Executive Chairman Terence Cryan and CAO Steven Cates
DISCLOSURES

Water Tower Research (“WTR”) is a professional publisher of investment research reports on public companies and, to a lesser extent, private firms (“the Companies”). WTR provides investor-focused content and digital distribution strategies designed to help companies communicate with investors.  WTR is not a registered investment adviser or a broker/dealer nor does WTR provide investment banking services. WTR operates as an exempt investment adviser under the so called “publishers’ exemption” from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940. WTR does not provide investment ratings / recommendations or price targets on the companies it reports on. Readers are advised that the research reports are published and provided solely for informational purposes and should not be construed as an offer to sell or the solicitation of an offer to buy securities or the rendering of investment advice. The information provided in this report should not be construed in any manner whatsoever as personalized advice. All users and readers of WTR’s reports are cautioned to consult their own independent financial, tax and legal advisors prior to purchasing or selling securities.  Dmitry Silversteyn, who is the writer of this report, covers the BioEconomy and Chemicals &amp; Materials Technology sectors for WTR. Mr. Silversteyn and members of his household have no personal or business-related relationship to the subject company other than providing digital content and any ancillary services WTR may offer.  Unless otherwise indicated, WTR intends to provide continuing coverage of the covered companies. WTR will notify its readers through website postings or other appropriate means if WTR determines to terminate coverage of any of the companies covered.  In certain instances, including this report, WTR will write research covering non-clients. Readers should assume that WTR may seek to turn these non-paying companies into paying clients. Likewise, WTR may seek to transform these non-clients into paying clients of it or of its affiliate, which provides services such as presenting at sponsored investor conferences, distributing press releases, advising on investor relations and broader corporate communications and public relations strategies as well as performing certain other related services (“Ancillary Services”). The companies that WTR covers in our research are not required to purchase or use Ancillary Services of WTR or an affiliate might offer to clients.  The manner of WTR’s potential research compensation and Ancillary Services to covered companies raise actual and perceived conflicts of interest. WTR is committed to manage those conflicts to protect its reputation and the objectivity of employees/analysts by adhering to strictly written compliance guidelines.  The views and analyses included in our research reports are based on current public information that we consider to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness, timeliness, or correctness. Neither we nor our analysts, directors, officers, employees, representatives, independent contractors or agents shall be liable for any omissions, errors or inaccuracies, regardless of cause, foreseeability or the lack of timeliness of, or any delay or interruptions in the transmission of our reports to content users. This lack of liability extends to direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, losses, lost income, lost profit or opportunity costs.  All investment information contained herein should be independently verified by the reader or user of this report. For additional information, all readers of this report are encouraged to visit WTR’s website www.watertowerresearch.com.

Mat-Chem Notes for the Week Ended August 7, 2022

<h2>KEY HIGHLIGHTS</h2>
<div></div>
<ul>
<li>WTR-CMI last week.&nbsp;In what was another positive week for the stock market, both the Russell 2000 and S&amp;P 500 appreciated 4.3% versus week-ago levels, while our WTR-CMI index of 30 chemicals and materials technology stocks outperformed the broader market with a 4.9% return. Lithium stocks once again led our index higher, as PLL, LAC, and ALB benefited from improved investor sentiment on lithium demand and, more importantly, pricing by appreciating 21.1%, 12.3% and 10.3%, respectively. LTHM, while not quite keeping up the pace with an 8.9% improvement,&nbsp;signed a long-term lithium hydroxide supply agreement with GM, which also signed a&nbsp;long-term supply deal with South Korean LG Chem for battery cathodes. At the other end of the performance spectrum, SHW disappointed investors with its 2H22 guidance and saw its stock decline 6.6% for the week, with ASH’s 4.1% decline following an earnings beat and raise bounce the prior week and AXTA posting a 3.3% decline as its 2Q22 earrings and guidance left investors unimpressed, while the&nbsp;CEO transition, which the company announced at the same time, may also have contributed to shareholder unease.</li>
<li>Ford touts sufficient materials for EV push.&nbsp;Like many auto OEMs, Ford is not leaving the fate of its EV transition in the hands of Tier-I suppliers and instead is signing supply agreements directly with critical materials suppliers. The company recently&nbsp;announced sufficient lithium and nickel supply contracts&nbsp;to support its projected EV production into 2026.</li>
<li>China’s July new car sales continue to rebound.&nbsp;China Automobile Dealers Association expects the country’s new car sales&nbsp;to follow June’s trend of Y/Y improvement with an 18% Y/Y increase in July, as COVID lockdown restrictions continue to ease and the government’s incentives for gasoline powered vehicles kick in. NEV vehicle growth is expected to top 100% Y/Y as well.</li>
<li>MTRN commissions commercial plant.&nbsp;Materion and Kairos Power have&nbsp;jointly commissioned a Molten Salt Purification Plant (MSPP)&nbsp;for the production of beryllium fluoride and lithium fluoride for use as heat transfer fluid for the Kairos’ next generation Fluoride Salt-Cooled High-Temperature Reactor (KP-FHR) nuclear reactors.</li>
</ul>
<h2>WTR-CMI WEEKLY PERFORMANCE</h2>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/290/054/original/image_444686316221659573234657.png?1659573237" class="editor-image img-responsive" data-smartkarma-image-id="290054"></figure>
<h2>Ag-Tech and Bio-Ag</h2>
<p>Fertilizer availability (and price) remains a concern heading into 2023.&nbsp;Although fertilizer prices have come off the recent highs,&nbsp;they remain at multi-year high levels heading into the 2023 season. And it doesn’t look like prices will get much lower prior to the time farmers may want to think about locking in at least some supply at prevailing prices. Concerns remain regarding European production, particularly for nitrogen fertilizers (ammonia and urea) due to reductions in Russian-supplied natural gas and the resulting impact on both volume of fertilizer production and the cost of fertilizers in Europe. Adding further concerns is the possibility that China, which is a large producer and exporter of fertilizers, may reduce its exports due to high energy costs and increased domestic demand. Therefore, while US farmers may continue to struggle to secure sufficient supply of chemical fertilizers at acceptable prices next year yet again, the situation may also provide opportunities for American-based companies, such as CF Industries (NYSE: CF), to increase their market share and maintain elevated prices that should contribute to stronger margins. It may also create an opportunity for bio-based fertilizer companies to expand their market share.</p>
<h2>Automotive &amp; Transportation</h2>
<p>High natural gas prices and uncertain availability to affect German production.&nbsp;As Russia continues to play games with natural gas supplies to Europe, the region’s governments are asking their industries to work to reduce the use of natural gas for the time being.&nbsp;The German automotive industry is not an exception, and while steps to reduce gas use have been or are being take, the industry warns that they are temporary and further reductions would require easing of emission regulations and even then, may affect output. This may suggest continuing struggles for the European automotive market to regain its stride after two years of downward volatility. Meanwhile, commercial vehicle registrations in Europe&nbsp;continued to decline, posting a 22.5% drop Y/Y in June, with first half of the year registrations down 20.3% Y/Y.</p>
<p>Toyota struggles with production in Japan.&nbsp;The company had to&nbsp;suspend night shift production&nbsp;at one of its plants in Japan on re-emerging COVID concerns and continues to see domestic production decline as a result of supply chain disruptions and COVID protocols. The company has been able to&nbsp;offset reduced domestic production with higher output from its global network outside Japan, with foreign plant output growing 5.6% Y/Y through June, helping to offset an 18% plunge in Japanese plants’ output. Still, for the first six months of 2022, Toyota saw its total global output decline almost 4% Y/Y.</p>
<p>With car builds still down in most geographies Y/Y and likely to finish 2022 below 2021 levels, companies in our index with significant exposure to the automotive and transportation markets may continue to struggle with top-line growth despite higher prices, as sluggish volumes and negative FX headwind combined with still elevated raw material costs offset internal cost savings efforts and pricing initiatives leading to top-line and margin performance that may disappoint versus current forecasts. We therefore remain cautious on PPG and AXTA and, to a lesser extent, on HXL, AVNT, and FUL.</p>
<h2>Rating and Price Target Changes</h2>
<p>ALB –&nbsp;RBC raised its price target (PT) to $331 from $324 and reiterated its Outperform rating.</p>
<p>ASH –&nbsp;UBS raised its PT to $131 from $127 and reiterated its Buy rating; Wells Fargo also raised its PT to $110 from $107 and maintained its Equal Weight rating; BMO likewise raised its PT to $135 from $129 and reiterated its Outperform rating.</p>
<p>AVNT –&nbsp;Baird lowered its PT to $56 from $63 and reiterated its Outperform rating; Stifel also lowered its PT to $70 from $76 and reiterated its Buy recommendation; Morgan Stanley lowered its PT to $50 from $63 and maintained its Equal Weight recommendation.</p>
<p>AXTA –&nbsp;KeyBank raised its PT to $31 from $30 and reiterated its Overweight rating; JP Morgan lowered its PT to $32 from $35, while reiterating its Overweight rating; Wells Fargo raised its PT to $26 from $25 and maintained its Equal Weight rating; Baird lowered its PT to $53 from $38 and reiterated its Outperform rating.</p>
<p>CTVA –&nbsp;Mizuho Securities raised its PT to $68 from $67 and reiterated its Buy recommendation.</p>
<p>ECL –&nbsp;Deutsche Bank lowered its PT to $180 from $195 and reiterated its Buy rating; BMO lowered its PT to $172 from $181 and maintained its Market Perform rating; Mizuho Securities lowered its PT to $178 from $183 and maintained its Neutral rating; Baird lowered its PT to $171 from $193 and reiterated its Outperform rating; UBS lowered its PT to $198 from $205 and reiterated its Buy recommendation.</p>
<p>EMN –&nbsp;UBS lowered its PT to $118 from $121 and reiterated its Buy recommendation.</p>
<p>FMC –&nbsp;RBC lowered its PT to $139 from $152 and reiterated its Outperform rating; Mizuho Securities lowered its PT to $149 from $155 and reiterated its Buy recommendation.</p>
<p>HXL –&nbsp;Vertical Research raised its PT to $60 from $58 and reiterated its Buy rating; Morgan Stanley raised its PT to $59 from $57 and reiterated its Underweight recommendation.</p>
<p>PPG –&nbsp;Deutsche Bank lowered its PT to $150 from $15 and reiterated its Buy rating; Wells Fargo raised its PT to $135 from $126 and maintained its Equal Weight rating; Mizuho Securities raised its PT to $163 from $162 and reiterated its Buy rating.</p>
<p>RPM –&nbsp;UBS raised its PT to $99 from $96 and reiterated its Buy rating; RBC raised its PT to $89 from $86 and maintained its Sector Perform rating.</p>
<p>SHW –&nbsp;KeyBank lowered its PT to $290 from $335 and reiterated its Overweight rating; Deutsche Bank lowered its PT to $275 from $315 and reiterated its Buy rating; BMO lowered its PT to $251 from $274 and maintained its Market Perform rating; Wells Fargo lowered its PT to $250 from $274 and maintained its Equal Weight rating; JP Morgan lowered its PT to $275 from $300 and reiterated its Overweight rating; Morgan Stanley lowered its PT to $300 from $330 and reiterated its Overweight rating; Credit Suisse lowered its PT to $225 from $245 and reiterated its Underperform rating; UBS lowered its PT to $257 from $265 and maintained its Neutral rating; Vertical Research raised its PT to $252 from $241 and maintained its Hold rating; Berenberg Bank lowered its PT to $250 from $285 and maintained its Hold rating; RBC lowered its PT to 300 from $312 and reiterated its Outperform rating.</p>
<h2>Recent WTR Publications and Upcoming Events</h2>
<h3>Upcoming</h3>
<p>Fireside Chat with Management of Westwater Resources, Inc. (NYSE: WWR) – August 4 at 11:00 am EDT</p>
<h3>Recent Publications</h3>
<p>Management Series Report – Marrone Bio Innovations CEO Kevin Helash</p>
<p>Management Series Report – Westwater Resources Executive Chairman Terence Cryan and CAO Steven Cates</p>
<p>Initiation of Coverage – Westwater Resources, Inc.</p>
<h3>DISCLOSURES</h3>
<div></div>
<p>Water Tower Research (“WTR”) is a professional publisher of investment research reports on public companies and, to a lesser extent, private firms (“the Companies”). WTR provides investor-focused content and digital distribution strategies designed to help companies communicate with investors.<br><br>WTR is not a registered investment adviser or a broker/dealer nor does WTR provide investment banking services. WTR operates as an exempt investment adviser under the so called “publishers’ exemption” from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940. WTR does not provide investment ratings / recommendations or price targets on the companies it reports on. Readers are advised that the research reports are published and provided solely for informational purposes and should not be construed as an offer to sell or the solicitation of an offer to buy securities or the rendering of investment advice. The information provided in this report should not be construed in any manner whatsoever as personalized advice. All users and readers of WTR’s reports are cautioned to consult their own independent financial, tax and legal advisors prior to purchasing or selling securities.<br><br>Dmitry Silversteyn, who is the writer of this report, covers the Chemicals &amp; Materials Technology and BioEconomy sectors for WTR. Mr. Silversteyn and members of his household have no personal or business-related relationship to the subject company other than providing digital content and any ancillary services WTR may offer.<br><br>Unless otherwise indicated, WTR intends to provide continuing coverage of the covered companies. WTR will notify its readers through website postings or other appropriate means if WTR determines to terminate coverage of any of the companies covered.<br><br>In certain instances, including this report, WTR will write research covering non-clients. Readers should assume that WTR may seek to turn these non-paying companies into paying clients. Likewise, WTR may seek to transform these non-clients into paying clients of it or of its affiliate, which provides services such as presenting at sponsored investor conferences, distributing press releases, advising on investor relations and broader corporate communications and public relations strategies as well as performing certain other related services (“Ancillary Services”). The companies that WTR covers in our research are not required to purchase or use Ancillary Services of WTR or an affiliate might offer to clients.<br><br>The manner of WTR’s potential research compensation and Ancillary Services to covered companies raise actual and perceived conflicts of interest. WTR is committed to manage those conflicts to protect its reputation and the objectivity of employees/analysts by adhering to strictly written compliance guidelines.<br><br>The views and analyses included in our research reports are based on current public information that we consider to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness, timeliness, or correctness. Neither we nor our analysts, directors, officers, employees, representatives, independent contractors or agents shall be liable for any omissions, errors or inaccuracies, regardless of cause, foreseeability or the lack of timeliness of, or any delay or interruptions in the transmission of our reports to content users. This lack of liability extends to direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, losses, lost income, lost profit or opportunity costs.<br><br>All investment information contained herein should be independently verified by the reader or user of this report. For additional information, all readers of this report are encouraged to visit WTR’s website www.watertowerresearch.com.</p>

KEY HIGHLIGHTS


WTR-CMI last week.&nbsp;In what was another positive week for the stock market, both the Russell 2000 and S&amp;P 500 appreciated 4.3% versus week-ago levels, while our WTR-CMI index of 30 chemicals and materials technology stocks outperformed the broader market with a 4.9% return. Lithium stocks once again led our index higher, as PLL, LAC, and ALB benefited from improved investor sentiment on lithium demand and, more importantly, pricing by appreciating 21.1%, 12.3% and 10.3%, respectively. LTHM, while not quite keeping up the pace with an 8.9% improvement,&nbsp;signed a long-term lithium hydroxide supply agreement with GM, which also signed a&nbsp;long-term supply deal with South Korean LG Chem for battery cathodes. At the other end of the performance spectrum, SHW disappointed investors with its 2H22 guidance and saw its stock decline 6.6% for the week, with ASH’s 4.1% decline following an earnings beat and raise bounce the prior week and AXTA posting a 3.3% decline as its 2Q22 earrings and guidance left investors unimpressed, while the&nbsp;CEO transition, which the company announced at the same time, may also have contributed to shareholder unease.
Ford touts sufficient materials for EV push.&nbsp;Like many auto OEMs, Ford is not leaving the fate of its EV transition in the hands of Tier-I suppliers and instead is signing supply agreements directly with critical materials suppliers. The company recently&nbsp;announced sufficient lithium and nickel supply contracts&nbsp;to support its projected EV production into 2026.
China’s July new car sales continue to rebound.&nbsp;China Automobile Dealers Association expects the country’s new car sales&nbsp;to follow June’s trend of Y/Y improvement with an 18% Y/Y increase in July, as COVID lockdown restrictions continue to ease and the government’s incentives for gasoline powered vehicles kick in. NEV vehicle growth is expected to top 100% Y/Y as well.
MTRN commissions commercial plant.&nbsp;Materion and Kairos Power have&nbsp;jointly commissioned a Molten Salt Purification Plant (MSPP)&nbsp;for the production of beryllium fluoride and lithium fluoride for use as heat transfer fluid for the Kairos’ next generation Fluoride Salt-Cooled High-Temperature Reactor (KP-FHR) nuclear reactors.

WTR-CMI WEEKLY PERFORMANCE

Ag-Tech and Bio-Ag
Fertilizer availability (and price) remains a concern heading into 2023.&nbsp;Although fertilizer prices have come off the recent highs,&nbsp;they remain at multi-year high levels heading into the 2023 season. And it doesn’t look like prices will get much lower prior to the time farmers may want to think about locking in at least some supply at prevailing prices. Concerns remain regarding European production, particularly for nitrogen fertilizers (ammonia and urea) due to reductions in Russian-supplied natural gas and the resulting impact on both volume of fertilizer production and the cost of fertilizers in Europe. Adding further concerns is the possibility that China, which is a large producer and exporter of fertilizers, may reduce its exports due to high energy costs and increased domestic demand. Therefore, while US farmers may continue to struggle to secure sufficient supply of chemical fertilizers at acceptable prices next year yet again, the situation may also provide opportunities for American-based companies, such as CF Industries (NYSE: CF), to increase their market share and maintain elevated prices that should contribute to stronger margins. It may also create an opportunity for bio-based fertilizer companies to expand their market share.
Automotive &amp; Transportation
High natural gas prices and uncertain availability to affect German production.&nbsp;As Russia continues to play games with natural gas supplies to Europe, the region’s governments are asking their industries to work to reduce the use of natural gas for the time being.&nbsp;The German automotive industry is not an exception, and while steps to reduce gas use have been or are being take, the industry warns that they are temporary and further reductions would require easing of emission regulations and even then, may affect output. This may suggest continuing struggles for the European automotive market to regain its stride after two years of downward volatility. Meanwhile, commercial vehicle registrations in Europe&nbsp;continued to decline, posting a 22.5% drop Y/Y in June, with first half of the year registrations down 20.3% Y/Y.
Toyota struggles with production in Japan.&nbsp;The company had to&nbsp;suspend night shift production&nbsp;at one of its plants in Japan on re-emerging COVID concerns and continues to see domestic production decline as a result of supply chain disruptions and COVID protocols. The company has been able to&nbsp;offset reduced domestic production with higher output from its global network outside Japan, with foreign plant output growing 5.6% Y/Y through June, helping to offset an 18% plunge in Japanese plants’ output. Still, for the first six months of 2022, Toyota saw its total global output decline almost 4% Y/Y.
With car builds still down in most geographies Y/Y and likely to finish 2022 below 2021 levels, companies in our index with significant exposure to the automotive and transportation markets may continue to struggle with top-line growth despite higher prices, as sluggish volumes and negative FX headwind combined with still elevated raw material costs offset internal cost savings efforts and pricing initiatives leading to top-line and margin performance that may disappoint versus current forecasts. We therefore remain cautious on PPG and AXTA and, to a lesser extent, on HXL, AVNT, and FUL.
Rating and Price Target Changes
ALB –&nbsp;RBC raised its price target (PT) to $331 from $324 and reiterated its Outperform rating.
ASH –&nbsp;UBS raised its PT to $131 from $127 and reiterated its Buy rating; Wells Fargo also raised its PT to $110 from $107 and maintained its Equal Weight rating; BMO likewise raised its PT to $135 from $129 and reiterated its Outperform rating.
AVNT –&nbsp;Baird lowered its PT to $56 from $63 and reiterated its Outperform rating; Stifel also lowered its PT to $70 from $76 and reiterated its Buy recommendation; Morgan Stanley lowered its PT to $50 from $63 and maintained its Equal Weight recommendation.
AXTA –&nbsp;KeyBank raised its PT to $31 from $30 and reiterated its Overweight rating; JP Morgan lowered its PT to $32 from $35, while reiterating its Overweight rating; Wells Fargo raised its PT to $26 from $25 and maintained its Equal Weight rating; Baird lowered its PT to $53 from $38 and reiterated its Outperform rating.
CTVA –&nbsp;Mizuho Securities raised its PT to $68 from $67 and reiterated its Buy recommendation.
ECL –&nbsp;Deutsche Bank lowered its PT to $180 from $195 and reiterated its Buy rating; BMO lowered its PT to $172 from $181 and maintained its Market Perform rating; Mizuho Securities lowered its PT to $178 from $183 and maintained its Neutral rating; Baird lowered its PT to $171 from $193 and reiterated its Outperform rating; UBS lowered its PT to $198 from $205 and reiterated its Buy recommendation.
EMN –&nbsp;UBS lowered its PT to $118 from $121 and reiterated its Buy recommendation.
FMC –&nbsp;RBC lowered its PT to $139 from $152 and reiterated its Outperform rating; Mizuho Securities lowered its PT to $149 from $155 and reiterated its Buy recommendation.
HXL –&nbsp;Vertical Research raised its PT to $60 from $58 and reiterated its Buy rating; Morgan Stanley raised its PT to $59 from $57 and reiterated its Underweight recommendation.
PPG –&nbsp;Deutsche Bank lowered its PT to $150 from $15 and reiterated its Buy rating; Wells Fargo raised its PT to $135 from $126 and maintained its Equal Weight rating; Mizuho Securities raised its PT to $163 from $162 and reiterated its Buy rating.
RPM –&nbsp;UBS raised its PT to $99 from $96 and reiterated its Buy rating; RBC raised its PT to $89 from $86 and maintained its Sector Perform rating.
SHW –&nbsp;KeyBank lowered its PT to $290 from $335 and reiterated its Overweight rating; Deutsche Bank lowered its PT to $275 from $315 and reiterated its Buy rating; BMO lowered its PT to $251 from $274 and maintained its Market Perform rating; Wells Fargo lowered its PT to $250 from $274 and maintained its Equal Weight rating; JP Morgan lowered its PT to $275 from $300 and reiterated its Overweight rating; Morgan Stanley lowered its PT to $300 from $330 and reiterated its Overweight rating; Credit Suisse lowered its PT to $225 from $245 and reiterated its Underperform rating; UBS lowered its PT to $257 from $265 and maintained its Neutral rating; Vertical Research raised its PT to $252 from $241 and maintained its Hold rating; Berenberg Bank lowered its PT to $250 from $285 and maintained its Hold rating; RBC lowered its PT to 300 from $312 and reiterated its Outperform rating.
Recent WTR Publications and Upcoming Events
Upcoming
Fireside Chat with Management of Westwater Resources, Inc. (NYSE: WWR) – August 4 at 11:00 am EDT
Recent Publications
Management Series Report – Marrone Bio Innovations CEO Kevin Helash
Management Series Report – Westwater Resources Executive Chairman Terence Cryan and CAO Steven Cates
Initiation of Coverage – Westwater Resources, Inc.
DISCLOSURES

Water Tower Research (“WTR”) is a professional publisher of investment research reports on public companies and, to a lesser extent, private firms (“the Companies”). WTR provides investor-focused content and digital distribution strategies designed to help companies communicate with investors.  WTR is not a registered investment adviser or a broker/dealer nor does WTR provide investment banking services. WTR operates as an exempt investment adviser under the so called “publishers’ exemption” from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940. WTR does not provide investment ratings / recommendations or price targets on the companies it reports on. Readers are advised that the research reports are published and provided solely for informational purposes and should not be construed as an offer to sell or the solicitation of an offer to buy securities or the rendering of investment advice. The information provided in this report should not be construed in any manner whatsoever as personalized advice. All users and readers of WTR’s reports are cautioned to consult their own independent financial, tax and legal advisors prior to purchasing or selling securities.  Dmitry Silversteyn, who is the writer of this report, covers the Chemicals &amp; Materials Technology and BioEconomy sectors for WTR. Mr. Silversteyn and members of his household have no personal or business-related relationship to the subject company other than providing digital content and any ancillary services WTR may offer.  Unless otherwise indicated, WTR intends to provide continuing coverage of the covered companies. WTR will notify its readers through website postings or other appropriate means if WTR determines to terminate coverage of any of the companies covered.  In certain instances, including this report, WTR will write research covering non-clients. Readers should assume that WTR may seek to turn these non-paying companies into paying clients. Likewise, WTR may seek to transform these non-clients into paying clients of it or of its affiliate, which provides services such as presenting at sponsored investor conferences, distributing press releases, advising on investor relations and broader corporate communications and public relations strategies as well as performing certain other related services (“Ancillary Services”). The companies that WTR covers in our research are not required to purchase or use Ancillary Services of WTR or an affiliate might offer to clients.  The manner of WTR’s potential research compensation and Ancillary Services to covered companies raise actual and perceived conflicts of interest. WTR is committed to manage those conflicts to protect its reputation and the objectivity of employees/analysts by adhering to strictly written compliance guidelines.  The views and analyses included in our research reports are based on current public information that we consider to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness, timeliness, or correctness. Neither we nor our analysts, directors, officers, employees, representatives, independent contractors or agents shall be liable for any omissions, errors or inaccuracies, regardless of cause, foreseeability or the lack of timeliness of, or any delay or interruptions in the transmission of our reports to content users. This lack of liability extends to direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, losses, lost income, lost profit or opportunity costs.  All investment information contained herein should be independently verified by the reader or user of this report. For additional information, all readers of this report are encouraged to visit WTR’s website www.watertowerresearch.com.

Mat-Chem Notes for the Week Ended July 31, 2022

<h2>KEY HIGHLIGHTS</h2>
<div></div>
<ul>
<li>WTR-CMI last week.&nbsp;The market continued to correct, with both the S&amp;P 500 and Russell 2000 declining 2.4% and 2.5%, respectively. Our WTR-CMI index of 30 chemicals and materials technology stocks didn’t quite keep up the pace, losing 2.6% over the course of last week.</li>
<li>Winners and losers.&nbsp;Possibly driven by the prospects of boardroom actions, AVD led our index last week with a 4.1% gain. Overall, only eight of our 30 stocks saw their value increase last week. The declines were led by PLL, which lost 15.5%, along with other lithium stocks in our index, including ALB, LTHM, and LAC (down 5.6%, 5.9%, and 7.0%, respectively), which are beginning to trade like energy stocks in response to announced increases in Saudi Arabian oil production.</li>
<li>Patent fights and boardroom machinations (cont.).&nbsp;FMC continues its legal battles with unlicensed manufacturers of its leading insecticide active ingredient and announced that the Ningbo Intermediate People’s Court in Zhejiang Province, China,&nbsp;granted the company a pre-suit preliminary injunction&nbsp;restraining Zhejiang Yongtai Technology Co. Ltd. from infringing on the chlorantraniliprole (Rynaxypyr®) patent. Meanwhile, Cruiser Capital Advisors responded to the AVD board’s letter to the shareholders with one of its own, accompanied by a&nbsp;presentation filed with the SEC&nbsp;that advocates its position.</li>
<li>String of auto sales declines continued in April.&nbsp;If April new car registration declines in the US, UK, and France were bad, China’s COVID lockdown policies contributed to an even steeper&nbsp;48% drop in Y/Y registrations&nbsp;to the lowest April level in 10 years. The consequences of the invasion of Ukraine and the sanctions that followed were evident in&nbsp;Russia’s 79% Y/Y plunge&nbsp;in new car registrations last month. Even&nbsp;Germany&nbsp;wasn’t spared, with April registrations down 22% Y/Y.</li>
<li>Not quite ready for primetime?&nbsp;Stellantis CEO Carlos Tavares recently spoke at an industry event and&nbsp;expressed apprehension&nbsp;over the rapid growth of EV production, often driven by political considerations, without addressing the other parts of the EV infrastructure, such as charging, mining, and energy grids, which may give rise to problems of their own, suggesting more thought should be given to the execution of the EV transition.</li>
</ul>
<h2>WTR-CMI WEEKLY PERFORMANCE</h2>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/275/517/original/image_84217254721653010732172.png?1653010735" class="editor-image img-responsive" data-smartkarma-image-id="275517"></figure>
<p>Source: YCharts; May 13 close</p>
<h2>Automotive &amp; Transportation</h2>
<p>Bad April results may not be the last.&nbsp;As major auto producing countries finish reporting their April new car sales results, early indications are that May may not show much of an improvement, even as Y/Y comps get slightly easier. Recently,&nbsp;Toyota announced temporary idling&nbsp;of several lines across its plants in Japan, citing COVID lockdowns and supply chain disruptions. The company lowered its production target for the month by approximately 7%. While some supply chain issues are getting resolved, particularly when it comes to European manufacturers, with wire harness producer&nbsp;Leoni getting back close to pre-war levels, semiconductor chip shortages continue to buffet the industry as well, with&nbsp;another 75,300 vehicles axed&nbsp;from global production estimates by AutoForecast Solutions. Consequently, we remain concerned over the performance of PPG, AXTA, FUL, AVNT, and other companies in our sector with significant exposure to the automotive and transportation industry, as weaker end customer volumes may not be fully offset by higher prices, especially now that the US dollar has rallied to multi-year highs against foreign currencies, adding FX risk to earnings and sales forecasts.</p>
<h2>Lithium &amp; EV Ecosystem</h2>
<p>China’s NEV growth hits a snag in April.&nbsp;While April NEV sales in the country were up 50% Y/Y, they&nbsp;were down more than 38% versus March&nbsp;and were the lowest monthly sales so far this year, even when compared with February, which was affected by Chinese Lunar New Year events. The unwinding of COVID lockdowns may allow the Y/Y growth pace to pick up again in May, but we may have to wait until June for the industry to return to high double-digit or<br>triple-digit Y/Y growth of NEVs, especially as vehicle prices are going up due to rapidly rising battery metal and other raw material costs.</p>
<p>Expanding European EV ecosystem.&nbsp;Privately held Green Lithium, a lithium processing company, has published plans to build the&nbsp;UK’s first lithium refinery&nbsp;in northern England. Construction is expected to begin in2023, with production targeted to start in 2024. Full production capacity of 50,000 mt of battery-grade lithium products is expected to be reached in 2026 and is intended to supply the European EV and battery market. Meanwhile, a year after buying land in Germany for the construction of a battery grade-lithium hydroxide processing plant, AMG Lithium GmbH, a subsidiary of the Dutch Advanced Metallurgical Group (AMG),&nbsp;started construction&nbsp;of its lithium hydroxide plant in Bitterfeld-Wolfen<br>(Saxony-Anhalt), with production expected in the fall of 2023 and initial annual production capacity of 20,000 mt, enough to supply 800,000 electric cars. The plant will be capable of expanding production to 100,000 mt over time, as demand warrants.</p>
<p>Rising costs drive consternation and innovation.&nbsp;We previously highlighted Stellantis CEO Carlos Tavares’ concerns over the hurdles the EV industry must clear in the near to mid-term; a somewhat more optimistic view was provided by a&nbsp;recent report analyzing the EV market&nbsp;published by Transportation &amp; Environment, which suggests we have sufficient critical metals infrastructure to meet the expected demand from the EV market at least through the next two to four years, by which time a slew of new mining, refining, converting, and battery production capacity is expected to be brought online. A more&nbsp;granular look at the various metals&nbsp;that go into EV batteries was provided by Davis Index, which highlighted recent geopolitical issues, including the war in Ukraine, and offered a less optimistic view, more in line with that of Mr. Tavares. Regardless of forecasts and assumptions around EV growth and possible projected raw material shortfalls, one thing is certain now: metal prices have skyrocketed over the last two years, which is driving technology decisions today, and may have implications for the long term. Thus,&nbsp;BMW is working to switch to a newer and cheaper battery cell technology&nbsp;that may allow it to cut its battery costs by 30%, while improving energy density of battery packs by at least low double-digit percent versus batteries currently used by Tesla. With higher lithium prices&nbsp;reducing the premium&nbsp;of nickel-cobalt-manganese, or NCM, batteries versus lithium-iron-phosphate, or LFP batteries, auto manufacturers may begin to reconsider sacrificing the performance of NCM packs in favor of lower priced LFP technology for entry level and bargain priced EVs. Meanwhile, research continues on&nbsp;commercializing sodium-ion batteries&nbsp;as an alternative to current lithium-ion technologies, given the obvious price and availability advantages of sodium versus lithium.</p>
<h2>Ag-Chem and Ag-Tech</h2>
<p>Weather takes center stage as US plantings fall behind schedule.&nbsp;The latest USDA report shows that&nbsp;plantings are off to their worst start in nine years, with only 22% the crop planted, which is 28% below the five-year average for this time of year. The news isn’t much better in soybeans, with plantings at 12% being half that of the five-year average. Not surprising,&nbsp;the USDA recently lowered its yield projections for corn, although the soybean outlook still remains robust, with higher planted acres still expected. Historically, it’s been difficult, if not impossible, to catch up with plantings after such a slow start, but even&nbsp;late plantings have a chance to produce higher-than-expected yields. However, record yields still used by the USDA in its projections for corn may not be achievable, suggesting another cut in USDA expectations may be coming. Globally, despite ongoing war,&nbsp;Ukrainian farmers are doing what they can&nbsp;to get their crop into the ground to help avert food shortages at home and have an opportunity to export to countries dependent on Ukraine for crops. Meanwhile, the country awaits the opportunity to export the wheat from its last harvest, which is currently being blocked by Russian blockades of Ukrainian ports.</p>
<h2>Recent WTR Publications</h2>
<p>Bio-ag market update and Marrone Bio Innovations-Bioceres Merger</p>
<p>Marrone Bio Innovations 1Q22 Results</p>
<p>Fireside Chat with Marrone Bio Innovations CEO – Kevin Helash</p>
<h2>Rating and Price Target Changes</h2>
<p>ALB –&nbsp;KeyBank raised its price target (PT) to $125 from $198 and reiterated its Underweight recommendation; JP Morgan raised its PT to $235 from $200 and maintained its Neutral rating; Morgan Stanley raised its PT to $135 from $80 and reiterated its Underweight rating; RBC raised its PT to $300 from $276 and reiterated its Outperform rating; Wells Fargo upgraded the stock to Overweight from Equal Weight and raised its PT to $285 from $215.</p>
<p>CTVA –&nbsp;Deutsche Bank raised its PT to $64 from $56 and reiterated its Buy recommendation.</p>
<p>EAF –&nbsp;RBC lowered its PT to $10 from $12 but reiterated its Buy recommendation.</p>
<p>NGVT –&nbsp;Wells Fargo raised its PT to $74 from $70 and maintained its Equal Weight recommendation.</p>
<p>VVV –&nbsp;CFRA lowered its PT to $34 from $40 and reiterated its Buy rating; Citigroup also lowered its PT to $35 from $40 and reiterated its Buy recommendation; JP Morgan upgraded the stock to Overweight from Neutral and established a $36 PT.</p>
<h2>DISCLOSURES</h2>
<div></div>
<p>Water Tower Research (“WTR”) is a professional publisher of investment research reports on public companies and, to a lesser extent, private firms (“the Companies”). WTR provides investor-focused content and digital distribution strategies designed to help companies communicate with investors.<br><br>WTR is not a registered investment adviser or a broker/dealer nor does WTR provide investment banking services. WTR operates as an exempt investment adviser under the so called “publishers’ exemption” from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940. WTR does not provide investment ratings / recommendations or price targets on the companies it reports on. Readers are advised that the research reports are published and provided solely for informational purposes and should not be construed as an offer to sell or the solicitation of an offer to buy securities or the rendering of investment advice. The information provided in this report should not be construed in any manner whatsoever as personalized advice. All users and readers of WTR’s reports are cautioned to consult their own independent financial, tax and legal advisors prior to purchasing or selling securities.<br><br>Dmitry Silversteyn, who is the writer of this report, covers the Chemicals &amp; Materials Technology and BioEconomy sectors for WTR. Mr. Silversteyn and members of his household have no personal or business-related relationship to the subject company other than providing digital content and any ancillary services WTR may offer.<br><br>Unless otherwise indicated, WTR intends to provide continuing coverage of the covered companies. WTR will notify its readers through website postings or other appropriate means if WTR determines to terminate coverage of any of the companies covered.<br><br>In certain instances, including this report, WTR will write research covering non-clients. Readers should assume that WTR may seek to turn these non-paying companies into paying clients. Likewise, WTR may seek to transform these non-clients into paying clients of it or of its affiliate, which provides services such as presenting at sponsored investor conferences, distributing press releases, advising on investor relations and broader corporate communications and public relations strategies as well as performing certain other related services (“Ancillary Services”). The companies that WTR covers in our research are not required to purchase or use Ancillary Services of WTR or an affiliate might offer to clients.<br><br>The manner of WTR’s potential research compensation and Ancillary Services to covered companies raise actual and perceived conflicts of interest. WTR is committed to manage those conflicts to protect its reputation and the objectivity of employees/analysts by adhering to strictly written compliance guidelines.<br><br>The views and analyses included in our research reports are based on current public information that we consider to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness, timeliness, or correctness. Neither we nor our analysts, directors, officers, employees, representatives, independent contractors or agents shall be liable for any omissions, errors or inaccuracies, regardless of cause, foreseeability or the lack of timeliness of, or any delay or interruptions in the transmission of our reports to content users. This lack of liability extends to direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, losses, lost income, lost profit or opportunity costs.<br><br>All investment information contained herein should be independently verified by the reader or user of this report. For additional information, all readers of this report are encouraged to visit WTR’s website www.watertowerresearch.com.</p>

KEY HIGHLIGHTS


WTR-CMI last week.&nbsp;The market continued to correct, with both the S&amp;P 500 and Russell 2000 declining 2.4% and 2.5%, respectively. Our WTR-CMI index of 30 chemicals and materials technology stocks didn’t quite keep up the pace, losing 2.6% over the course of last week.
Winners and losers.&nbsp;Possibly driven by the prospects of boardroom actions, AVD led our index last week with a 4.1% gain. Overall, only eight of our 30 stocks saw their value increase last week. The declines were led by PLL, which lost 15.5%, along with other lithium stocks in our index, including ALB, LTHM, and LAC (down 5.6%, 5.9%, and 7.0%, respectively), which are beginning to trade like energy stocks in response to announced increases in Saudi Arabian oil production.
Patent fights and boardroom machinations (cont.).&nbsp;FMC continues its legal battles with unlicensed manufacturers of its leading insecticide active ingredient and announced that the Ningbo Intermediate People’s Court in Zhejiang Province, China,&nbsp;granted the company a pre-suit preliminary injunction&nbsp;restraining Zhejiang Yongtai Technology Co. Ltd. from infringing on the chlorantraniliprole (Rynaxypyr®) patent. Meanwhile, Cruiser Capital Advisors responded to the AVD board’s letter to the shareholders with one of its own, accompanied by a&nbsp;presentation filed with the SEC&nbsp;that advocates its position.
String of auto sales declines continued in April.&nbsp;If April new car registration declines in the US, UK, and France were bad, China’s COVID lockdown policies contributed to an even steeper&nbsp;48% drop in Y/Y registrations&nbsp;to the lowest April level in 10 years. The consequences of the invasion of Ukraine and the sanctions that followed were evident in&nbsp;Russia’s 79% Y/Y plunge&nbsp;in new car registrations last month. Even&nbsp;Germany&nbsp;wasn’t spared, with April registrations down 22% Y/Y.
Not quite ready for primetime?&nbsp;Stellantis CEO Carlos Tavares recently spoke at an industry event and&nbsp;expressed apprehension&nbsp;over the rapid growth of EV production, often driven by political considerations, without addressing the other parts of the EV infrastructure, such as charging, mining, and energy grids, which may give rise to problems of their own, suggesting more thought should be given to the execution of the EV transition.

WTR-CMI WEEKLY PERFORMANCE

Source: YCharts; May 13 close
Automotive &amp; Transportation
Bad April results may not be the last.&nbsp;As major auto producing countries finish reporting their April new car sales results, early indications are that May may not show much of an improvement, even as Y/Y comps get slightly easier. Recently,&nbsp;Toyota announced temporary idling&nbsp;of several lines across its plants in Japan, citing COVID lockdowns and supply chain disruptions. The company lowered its production target for the month by approximately 7%. While some supply chain issues are getting resolved, particularly when it comes to European manufacturers, with wire harness producer&nbsp;Leoni getting back close to pre-war levels, semiconductor chip shortages continue to buffet the industry as well, with&nbsp;another 75,300 vehicles axed&nbsp;from global production estimates by AutoForecast Solutions. Consequently, we remain concerned over the performance of PPG, AXTA, FUL, AVNT, and other companies in our sector with significant exposure to the automotive and transportation industry, as weaker end customer volumes may not be fully offset by higher prices, especially now that the US dollar has rallied to multi-year highs against foreign currencies, adding FX risk to earnings and sales forecasts.
Lithium &amp; EV Ecosystem
China’s NEV growth hits a snag in April.&nbsp;While April NEV sales in the country were up 50% Y/Y, they&nbsp;were down more than 38% versus March&nbsp;and were the lowest monthly sales so far this year, even when compared with February, which was affected by Chinese Lunar New Year events. The unwinding of COVID lockdowns may allow the Y/Y growth pace to pick up again in May, but we may have to wait until June for the industry to return to high double-digit or triple-digit Y/Y growth of NEVs, especially as vehicle prices are going up due to rapidly rising battery metal and other raw material costs.
Expanding European EV ecosystem.&nbsp;Privately held Green Lithium, a lithium processing company, has published plans to build the&nbsp;UK’s first lithium refinery&nbsp;in northern England. Construction is expected to begin in2023, with production targeted to start in 2024. Full production capacity of 50,000 mt of battery-grade lithium products is expected to be reached in 2026 and is intended to supply the European EV and battery market. Meanwhile, a year after buying land in Germany for the construction of a battery grade-lithium hydroxide processing plant, AMG Lithium GmbH, a subsidiary of the Dutch Advanced Metallurgical Group (AMG),&nbsp;started construction&nbsp;of its lithium hydroxide plant in Bitterfeld-Wolfen (Saxony-Anhalt), with production expected in the fall of 2023 and initial annual production capacity of 20,000 mt, enough to supply 800,000 electric cars. The plant will be capable of expanding production to 100,000 mt over time, as demand warrants.
Rising costs drive consternation and innovation.&nbsp;We previously highlighted Stellantis CEO Carlos Tavares’ concerns over the hurdles the EV industry must clear in the near to mid-term; a somewhat more optimistic view was provided by a&nbsp;recent report analyzing the EV market&nbsp;published by Transportation &amp; Environment, which suggests we have sufficient critical metals infrastructure to meet the expected demand from the EV market at least through the next two to four years, by which time a slew of new mining, refining, converting, and battery production capacity is expected to be brought online. A more&nbsp;granular look at the various metals&nbsp;that go into EV batteries was provided by Davis Index, which highlighted recent geopolitical issues, including the war in Ukraine, and offered a less optimistic view, more in line with that of Mr. Tavares. Regardless of forecasts and assumptions around EV growth and possible projected raw material shortfalls, one thing is certain now: metal prices have skyrocketed over the last two years, which is driving technology decisions today, and may have implications for the long term. Thus,&nbsp;BMW is working to switch to a newer and cheaper battery cell technology&nbsp;that may allow it to cut its battery costs by 30%, while improving energy density of battery packs by at least low double-digit percent versus batteries currently used by Tesla. With higher lithium prices&nbsp;reducing the premium&nbsp;of nickel-cobalt-manganese, or NCM, batteries versus lithium-iron-phosphate, or LFP batteries, auto manufacturers may begin to reconsider sacrificing the performance of NCM packs in favor of lower priced LFP technology for entry level and bargain priced EVs. Meanwhile, research continues on&nbsp;commercializing sodium-ion batteries&nbsp;as an alternative to current lithium-ion technologies, given the obvious price and availability advantages of sodium versus lithium.
Ag-Chem and Ag-Tech
Weather takes center stage as US plantings fall behind schedule.&nbsp;The latest USDA report shows that&nbsp;plantings are off to their worst start in nine years, with only 22% the crop planted, which is 28% below the five-year average for this time of year. The news isn’t much better in soybeans, with plantings at 12% being half that of the five-year average. Not surprising,&nbsp;the USDA recently lowered its yield projections for corn, although the soybean outlook still remains robust, with higher planted acres still expected. Historically, it’s been difficult, if not impossible, to catch up with plantings after such a slow start, but even&nbsp;late plantings have a chance to produce higher-than-expected yields. However, record yields still used by the USDA in its projections for corn may not be achievable, suggesting another cut in USDA expectations may be coming. Globally, despite ongoing war,&nbsp;Ukrainian farmers are doing what they can&nbsp;to get their crop into the ground to help avert food shortages at home and have an opportunity to export to countries dependent on Ukraine for crops. Meanwhile, the country awaits the opportunity to export the wheat from its last harvest, which is currently being blocked by Russian blockades of Ukrainian ports.
Recent WTR Publications
Bio-ag market update and Marrone Bio Innovations-Bioceres Merger
Marrone Bio Innovations 1Q22 Results
Fireside Chat with Marrone Bio Innovations CEO – Kevin Helash
Rating and Price Target Changes
ALB –&nbsp;KeyBank raised its price target (PT) to $125 from $198 and reiterated its Underweight recommendation; JP Morgan raised its PT to $235 from $200 and maintained its Neutral rating; Morgan Stanley raised its PT to $135 from $80 and reiterated its Underweight rating; RBC raised its PT to $300 from $276 and reiterated its Outperform rating; Wells Fargo upgraded the stock to Overweight from Equal Weight and raised its PT to $285 from $215.
CTVA –&nbsp;Deutsche Bank raised its PT to $64 from $56 and reiterated its Buy recommendation.
EAF –&nbsp;RBC lowered its PT to $10 from $12 but reiterated its Buy recommendation.
NGVT –&nbsp;Wells Fargo raised its PT to $74 from $70 and maintained its Equal Weight recommendation.
VVV –&nbsp;CFRA lowered its PT to $34 from $40 and reiterated its Buy rating; Citigroup also lowered its PT to $35 from $40 and reiterated its Buy recommendation; JP Morgan upgraded the stock to Overweight from Neutral and established a $36 PT.
DISCLOSURES

Water Tower Research (“WTR”) is a professional publisher of investment research reports on public companies and, to a lesser extent, private firms (“the Companies”). WTR provides investor-focused content and digital distribution strategies designed to help companies communicate with investors.  WTR is not a registered investment adviser or a broker/dealer nor does WTR provide investment banking services. WTR operates as an exempt investment adviser under the so called “publishers’ exemption” from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940. WTR does not provide investment ratings / recommendations or price targets on the companies it reports on. Readers are advised that the research reports are published and provided solely for informational purposes and should not be construed as an offer to sell or the solicitation of an offer to buy securities or the rendering of investment advice. The information provided in this report should not be construed in any manner whatsoever as personalized advice. All users and readers of WTR’s reports are cautioned to consult their own independent financial, tax and legal advisors prior to purchasing or selling securities.  Dmitry Silversteyn, who is the writer of this report, covers the Chemicals &amp; Materials Technology and BioEconomy sectors for WTR. Mr. Silversteyn and members of his household have no personal or business-related relationship to the subject company other than providing digital content and any ancillary services WTR may offer.  Unless otherwise indicated, WTR intends to provide continuing coverage of the covered companies. WTR will notify its readers through website postings or other appropriate means if WTR determines to terminate coverage of any of the companies covered.  In certain instances, including this report, WTR will write research covering non-clients. Readers should assume that WTR may seek to turn these non-paying companies into paying clients. Likewise, WTR may seek to transform these non-clients into paying clients of it or of its affiliate, which provides services such as presenting at sponsored investor conferences, distributing press releases, advising on investor relations and broader corporate communications and public relations strategies as well as performing certain other related services (“Ancillary Services”). The companies that WTR covers in our research are not required to purchase or use Ancillary Services of WTR or an affiliate might offer to clients.  The manner of WTR’s potential research compensation and Ancillary Services to covered companies raise actual and perceived conflicts of interest. WTR is committed to manage those conflicts to protect its reputation and the objectivity of employees/analysts by adhering to strictly written compliance guidelines.  The views and analyses included in our research reports are based on current public information that we consider to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness, timeliness, or correctness. Neither we nor our analysts, directors, officers, employees, representatives, independent contractors or agents shall be liable for any omissions, errors or inaccuracies, regardless of cause, foreseeability or the lack of timeliness of, or any delay or interruptions in the transmission of our reports to content users. This lack of liability extends to direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, losses, lost income, lost profit or opportunity costs.  All investment information contained herein should be independently verified by the reader or user of this report. For additional information, all readers of this report are encouraged to visit WTR’s website www.watertowerresearch.com.

Mat-Chem Notes for the Week Ended May 15, 2022

<h2>KEY HIGHLIGHTS</h2>
<ul>
<li>WTR-CMI last week. Despite a (17.5%) drop in the ALB stock price, our WTR-CMI index of 30 chemicals and materials technology companies appreciated 0.5% last week. That’s well ahead of the (1.0%) dip in the Russell 2000 and another (1.6%) in the S&amp;P 500 (1.6%). YTD, our index is also outperforming the broader markets by losing less (7.4%) compared with (8.8%) by the S&amp;P 500 and (10.5%) by the Russell 2000. Nevertheless, there is no escaping the conclusion that the market, and our sector, may be in a correction phase, with weaker performance likely to continue now that geopolitical concerns are added to economic and fiscal considerations.</li>
<li>Winners and losers. Dec-Q results and 2022 management guidance continue to serve as catalysts for stock price movement as the earnings season winds down. Better outlook by IOSP drove the stock up 8.9% last week, leading the way in our index. MTRN also provided above-expectation guidance and appreciated 5.5% as a result, while ECVT and KWR benefited from investor expectations of solid results in the days ahead. Despite beating expectations and providing stronger lithium price and revenue guidance for 2022, the ALB stock dropped ~20% before recovering slightly, as higher capex and negative FCF outlook for the next 12-18 months surprised investors. Lower-than-anticipated guidance also dragged ECL down (3.1%), while PLL and other lithium stocks—LAC and LTHM—followed ALB’s lead down.</li>
<li>Demand trigger. Market research firm MarketsandMarkets published a report forecasting the&nbsp;global antimicrobial coatings market would grow&nbsp;at a 10.5% CAGR over the next five years, driven by COVID-19-related concerns in several industrial applications. This would be a positive for major coating manufacturers such as SHW and PPG, as well as specialty coatings producers such as RPM.</li>
<li>France getting in on domestic lithium bandwagon. In a recent interview,&nbsp;French environment minister noted&nbsp;the need for the country to develop its own lithium supplies to avoid overreliance on China (or other European Union nations, for that matter). While exploratory work is in the early stages, the French government’s willingness to embrace metal mining is a stark contrast to Serbia’s recent decision to buckle to anti-mining protests and revoke Rio Tinto’s mining license.</li>
</ul>
<p>WTR-CMI WEEKLY PERFORMANCE</p>
<p>Source: Y-Charts; Prices as of February 18 close</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/259/519/original/image_942282550351645752292595.png?1645752295" class="editor-image img-responsive" data-smartkarma-image-id="259519"></figure>
<h2>Lithium &amp; EV Ecosystem Developments</h2>
<p>Going to California. Last week, we mentioned the need for significant expansion of capacity to recycle end-of-life lithium-ion batteries in the U.S. as well as globally, and highlighted some of the partnerships being formed across the lithium supply-chain industry to accelerate the development of economically viable battery recycling and lithium/metal reclamation processes and operations. On cue, Ford Motor (NYSE: F) and Volvo Cars, a unit of Chinese Geely Automobile (OTC: GELYF), announced that they are&nbsp;joining Redwood Materials, a recycling startup&nbsp;to develop processes to collect end-of-life batteries from electric and hybrid vehicles and recover the materials for re-use in new batteries. The venture will start in California—not surprising, given the state leads the nation in BEV and PHEV vehicle sales, and existing NEV car park.</p>
<h2>Automotive &amp; Transportation</h2>
<p>January results suggest 1H22 will be a tough period for autos and those who supply them.&nbsp;While January&nbsp;sales in China&nbsp;improved 6.7% YoY after the market posted a 2% growth in December 2021,&nbsp;European sales decelerated&nbsp;(6.7%) YoY, continuing the YoY declines in monthly sales seen for most of 2H21. VW expects higher car production to be a 2H22 event, and growth in 2022 will still leave the automotive industry below 2019 levels. So it would seem companies such as AXTA and PPG, which derive 30-60% of their revenues from the transportation market—as well as companies such as FUL, AVNT, RPM, MTRN, HXL and others that count on the growth of the automotive market to drive sales of their higher-margin specialty products—may see results that underwhelm expectations in 1Q22 and, particularly, in 2Q22, which will include the toughest YoY comps. With European Union auto registrations down YoY in January (and we suspect U.S. sales will show a similar YoY decline, when reported) and March comps being significantly tougher, chances of a positive YoY volume 1Q22 appear to have significantly diminished. So it’s a good thing that prices are going up.</p>
<h2>Ag-Chem and Ag-Tech</h2>
<p>Good times for domestic ag looks to continue. Commodity prices were helped by both, strong internal demand and international demand.&nbsp;Exports of U.S. farm and food products&nbsp;totaled $177 billion in 2021, an increase of 18% YoY, and 14.6% higher than the previous record set in in 2014. Chinese purchases were a key driver of export growth, despite all the trade-deficit rhetoric. Furthermore, with LATAM supply expectations reduced by the current drought in parts of Brazil, Argentina and Paraguay,&nbsp;Chinese purchases&nbsp;have not only continued in 2022, but may be ramping up. All that is setting the stage for continuation of the 15-month trend of the Creighton University’s&nbsp;Rural Mainstreet Index (RMI)&nbsp;remaining above growth-neutral, with rural bank CEOs expecting this to continue through the 2021-22 season. That is indeed good news because higher farmer cash incomes in 2021, and expectations for above-normal prices in row crops such as soybean and corn in 2022, will help farmers deal with record high input costs, including fertilizers and crop chemicals such as insecticides and herbicides. In fact, it may not be the price but the availability of key inputs that could be the fly in the ointment when it comes to farm economy this year.&nbsp;Bayer’s announced force majeure&nbsp;in glyphosate is a case in point.</p>
<h2>In Other News</h2>
<p>Ag-bio industry leaders continue to partner with established ag-chem majors. Marrone Bio Solutions (NASDAQ: MBII), an innovative ag-tech company, recently&nbsp;announced the signing of an exclusive distribution agreement&nbsp;with CTVA that gives Corteva exclusive license to distribute MBII’s Kinsidro® Grow product, a novel foliar bionutrient, across European markets. The multi-year agreement applies to row crops such as corn, soybeans, wheat, and cotton, and further expands the relationship between the two companies which began with the successful seed treatment agreement.</p>
<p>Industry reshuffling continues. Following the watershed merger of Dow Chemicals and Dupont, the subsequent spinoff of Corteva and Axalta, the divestiture of Dupont’s insecticide business to FMC, and other related divestitures, and the split up of the combined entity into two public companies once again, it seems DuPont (NYSE: DD) is still not done reshaping its portfolio. Last week, the company announced the&nbsp;sale of most of its Mobility and Materials segment&nbsp;to Celanese (NYSE: CE) for gross cash proceeds of $11 billion, or about 14x trailing EBITDA of the businesses being sold.</p>
<h2>Rating and Price Target Changes</h2>
<p>ALB&nbsp;– KeyBank raised its price target (PT) to $163 from $153, and reiterated its Underweight recommendation; Jefferies lowered its PT to $290 from $325, but reiterated its Buy rating; Wells Fargo lowered its PT to $215 from $260, while maintaining its Equal Weight recommendation; BMO also lowered its PT from $300 to $280 and reiterated its Outperform rating; Deutsche Bank dropped its PT from $305 to $250, but reiterated its Buy rating; Mizuho Securities reduced its PT from $281 to $243 and maintained its Neutral rating.</p>
<p>ECL&nbsp;– JP Morgan upgraded the stock to Neutral from Underperform despite reducing its PT to $191 from $230; Citigroup also lowered its PT to $205 from $220 and maintained its Neutral rating; Credit Suisse lowered its PT to $215 from $255, maintaining its Neutral rating; Deutsche Bank cut its PT to $2210 from $230, but reiterated its Buy recommendation; Morgan Stanley reduced PT to $200 from $240, maintaining its Equal Weight recommendation.</p>
<p>PLL&nbsp;– R. Riley raised its PT to $163 from $153 and reiterated its Buy rating.</p>
<h2>DISCLOSURES</h2>
<p>Water Tower Research (“WTR”) is a professional publisher of investment research reports on public companies and, to a lesser extent, private firms (“the Companies”). WTR provides investor-focused content and digital distribution strategies designed to help companies communicate with investors.<br><br>WTR is not a registered investment adviser or a broker/dealer nor does WTR provide investment banking services. WTR operates as an exempt investment adviser under the so called “publishers’ exemption” from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940. WTR does not provide investment ratings / recommendations or price targets on the companies it reports on. Readers are advised that the research reports are published and provided solely for informational purposes and should not be construed as an offer to sell or the solicitation of an offer to buy securities or the rendering of investment advice. The information provided in this report should not be construed in any manner whatsoever as personalized advice. All users and readers of WTR’s reports are cautioned to consult their own independent financial, tax and legal advisors prior to purchasing or selling securities.<br><br>Dmitry Silversteyn, who is the writer of this report, covers the Chemicals &amp; Materials Technology and BioEconomy sectors for WTR. Mr. Silversteyn and members of his household have no personal or business-related relationship to the subject company other than providing digital content and any ancillary services WTR may offer.<br><br>Unless otherwise indicated, WTR intends to provide continuing coverage of the covered companies. WTR will notify its readers through website postings or other appropriate means if WTR determines to terminate coverage of any of the companies covered.<br><br>In certain instances, including this report, WTR will write research covering non-clients. Readers should assume that WTR may seek to turn these non-paying companies into paying clients. Likewise, WTR may seek to transform these non-clients into paying clients of it or of its affiliate, which provides services such as presenting at sponsored investor conferences, distributing press releases, advising on investor relations and broader corporate communications and public relations strategies as well as performing certain other related services (“Ancillary Services”). The companies that WTR covers in our research are not required to purchase or use Ancillary Services of WTR or an affiliate might offer to clients.<br><br>The manner of WTR’s potential research compensation and Ancillary Services to covered companies raise actual and perceived conflicts of interest. WTR is committed to manage those conflicts to protect its reputation and the objectivity of employees/analysts by adhering to strictly written compliance guidelines.<br><br>The views and analyses included in our research reports are based on current public information that we consider to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness, timeliness, or correctness. Neither we nor our analysts, directors, officers, employees, representatives, independent contractors or agents shall be liable for any omissions, errors or inaccuracies, regardless of cause, foreseeability or the lack of timeliness of, or any delay or interruptions in the transmission of our reports to content users. This lack of liability extends to direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, losses, lost income, lost profit or opportunity costs.<br><br>All investment information contained herein should be independently verified by the reader or user of this report. For additional information, all readers of this report are encouraged to visit WTR’s website www.watertowerresearch.com.</p>

KEY HIGHLIGHTS

WTR-CMI last week. Despite a (17.5%) drop in the ALB stock price, our WTR-CMI index of 30 chemicals and materials technology companies appreciated 0.5% last week. That’s well ahead of the (1.0%) dip in the Russell 2000 and another (1.6%) in the S&amp;P 500 (1.6%). YTD, our index is also outperforming the broader markets by losing less (7.4%) compared with (8.8%) by the S&amp;P 500 and (10.5%) by the Russell 2000. Nevertheless, there is no escaping the conclusion that the market, and our sector, may be in a correction phase, with weaker performance likely to continue now that geopolitical concerns are added to economic and fiscal considerations.
Winners and losers. Dec-Q results and 2022 management guidance continue to serve as catalysts for stock price movement as the earnings season winds down. Better outlook by IOSP drove the stock up 8.9% last week, leading the way in our index. MTRN also provided above-expectation guidance and appreciated 5.5% as a result, while ECVT and KWR benefited from investor expectations of solid results in the days ahead. Despite beating expectations and providing stronger lithium price and revenue guidance for 2022, the ALB stock dropped ~20% before recovering slightly, as higher capex and negative FCF outlook for the next 12-18 months surprised investors. Lower-than-anticipated guidance also dragged ECL down (3.1%), while PLL and other lithium stocks—LAC and LTHM—followed ALB’s lead down.
Demand trigger. Market research firm MarketsandMarkets published a report forecasting the&nbsp;global antimicrobial coatings market would grow&nbsp;at a 10.5% CAGR over the next five years, driven by COVID-19-related concerns in several industrial applications. This would be a positive for major coating manufacturers such as SHW and PPG, as well as specialty coatings producers such as RPM.
France getting in on domestic lithium bandwagon. In a recent interview,&nbsp;French environment minister noted&nbsp;the need for the country to develop its own lithium supplies to avoid overreliance on China (or other European Union nations, for that matter). While exploratory work is in the early stages, the French government’s willingness to embrace metal mining is a stark contrast to Serbia’s recent decision to buckle to anti-mining protests and revoke Rio Tinto’s mining license.

WTR-CMI WEEKLY PERFORMANCE
Source: Y-Charts; Prices as of February 18 close

Lithium &amp; EV Ecosystem Developments
Going to California. Last week, we mentioned the need for significant expansion of capacity to recycle end-of-life lithium-ion batteries in the U.S. as well as globally, and highlighted some of the partnerships being formed across the lithium supply-chain industry to accelerate the development of economically viable battery recycling and lithium/metal reclamation processes and operations. On cue, Ford Motor (NYSE: F) and Volvo Cars, a unit of Chinese Geely Automobile (OTC: GELYF), announced that they are&nbsp;joining Redwood Materials, a recycling startup&nbsp;to develop processes to collect end-of-life batteries from electric and hybrid vehicles and recover the materials for re-use in new batteries. The venture will start in California—not surprising, given the state leads the nation in BEV and PHEV vehicle sales, and existing NEV car park.
Automotive &amp; Transportation
January results suggest 1H22 will be a tough period for autos and those who supply them.&nbsp;While January&nbsp;sales in China&nbsp;improved 6.7% YoY after the market posted a 2% growth in December 2021,&nbsp;European sales decelerated&nbsp;(6.7%) YoY, continuing the YoY declines in monthly sales seen for most of 2H21. VW expects higher car production to be a 2H22 event, and growth in 2022 will still leave the automotive industry below 2019 levels. So it would seem companies such as AXTA and PPG, which derive 30-60% of their revenues from the transportation market—as well as companies such as FUL, AVNT, RPM, MTRN, HXL and others that count on the growth of the automotive market to drive sales of their higher-margin specialty products—may see results that underwhelm expectations in 1Q22 and, particularly, in 2Q22, which will include the toughest YoY comps. With European Union auto registrations down YoY in January (and we suspect U.S. sales will show a similar YoY decline, when reported) and March comps being significantly tougher, chances of a positive YoY volume 1Q22 appear to have significantly diminished. So it’s a good thing that prices are going up.
Ag-Chem and Ag-Tech
Good times for domestic ag looks to continue. Commodity prices were helped by both, strong internal demand and international demand.&nbsp;Exports of U.S. farm and food products&nbsp;totaled $177 billion in 2021, an increase of 18% YoY, and 14.6% higher than the previous record set in in 2014. Chinese purchases were a key driver of export growth, despite all the trade-deficit rhetoric. Furthermore, with LATAM supply expectations reduced by the current drought in parts of Brazil, Argentina and Paraguay,&nbsp;Chinese purchases&nbsp;have not only continued in 2022, but may be ramping up. All that is setting the stage for continuation of the 15-month trend of the Creighton University’s&nbsp;Rural Mainstreet Index (RMI)&nbsp;remaining above growth-neutral, with rural bank CEOs expecting this to continue through the 2021-22 season. That is indeed good news because higher farmer cash incomes in 2021, and expectations for above-normal prices in row crops such as soybean and corn in 2022, will help farmers deal with record high input costs, including fertilizers and crop chemicals such as insecticides and herbicides. In fact, it may not be the price but the availability of key inputs that could be the fly in the ointment when it comes to farm economy this year.&nbsp;Bayer’s announced force majeure&nbsp;in glyphosate is a case in point.
In Other News
Ag-bio industry leaders continue to partner with established ag-chem majors. Marrone Bio Solutions (NASDAQ: MBII), an innovative ag-tech company, recently&nbsp;announced the signing of an exclusive distribution agreement&nbsp;with CTVA that gives Corteva exclusive license to distribute MBII’s Kinsidro® Grow product, a novel foliar bionutrient, across European markets. The multi-year agreement applies to row crops such as corn, soybeans, wheat, and cotton, and further expands the relationship between the two companies which began with the successful seed treatment agreement.
Industry reshuffling continues. Following the watershed merger of Dow Chemicals and Dupont, the subsequent spinoff of Corteva and Axalta, the divestiture of Dupont’s insecticide business to FMC, and other related divestitures, and the split up of the combined entity into two public companies once again, it seems DuPont (NYSE: DD) is still not done reshaping its portfolio. Last week, the company announced the&nbsp;sale of most of its Mobility and Materials segment&nbsp;to Celanese (NYSE: CE) for gross cash proceeds of $11 billion, or about 14x trailing EBITDA of the businesses being sold.
Rating and Price Target Changes
ALB&nbsp;– KeyBank raised its price target (PT) to $163 from $153, and reiterated its Underweight recommendation; Jefferies lowered its PT to $290 from $325, but reiterated its Buy rating; Wells Fargo lowered its PT to $215 from $260, while maintaining its Equal Weight recommendation; BMO also lowered its PT from $300 to $280 and reiterated its Outperform rating; Deutsche Bank dropped its PT from $305 to $250, but reiterated its Buy rating; Mizuho Securities reduced its PT from $281 to $243 and maintained its Neutral rating.
ECL&nbsp;– JP Morgan upgraded the stock to Neutral from Underperform despite reducing its PT to $191 from $230; Citigroup also lowered its PT to $205 from $220 and maintained its Neutral rating; Credit Suisse lowered its PT to $215 from $255, maintaining its Neutral rating; Deutsche Bank cut its PT to $2210 from $230, but reiterated its Buy recommendation; Morgan Stanley reduced PT to $200 from $240, maintaining its Equal Weight recommendation.
PLL&nbsp;– R. Riley raised its PT to $163 from $153 and reiterated its Buy rating.
DISCLOSURES
Water Tower Research (“WTR”) is a professional publisher of investment research reports on public companies and, to a lesser extent, private firms (“the Companies”). WTR provides investor-focused content and digital distribution strategies designed to help companies communicate with investors.  WTR is not a registered investment adviser or a broker/dealer nor does WTR provide investment banking services. WTR operates as an exempt investment adviser under the so called “publishers’ exemption” from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940. WTR does not provide investment ratings / recommendations or price targets on the companies it reports on. Readers are advised that the research reports are published and provided solely for informational purposes and should not be construed as an offer to sell or the solicitation of an offer to buy securities or the rendering of investment advice. The information provided in this report should not be construed in any manner whatsoever as personalized advice. All users and readers of WTR’s reports are cautioned to consult their own independent financial, tax and legal advisors prior to purchasing or selling securities.  Dmitry Silversteyn, who is the writer of this report, covers the Chemicals &amp; Materials Technology and BioEconomy sectors for WTR. Mr. Silversteyn and members of his household have no personal or business-related relationship to the subject company other than providing digital content and any ancillary services WTR may offer.  Unless otherwise indicated, WTR intends to provide continuing coverage of the covered companies. WTR will notify its readers through website postings or other appropriate means if WTR determines to terminate coverage of any of the companies covered.  In certain instances, including this report, WTR will write research covering non-clients. Readers should assume that WTR may seek to turn these non-paying companies into paying clients. Likewise, WTR may seek to transform these non-clients into paying clients of it or of its affiliate, which provides services such as presenting at sponsored investor conferences, distributing press releases, advising on investor relations and broader corporate communications and public relations strategies as well as performing certain other related services (“Ancillary Services”). The companies that WTR covers in our research are not required to purchase or use Ancillary Services of WTR or an affiliate might offer to clients.  The manner of WTR’s potential research compensation and Ancillary Services to covered companies raise actual and perceived conflicts of interest. WTR is committed to manage those conflicts to protect its reputation and the objectivity of employees/analysts by adhering to strictly written compliance guidelines.  The views and analyses included in our research reports are based on current public information that we consider to be reliable, but no representation or warranty, expressed or implied, is made as to their accuracy, completeness, timeliness, or correctness. Neither we nor our analysts, directors, officers, employees, representatives, independent contractors or agents shall be liable for any omissions, errors or inaccuracies, regardless of cause, foreseeability or the lack of timeliness of, or any delay or interruptions in the transmission of our reports to content users. This lack of liability extends to direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, losses, lost income, lost profit or opportunity costs.  All investment information contained herein should be independently verified by the reader or user of this report. For additional information, all readers of this report are encouraged to visit WTR’s website www.watertowerresearch.com.

Mat-Chem Notes for the Week Ended February 20, 2022

United States

Koppers Holdings, Inc. manufactures carbon compounds and wood treatments.  The Company distills coal tar into carbon pitch, creosote and phthalic anhydride, which are used to produce aluminum, plasticizers and specialty chemicals, and pressure treat wood.  Koppers also manufactures railroad ties.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Koppers Holdings (KOP US)

Mat-Chem Notes for the Week Ended September 4 2022

KEY HIGHLIGHTS WTR-CMI last week. In another down week for the market, the S&P 500 retreated 3.3%, while the Russell 2000 lost 4.7% of its...

Water Tower Research

Mat-Chem Notes for the Week Ended August 7, 2022

KEY HIGHLIGHTS WTR-CMI last week. Our WTR-CMI index of 30 chemicals and materials technology stocks couldn’t keep up with the broader market last...

Water Tower Research

Mat-Chem Notes for the Week Ended July 31, 2022

KEY HIGHLIGHTS WTR-CMI last week. In what was another positive week for the stock market, both the Russell 2000 and S&P 500 appreciated 4.3%...

Water Tower Research

Mat-Chem Notes for the Week Ended May 15, 2022

KEY HIGHLIGHTS WTR-CMI last week. The market continued to correct, with both the S&P 500 and Russell 2000 declining 2.4% and 2.5%,...

Water Tower Research

Mat-Chem Notes for the Week Ended February 20, 2022

KEY HIGHLIGHTS WTR-CMI last week. Despite a (17.5%) drop in the ALB stock price, our WTR-CMI index of 30 chemicals and materials technology...

Water Tower Research

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)