The Gas Tank diversification

The gas in a tank diversification

Put it together, give it good pressure, and it's good to go.

As global demand for aluminium and natural gas increases, prices of these commodities have skyrocketed to all-time highs in the last year.

Much like an actual aluminium gas tank will only shoot with an upwards trajectory with the correct pressure; in an investors' case - it's demand.

Here's a look into two JSE listed companies that deal with natural gas and aluminium:

Hulamin Limited (HLM)

Aluminium

Aluminium is not only used for gas tanks; this metal has many uses, including in the green energy space. It's a metal that's not that green but is needed to make an economy green. On the JSE, Hulamin is one of the companies that deal with aluminium.

The company's share price has appreciated by over 240% to R4.14 in the past 12 months, outperforming the aluminium futures by over 130%. This comes after increasing energy prices disrupted the metal supply.

Moving into 2021, the South African government announced that it would be imposing 15% import duties on aluminium products as of 1st January 2021. This move has shifted the focus of competition to unprotected markets, including South Africa, while still enabling free trade between the countries in the existing free trade agreements, with the EU and SADC included.

As the custom duties came into play, the company saw a rise in demand for its products, "Both Rolled and Extruded Products continued their turnaround actions. These include improvements to capacity utilisation, cost management, tight controls over working capital and a focus on sales growth and distribution." The group CEO, Richard Jacob, commented.

Positioned for growth, Hulamins' revenue was up by 50% to R 5.49 billion, and profits from operations nearly doubled by 166% to R78 million. Earnings increased to 29 cents per share, representing a 139% improvement from a 75 cents loss in the previous comparative (PCP), with headline earnings sitting at 15 cents per share compared to a loss of 70 cents.

With more deals in the pipeline, the company recently issued a cautionary announcement which was followed by a 23% appreciation in the company's share price.

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Renergen Limited (REN)

Natural gas

Driven by the disruptive demand and supply for renewable and clean energy, natural gas prices were fuelled over the last 12 months, reaching highs of $5 per million British thermal units.

Adding to the shortage that could potentially disrupt supply, Saad Al-Kaabi, a minister of the world's biggest exporters Gulf Nation's, said in September 2021 that "We have huge demand from all our customers and unfortunately we can't cater for everyone."

Back home in South Africa, Renergen, a natural gas-focused company, is securing its place in the gas industry. The company has since its establishment secured several deposits, rich with natural gas. The company's exploration for natural gas expands into Free-State, Virginia, an area known for its natural gas mining opportunities.

At an exploration phase, the company has made moves in securing contracts, locally and offshore. A group of Renergen INVSTRs recently had the opportunity to visit the Free State, Virginia plant.

Renergen CEO, Stefano Marani shared insight on the company, adding that the plant is expected to be fully commercialized by 2022. Marani further added that the company continues to make more discoveries on rare gas types that they believe are more effective and efficient for clean energy.
"Beyond learning the importance and benefits of investing in future energy, the tour was an eye-opener on learning more about helium and why we need it", Reagetseng Junior, who attended the plant visit, commented.

Another guest Sindi Ntwayaborwa added that "without much knowledge in helium, the tour has shown me, together with other investors, how domestic gas works, and how it is processed. The tour has also equipped me with knowledge and understanding of how the gas industry works, and I believe that Renergen is the future."

Renergen continues to pave the way for its natural gas ambitions. The company recently secured a 19-year deal (valued at R378 million/$25 million) to pioneer the first helium spot market with Argonomon Helium in order to fast track the Virginia project in the Free-State; this comes after the demand for helium is expected to increase within approximately 20 years. According to Argonon CEO, Richard Charrington "The collaboration between Renergen and Argonon is specifically designed to bring transparency of pricing into the helium market and highlight the growing global importance of helium."

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Roundup

As prices of natural gas and aluminium increase due to demand, let's also keep in mind the relation between the two, as aluminium is one of the widely used metals in the storage of natural gas tanks.

And despite causing cost price inflation, strong support from economic demand may continue to be a contributing factor to the bullish market of these two commodities as we shift into renewable energy.

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and want to know more about our other stock picks?

Read: The race from fossil fuels to renewable energy

Sources – EasyResearch, JSE Sens, Renergen Limited, Hulamin Limited, Moneyweb, 

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