Most Recent Audio: 06 May 2021

David Fuller and Eoin Treacy's Free (Abbreviated)
Comment of the Day

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May 06 2021

Commentary by Eoin Treacy

Please note - We are working on a technical issue with the Chart Library which may result in some down time over the next 24 hours.

May 06 2021

Commentary by Eoin Treacy

Video commentary for May 6th 2021

May 06 2021

Commentary by Eoin Treacy

Kellogg Gains Amid Unexpected Organic Sales Growth in 1Q

Kellogg shares rose as much as 3.9% to $65.50 premarket, which would be the highest intraday level since November, after the packaged food company surprised analysts with positive organic sales growth in the first quarter, vs expectations for a decline.

“K impressed this morning, as another large-cap food name tops revenue and profit expectations, partially driven by positive shipment timing and emerging market strength,” Jefferies analyst Rob Dickerson writes

Eoin Treacy's view

Commodities prices are running higher and that raises the question of how you can pass on higher costs to consumers. It’s the same old corn flakes or shredded wheat so you need to do something. Organics are a great way to do that. Fair trade is another rationale to charge more. Reusable packaging, different shaped packaging and substitution with additional ingredients all allow food producers to protect margins. During this bull market I fully except to see carbon footprint credentials printed on each individual box of food and that will be used as the rationale for price increases.

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May 06 2021

Commentary by Eoin Treacy

Americas May Lead World's Silver Mined-Supply Recovery

This note from Bloomberg may be of interest to subscribers.

Silver primary supply set to recover in 2021, following Covid-19 operational restrictions suffered last year. 2020 saw the silver mining industry's biggest fall of the last decade, down 6% to 784 million ounce, based on Metals Focus data. Mined-output may rise by 8% year-over-year to 849 million ounces in 2021, based on Metals Focus estimates. We believe the Americas, with a 58% of global supply share, will lead the recovery in 2021, thanks to higher output from Mexico, Peru and Bolivia. Mexico could stay as the world's No. 2 producer, with nearly 200 million ounces, up 12% based on BI's scenario analysis.

Fresnillo kept its crown as world's No. 1 silver producing company in 2020, followed by KGHM, Glencore, Newmont and Codelco. We calculated that these miners combined represented 23% of global mined supply.

Eoin Treacy's view

Silver is mostly produced as a by-production of other mining activity and the majority of pureplay silver miners now concentrate on gold. Additionally, silver is more of an industrial resource than gold so it tends to elicit interest from many different sources. Those complicated supply and demand fundamentals mean significant new sources of supply or demand are required to meaningfully change the outlook for prices. The loss of photographic film demand was a major hit meanwhile the building boom in solar cells now accounts for 10% of total demand.  

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May 06 2021

Commentary by Eoin Treacy

The Chip Shortage Keeps Getting Worse. Why Can't We Just Make More?

This article from Bloomberg may be of interest to subscribers. Here is a section:

Chip plants run 24 hours a day, seven days a week. They do that for one reason: cost. Building an entry-level factory that produces 50,000 wafers per month costs about $15 billion. Most of this is spent on specialized equipment—a market that exceeded $60 billion in sales for the first time in 2020.

Three companies—Intel, Samsung and TSMC—account for most of this investment. Their factories are more advanced and cost over $20 billion each. This year, TSMC will spend as much as $28 billion on new plants and equipment. Compare that to the U.S. government’s attempt to pass a bill supporting domestic chip production. This legislation would offer just $50 billion over five years.

Once you spend all that money building giant facilities, they become obsolete in five years or less. To avoid losing money, chipmakers must generate $3 billion in profit from each plant. But now only the biggest companies, in particular the top three that combined generated $188 billion in revenue last year, can afford to build multiple plants.

Eoin Treacy's view

Semiconductor factories are largely automated so they were not particularly impacted by the global lockdowns. Demand for their products surged during the lockdowns. Factories running on thin margins and under constant threat from obsolescence do not operate with a lot of spare capacity. That is the primary reason we now have a semiconductor availability issue. The demand curve has accelerated well above the ability of supply to keep up. The increasing dependence of the automotive sector on chips has been building for a while and will contribute to the investment case for more supply. 

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May 06 2021

Commentary by Eoin Treacy