Auquan's Weekly Wrap | 23-27 May: What you might have missed
Recap of the week's market activity: Looming rare earth metals shortage, Safety Concerns at Hyundai Steel, Warning to SaaS revenues and more
Looming rare earth metals shortage, Safety Concerns at Hyundai Steel and Warning to SaaS revenues.
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Another EV production risk - Rare Earth Metals Shortage?
We're running short on Lithium, and that is well known. With the EV revolution, investments in downstream EV factories and battery plants have outstripped investments in upstream lithium mining - by almost two times.
Besides lithium, EVs depend on several “rare earth” elements: Neodymium, Dysprosium, Praseodymium, and Terbium - all of which are essential for making the magnets used in EV motors. And we are seeing signs that a disruption to their supply looms near:
- May 5, 2022: Rare Earths Supply Is About To Get Much Tighter
- May 1, 2022: China to tighten export controls on dual-use technology
- Mar 25, 2022: Chinese rare-earth firms' capacity cut by at least 25% as border closure with Myanmar weighs on mineral shipments
Is worker safety neglected at Hyundai Steel Co.?
Hyundai Steel Co. (KRX: 004020) has an average rating with most ESG rating providers. What these ratings fail to address is the occupational hazards at it's factories, likley because they never make it past local media. We have been picking multiple stories from Korean media about worker injuries and deaths at Hyundai Steel's factories, some examples below:
- April 29, 2022: Hyundai Rotem Worker Sustains Serious Burns in Explosion
- March 7, 2022: Metallurgical union "Hundreds of workers killed at Hyundai Steel's site, the railing is only 15 cm"
- May 9, 2021: Hyundai Steel worker dies in workplace incident
Are SaaS revenues at risk?
It’s been a rough month for tech employees. Almost 20k workers have lost their jobs in US, 9k in India and 2k in Europe, showing that the sector, as a whole, appears to be scaling back as the economy enters a turbulent stretch. Many others, including public companies like Meta and and Twitter have publicly announced hiring freezes.
These layoffs can bring about a dangerous snowball effect - growth in tech headcount is a key growth factor for many SaaS businesses which sell their software licenses per user. What happens to the revenues of employee communcations, productivity and workflow companies like Atlassian, Zoom, Asana, Gitlab, Docusign, Dropbox with a reducing global tech headcount? If jobs are lost in this quarter, will it present a significant growth hurdle to them?