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China’s picking up the pace

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October 16, 2023

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China’s picking up the pace

Sven Jösting’s stock analysis

In the past weeks, news reached us from The Central Country: China is repositioning itself in the field of hydrogen and intends to take the lead in various fuel cell and hydrogen markets around the world. When it came to the solar and wind energy sectors, or even battery-electric mobility, China stimulated them with its extensive subsidy programs and the People’s Republic quickly advanced to the position of global market leader. Will we now see the same development in the H2 and FC sectors?

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First, China defined, among other things through the CO2 footprint, the various colors of hydrogen for itself at the end of July and then, August 8, through six central authorities (standardization administration, NDRC, ministry of industry and information technology, ministry of emergency management and national energy administration), set corresponding guidelines. According to the Formation Guidance for Standard System of Hydrogen Industry, standards for the use of hydrogen in various markets and application fields are to be established by year 2025. This covers the various production processes of hydrogen, safety aspects, storage and transport, H2 infrastructure and various fields of application/markets.

This can safely be viewed as a framework in which the Chinese government could soon launch support programs for companies, provinces, universities and research institutes on a grand scale. Perhaps as early as 2024? For three years, we’ve been waiting for such a program – one with a volume that could be comparable to the US Inflation Reduction Act (500 billion USD, a trillion even?).

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As China has major problems in the infrastructure/construction sector, the swing in the direction of hydrogen and climate protection could represent the perfect counter: growth through sustainability. This should now become a reality in one to two years. China has long been by far the world’s largest producer and also consumer of hydrogen (natural gas-based). In the future, the hydrogen is to eventually become green, even if surely also the color blue (natural gas reforming with CCS) is used in the transition.

What does this have to do with the H2/FC shares discussed here?

China will be setting down specifications that will influence the entire H2 industry worldwide, is the expectation. The use of fuel cells in motor vehicles of various types (from commercial vehicles to passenger cars) could help this technology achieve a breakthrough, if for example a national quota were to be introduced like that previously made for battery-electric. The same goes for the corresponding infrastructure and, of course, also production, storage and transport.

Based on planning until now, China was to have 1 million vehicles with H2 drives on the road by year 2030. A suitable funding program could ensure that it becomes many millions. For comparison: South Korea plans to have around 6.1 million FC vehicles on its roads by 2040.

For such a ramp-up, many companies active in this field in China need to prepare themselves. Toyota and Hyundai, but also Ballard, Cummins and Bosch, with large investments in regional production facilities for among other things FC stacks, are already in position. It is only a question of time when the global industry of suppliers show their commitment here.

On the small scale, this can already be seen in individual provinces and major cities: Shanghai plans by year 2025 to build up the number of H2 refueling stations from the current 14 to 70 and the number of FC vehicles from today’s 2,500 to 10,000 (primarily buses and commercial vehicles). This allows the conclusion that Shanghai wants to be prepared for the plans (subsidies) of the central government.

Why is the year 2023 the start of the hydrogen megatrend?

Trend research is showing green – including with hydrogen. John Naisbitt in his bestseller “Megatrends” has shown through many examples that the number 20 has a special meaning. And exactly 20 years ago, in 2003, the book “The Hydrogen Economy: The Creation of the Worldwide Energy Web…” of visionary Jeremy Rifkin was published in German (the English edition a year before in 2002). After reading it, you’ll know what is possible in terms of hydrogen.

Today, it is real. The book was my entrée into this subject area. From trend research, we know that for a new megatrend to go from its starting to melting point, it takes an average of 20 years. We’re penning the year 2023. The stock market is in the starting blocks. Will Naisbitt and Rifkin be right? Looks that way.

Disclaimer

Each investor must always be aware of their own risk when investing in shares and should consider a sensible risk diversification. The FC companies and shares mentioned here are small and mid cap, i.e. they are not standard stocks and their volatility is also much higher. This report is not meant to be viewed as purchase recommendations, and the author holds no liability for your actions. All information is based on publicly available sources and, as far as assessment is concerned, represents exclusively the personal opinion of the author, who focuses on medium- and long-term valuation and not on short-term profit. The author may be in possession of the shares presented here.

Author: Sven Jösting

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