Description
Alpha is an under-the-radar specialty chemicals company that allows you to play the EV, renewables and semiconductor themes in the commodity markets. We think the stock is worth between $2-$4 over the next three years, compared to $0.90 AUD today. Addtionally, with a strategic like Orica already on the share register there is M&A optionality in the medium term.
Overview of HPA demand drivers
Alpha’s primary product is HPA (high-purity Alumina). HPA market was valued at $3.2bn globally in 2022 and is expected to grow at a compounded 22%+ growth rate until 2030 (source: Grand view research).
The increasing use of HPA in EV batteries, LED products and electronics manufacturing will be driving this growth. The lithium-ion battery consists of a thin coating on the separator sheet and a nano thickness for alumina-coated separators to improve battery performance. This HPA enhances the durability of the battery by increasing its ability to withstand a high rate of discharge. Finally, these high purity materials unlock key lithium-ion battery safety technology.
Nearly half the demand for lighting in the US has now shifted to LED as they are considered more energy efficient. This will be close to 100% by 2035, as LED products consume 75% less energy when compared to LCD.
HPA is also an essential base material for synthetic sapphire substrates that are used in numerous microelectronics, especially in semiconductors. In the high power semiconductor sector, HPA demand is linked to silicon-carbide (SIC). The value of SIC semiconductors used in EVs is expected to grow significantly in the coming decade.
Currently most of the producers of HPA are Chinese and this is a major issue for western companies looking to secure supply with friendly countries. It recently was added to the critical mineral list in Australia.