KOREA GOES HUGE FOR HYDROGEN. INVESTORS NOT SO MUCH
Chaebol are hard to get excited about, even when they do exciting things.
For an aging nation shlepping along at 2% growth for the past decade, South Korea retains a lot of fire in its belly. Its multi-tentacled chaebol are essential to one advanced industry of the present, phones and semiconductors, and damn near dominant in the near-future of electric vehicle batteries. LG Chem (ticker: 0151910. Korea) is widely viewed as the global leader in this technology. It’s joined by countrymen Samsung SDI (006400. Korea) and SK Innovation (096770. Korea) in the Big Six, which produce nearly 90% of EV batteries globally.
Now Korea’s magnates are joining forces to seize the day after tomorrow’s technology: hydrogen energy. An A-list of dark-suited rich dudes convened in Seoul September 9 for the Korea H2 Business Summit They pledged investment of $37 billion by 2030 to advance cars, trucks and buses that emit harmless water instead of carbon dioxide.
The ringleader of this effort is Hyundai Motor Co. (005380. Korea)— a bit surprising given its current niche as a down-to-earth middle-income automaker. But Hyundai already produces the world’s first hydrogen-powered SUV (the Nexo, in case you haven’t driven one). And it’s promising 20 truck and bus models by 2028, six-and-a-half short years away. All these hydrogen fuel-cell vehicles will need lots of hydrogen per se, which SK promises to extract from its extensive natural gas network.
If history is in the making here, however, investors aren’t taking much notice. Hyundai Motor shares are down 10% over the past three months, and edged lower still after the H2 Business Summit. An ETF cobbled together by enterprising Seoul brokers, the KB KBstar FN Hydrogen Economy fund (367770. Korea), did nothing on the announcement. It’s about even money since June.
Why the cold shoulder? The commercial viability of hydrogen-fueled vehicles remains speculative, to say the least. U.S. enthusiasts’ magazine Road & Track splashed out a cover story on “Hydrogen: New and Clean Fuel for the Future,” in 1974. We’re still waiting. Elon Musk called the technology, quote, “stupid” two years ago.
There’s another reason for stock pickers’ tepid reaction. The emerging Korean hydrogen complex is wrapped inside much larger businesses. So you can’t buy into it without buying a lot of other stuff you probably don’t want, like SK’s gas pipelines or the Hyundai Elantra. It makes a lot of sense long-term for chaebol to nurture risky new technology from established cash-spinning businesses. But it denies investors the rush they seek from a timely bet on the right innovative “pure play.” Hyundai and SK will never be bro stocks.
Most of the KBstar ETF’s smaller components are also old-school manufacturers dabbling in hydrogen. The core business at Hanwha Solutions Corp. (009830. Korea) is petrochemicals. Hanon Systems (018880. Korea) makes car radiators and air conditioners. True, the best-known hydrogen cell pure-play, U.S.-based Plug Power (PLUG) has proved a wild ride: Shares nearly quintupled in three months to January 31, and have plunged 60% since. But at least you know what you’re buying.
So keep an eye on Korea’s ambitious, admirable drive for hydrogen energy. And stick a toe in financially, at most.