Fuel cells could be the next big technology to power electric vehicles — Citi is naming it one of the 10 fastest-growing markets in industrial tech. Fuel cell technology has had its detractors , but Citi said it’s getting a boost from tailwinds such as the U.S. Inflation Reduction Act, also known as the climate bill. “The fuel cell equity story has had false starts before, but we see the impetus from emissions policy as well as announced hydrogen plans as creating attractive opportunities,” Citi said in an Oct. 11 note. Fuel cells use hydrogen or other fuels to cleanly produce electricity. They work like batteries , but don’t require recharging. “Fuel cells enable both de-carbonisation and energy resilience, and we see them as crucial in harder-to-abate sectors like commercial vehicles and marine,” Citi analysts wrote. The bank said fuel cells can go where “batteries cannot reach,” adding that batteries used in vehicles have limitations. “The issue for batteries is that certain applications have range, charging, and weight challenges – it is in the long-distance trucking, buses, marine, and aerospace markets, where we see more opportunities for fuel cells within transport,” its analysts said. Stock picks Citi highlighted buy-rated stocks with high exposure to this theme. Its picks are: Plug Power , Ceres Power , Toyota and Umicore . Citi noted that fuel cell stocks are down more than 70% on average since peaking in January 2021, but it added that conditions have become more positive. “Despite the share price declines, government energy policy has actually become more supportive for fuel cells and electrolysers – most notably in the US under the Inflation Reduction Act, and the EU ‘IPCEI’ program,” it said, referring to an EU initiative that supports hydrogen projects . Citi estimated the fuel cell market could grow from around $2.5 billion in 2021 to $43 billion by 2030. A ‘hidden’ EV battery play Morgan Stanley flagged one stock that it says is a “hidden EV battery play.” That’s Korea Zinc — a smelter of zinc, lead and other precious metals such as gold and silver. It has 10% of global market share by volume, said Morgan Stanley in a report. “Batteries are made of metals, but KZ’s long-accumulated expertise in metallurgy and its growth potential in the EV battery space still remains unearthed, in our view,” the bank wrote. “Having been in operation for nearly 50 years, KZ has established a business model that we believe can weather the business cycles and macro uncertainties to generate stable returns,” it added. “It boasts one of the highest metal recovery ratios globally from both concentrates and scraps, a key metric in assessing a smelter’s technology and profitability.” Morgan Stanley also pointed to the firm’s healthy balance sheet and cash resources, saying the EV battery recycling industry could give it further upside. It gave Korea Zinc an overweight rating and price target of 740,000 Korean won ($519) — or an upside of about 22%. The stock is already up nearly 19% so far this year.
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