Demand for these metals could send prices 300% higher
From Nick Rokke, Editor, Palm Beach Daily:
Take a look at this chart…
It shows the prices of copper, nickel, zinc, and cobalt—four of the most widely used industrial metals. And as you can see, prices are soaring this year.
All four are breaking out…And this could be the start of a rally.
Most people don’t follow these metals. They’re boring. But they’re very important.
They’re in just about everything you use… From cars to computers to phones.
And right now, these metals are primed to shoot higher. Today, I’ll show you one reason why they can rise at least 300%…and a simple way to play this trend.
The End of a Long Bear Market
Industrial metals have been in a downtrend for nine years. Since 2008, the Bloomberg Industrial Metals Index has dropped 75%.
During this bear market, miners decreased exploration and development. When prices are low, they go into cost savings mode.
This pullback ensures that supply will eventually tighten. And that’s what we’re starting to see today… Just as demand is picking up.
This setup is very bullish for industrial metals…
Sprott is one of the best natural resource asset management companies in Canada.
The largest investors on the planet let Sprott manage their money. The Royal Bank of Canada, Morgan Stanley, Merrill Lynch, and UBS are a few of its major North American clients.
Our friends over at Sprott say the supply of zinc has decreased 10% over the last five years. Here’s why…
Two of the world’s largest zinc mines (Century in Australia and Lisheen in Ireland) closed in 2016.
And in mid-August, China ordered a shutdown of all lead and zinc mines in its Hunan province. That’s a major zinc-producing region.
Decreasing copper supply also concerns Sprott.
Although mines aren’t shutting down (yet), the quality of ore is declining.
That means miners will have to dig up, and process, more ore to get the same amount of copper. This will reduce supply.
But it’s not just declining supplies that are pushing prices of industrial metals higher. It’s also timed with increasing demand.
The International Copper Study Group expects copper demand to increase 2% this year.
The International Lead and Zinc Study Group expects zinc demand to increase 3%.
Glencore is one of the world’s largest miners. It expects nickel demand to rise 5%.
But perhaps the biggest demand increase is coming from cobalt.
Lithium ion batteries use cobalt. Electric cars need these types of batteries to run.
As the demand for electric cars increases, so will the demand for lithium ion batteries… and the cobalt that goes into them.
Anil Agarwal is a billionaire resource investor. And Robert Friedland is a mining tycoon who built Ivanhoe Mines from nothing to a $3 billion company.
In recent interviews, both said they expect cobalt demand to soar 30-fold by 2030.
That’s 30% growth a year.
Industrial Metals Are Ready to Rally
When supply decreases and demand increases, prices can only go in one direction: up.
And these base metals have a lot of lost ground to make up. To make up their 75% loss over the past decade, these metals would need to go up 300%.
A 300% rise might even be on the low end. The last time industrial metals had a major bull run was from 2002–2007. Nickel, the best-performing metal, rose over 800%.
That’s enough to turn every $1,000 into $9,000.
Since the bottom in 2016, there is still further to go in this bull market.
One way to play this is through the PowerShares DB Base Metals ETF (DBB). It holds copper, zinc, and aluminum (another metal doing well this year).
Nick Rokke, CFA
Crux note: Industrial metals aren’t the only ones breaking out. After going through its longest bear market in 40 years, gold is ready to rally, too. And no one knows more about natural resources than our friends over at Casey Research. They’ve made millions in the gold market over the past 35 years using a secret strategy. And now they’re saying 2017 is the best time in history to use it. Learn more right here.