China just took a huge step toward carbon neutrality … how it’s signaling a bull market in batteries … what this means for a select group of metals
One of the simplest ways to create wealth in the stock market is by getting in front of the big money.
You identify the prevailing macroeconomic trends that will shape society for years … the same trends that governments will fund with trillions of dollars … then you put your investment capital in the path of those trillions, and simply wait.
Today, there are several gale-force trends blowing across the globe — but perhaps none bigger or more significant than the battle against climate change.
China plays a critical role in this battle.
On one hand, it’s the world’s biggest polluter, producing 28% of the world’s greenhouse gas emissions. That’s more than the United States and European Union combined.
On the other hand, just a few months ago, China made the world’s single largest commitment to climate policy change.
In remarks at the United Nations General Assembly on September 22, Chinese President Xi Jinping declared that China would achieve CO2 emissions neutrality by 2060.
Here’s The Interpreter on why this matters:
More than 60 other countries have pledged carbon neutrality by 2050, a deadline that scientists believe must be met to avoid completely overheating the planet, but none of these efforts matter if China doesn’t initiate drastic changes to its energy consumption models.
President Xi just declared such drastic changes are coming. But for this to happen, it means we’re going to see one thing …
A Chinese energy overhaul … fueled by trillions upon trillions of dollars.
On this note, here’s our macro specialist and editor of Investment Report, Eric Fry:
China’s transition from the world’s biggest polluter to carbon neutrality could require as much as $15 trillion in investment.
So, returning to the top of this Digest, what’s one of the simplest ways to make a fortunate in the stock market?
By standing in front of a $15 trillion green energy tsunami.
Today, let’s turn to Eric to get the details on where, exactly, to stand.
***How China just greenlit a bull market in battery metals
For readers less familiar, Eric is InvestorPlace’s global macro specialist.
This means he starts his investment analysis by looking at the big-picture forces that are driving global markets.
That could lead him to, say, a frontier-market stock … or possibly an opportunity in South American currencies … or in this case, a boom in green-energy metals that will be in high-demand this decade.
From Eric’s Saturday issue of Smart Money:
2060 might seem like a long way off, but if China is to hit that target, it must begin additional large-scale green-energy initiatives immediately.
For example, the country would need to halt construction of coal-fired power plants, including the 300 gigawatts (GW) of planned projects that are already in the pipeline.
Then, to offset this “missing” coal-fired energy, China would need to double its wind and solar capacity to around 500 GW each by 2025, according to one prominent Chinese think tank.
Looking further down the road, the analysts at consultancy Wood Mackenzie estimate that China’s solar, wind, and energy-storage capacities would have to rise by at least 11 times by 2050 if the country is to reach its clean-energy targets.
***Following the breadcrumbs from pollution … to green energy … to batteries
For China to become carbon neutral, it means sectors across its entire economy will be radically transformed.
As an illustration, we can look at China’s vehicle market.
Last year, the National Center for Biotechnology Information (NCBI) published a paper evaluating pollution in China, called “Vehicle emission and atmospheric pollution in China: problems, progress, and prospects.”
From the paper:
Atmospheric pollution has emerged as one of the primary environmental issues in China and other developing countries …
By 2009, China had the largest vehicle market in the world. Consequently, the vehicle industry has become an increasingly significant contributor to Gross Domestic Product (GDP) in China.
On the other hand, China ranked the 128th out of 133 countries with a score of 22.3 in overall air quality …
Vehicle emission from the consumption of a large amount of fossil fuel has been identified as a main contributor to air pollution in China, and also a major source of greenhouse gas emission.
In response to this combination of a huge vehicle market and massive air pollution, the Chinese electric vehicle market has exploded. In fact, China now boasts the largest EV market in the world.
The consulting group, McKinsey & Company, expects the number of EVs sold in China to climb from 1.2 million in 2019, to between 2.4 million and 3.5 million by 2022.
Now, turning to the investment implications here, this type of growth has some investors thinking about Chinese electric car manufacturers. For example, Luke Lango’s Daily 10X subscribers are currently sitting on a 1,124% return in Luke’s Chinese electric car recommendation, NIO.
Many forward-thinking investors know this type of growth also means similar growth in electric vehicle batteries. Matt McCall is one of the most vocal advocates of battery-investing. His Investment Opportunities subscribers are up 127% in their “Solid State Batteries” sub-portfolio.
But this type of growth begs a question …
***If electric cars and electric car batteries have a bright future, then wouldn’t investing in whatever powers those batteries and cars be a no-brainer investment?
That’s Eric’s belief.
And that’s why he’s looking at a handful of highly-valuable metals that are needed in these batteries.
Here’s Eric with more:
The average plug-in EV requires about 200 pounds of copper, which is nearly four times what a midsized internal combustion vehicle requires.
Depending on the exact battery chemistry, these vehicles also contain about 50 pounds of nickel, along with meaningful quantities of manganese, aluminum, and/or lithium.
You could say, in effect, that the road to carbon neutrality is paved with batteries.
Below is a chart from Eric that shows how much the demand for various battery metals will increase in the next 10 years.
If you have trouble seeing it, nickel and aluminum demand are set to explode around 14X … phosphorus and iron roughly 13X, and copper and graphite about 10X.
So, let’s connect the dots …
We have a global push toward green energy led by China, with the biggest EV market in the world … this leads to a huge demand for batteries … which leads toward huge demand for battery metals …
Where does the rubber meet the road for investors wanting to be a part of this battery-metals megatrend?
Back to Eric:
China’s transition from the world’s biggest polluter to carbon neutrality could require as much as $15 trillion in investment.
A big chunk of this multitrillion-dollar spending spree will find its way into the mining sector. That’s because green energy is also metal-intensive energy.
If this robust demand growth for battery metals comes to pass, select mining companies will mint money for years.
***Investors who followed Eric’s Best Stock for 2020 pick are already seeing big gains from a premium mining company
As 2019 turned into 2020, Eric was already reading the tea leaves on the opportunity in battery metals. That’s why he picked mining company, Freeport McMoRan (FCX). Readers who acted on Eric’s recommendation are up 89% on the year, compared to only 14% gains for the S&P 500.
Eric still likes FCX today. But that’s not the only way to play this trend.
He just came out with a new special report for his Investment Report subscribers called Red, White, and Blue Stocks … for a Six-Figure Payday that details a unique rare-earth-metals play, a world-class uranium company, and a mining company.
There are also three additional picks in the report that tap into other trends on Eric’s radar (we’ll profile them in a future Digest). Click here to learn more.
Wrapping up, the next several decades will see trillions of dollars flow toward green energy initiatives. And as we move from fossil fuels to renewable power, this will be a massive tailwind for battery demand — which, in turn, will mean enormous demand for battery metals.
Putting some investment capital in the path of this monumental economic transition should reward you many times over in the years to come.
Have a good evening,
Jeff Remsburg
