Oedipus received a glimpse of the future before it occurred, but that knowledge didn’t do him a whole lot of good. Look it up; clairvoyance isn’t always helpful.
Nevertheless, most of us share a fascination with the unknowable future. After all, who hasn’t wanted to time travel at least once in their lives?
The array of future-gazing tactics is a vast and mystical one — from crystal balls to Ouija boards and tarot cards to tea leaves. Even those of us who never darken the doorway of a palm reader or a psychic will engage in some sort of clairvoyant attempt from time to time.
We might make an “educated guess” about the outcome of a sporting event… or act on a “sixth sense” that a roulette ball will land on double-zero. Even though hunches like these rarely pay off more than once in a row, future-gazing can be fun… and sometimes even profitable.
So with that thought in mind, let’s conduct a bit of future-gazing. Perhaps this exercise will be as futile as betting at a roulette table, but we might get a few things right, and profitably so…
Last year in my Fry’s Investment Report research service, I identified four major “Power Trends” that I believed would provide great investment opportunities throughout the year (some of them may sound familiar to you…).
To summarize, those four trends were:
- A battery metal “rush” that would push prices higher for copper, nickel, and other metals that electric technologies require.
- A travel recovery from the severe slump caused by the Covid-19 pandemic.
- An extreme episode of “easy money” policies from both the Federal Reserve and Congress that would push the gold price higher.
- A worldwide 5G rollout that would gain significant momentum throughout the year.
Trend No. 1 from the list above certainly fulfilled, or exceeded, my expectations. So let’s take a closer look at that one, and its prospects for 2022.
2021 Power Trend No. 1: The Battery Metal “Rush”
When I introduced this trend last year, I wrote:
“The first major trend that could produce investment winners in 2021 is what I have been calling the Second Electric Revolution…
“I’m talking about the massive worldwide transition from combustion-based modes of power generation to renewable modes that fuel an array of electric- and battery-based technologies.
“To capitalize on this trend, I have recommended investing in the mining companies that are providing the metals essential to energy storage technologies…
“[Already] the copper price has soared to a seven-year high above $3.70 a pound.
“So we should not be surprised if the copper boom becomes a ‘copper rush,’ followed by a buying panic that pushes the metal’s price even higher.”
This forecast panned out almost exactly as predicted. The copper price did continue soaring from the $3.70 level to reach a high of $4.90 in May. Although it has retreated somewhat from that level, the red metal is still changing hands at $4.50 a pound.
Thanks to the strength of the copper market, our core “battery metal” position in the Investment Report portfolio, Freeport McMoran (NYSE:FCX), advanced 61% last year to lift its total gain since I recommended it to 200%.
New Sector Could Usher in Trillions in New Wealth
Also, in this sector, we booked gains of 88% and 58% on two ETFs in the space. But I believe the battery metals trend is far from over.
When I highlighted the battery metal trend last year, I mentioned two specific drivers of future metal demand: energy storage and EVs. I wrote:
“The research firm Wood Mackenzie predicts the global energy storage market will skyrocket between now and 2030 — from a starting point of less than 15 gigawatt-hours to 741 GWh.
“Incidentally, this new forecast is double the forecast that Bloomberg New Energy Finance (BNEF) issued about two years ago.”
Incredibly, that year-old forecast from Wood Mackenzie is already out of date. The firm now believes energy storage deployments will hit nearly 1,000 GWh by 2030. That projection is 35% higher than its previous one, and a whopping 200% higher than the forecast BNEF issued three years ago.
The 10-year forecasts for global EV production are also ramping higher. Because the eye-popping projections for energy storage and EV growth seem to ratchet higher by the day, so too do projections for global copper demand.
The Canadian metals mining firm, Teck Resources (NYSE:TECK), predicts that copper demand for EV battery production will jump 750% this decade — from 210,000 tons in 2020 to 1.8 million tons. Alongside that demand surge, Teck predicts copper demand for EV charging stations will soar more than 1,000% by 2030.
All else being equal, therefore, copper prices should trend higher for several years. But all else is not equal…
The copper supply is under extreme geological pressure; ore grades at the world’s major copper mines are declining. Australian-UK resources group BHP Group Limited (NYSE:BHP) estimates that declining grades will remove around two million tons/year of global copper mine supply by 2030.
That’s no small matter. As ore grades decline, copper supplies do not merely become less plentiful, they become more expensive to extract.
Bottom line: Robust future demand growth for copper is fairly certain, but the mining industry’s capacity to satisfy that growth is not. That’s the sort of equation that should put upward pressure on the copper price for many years to come.
Have a good weekend!
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On the date of publication, Eric Fry did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Eric Fry is an award-winning stock picker with numerous “10-bagger” calls — in good markets AND bad. How? By finding potent global megatrends… before they take off. In fact, Eric has recommended 41 different 1,000%+ stock market winners in his career. Plus, he beat 650 of the world’s most famous investors (including Bill Ackman and David Einhorn) in a contest. And today he’s revealing his next potential 1,000% winner for free, right here.