Hello, Reader.
On Tuesday, we talked about how just because the artificial intelligence (AI) megatrend is huge, lucrative, and unstoppable.
But just because AI is taking center stage does not mean that other megatrends packed up and went home. Multiple megatrends often move at the same time, while some are more popular than others.
This is the exact case in the commodity realm.
Specifically, I believe base metals like copper, nickel, lithium, and aluminum will end their “nap time” and spring to life once again.
Like the energy sector, favorable supply-demand trends in the base metals complex point to rising prices.
And that’s one of the reasons that “sleeping” on this megatrend could be a huge mistake.
Let’s dig a little deeper…
Are You Prepared for the Coming AI Panic?
According to Eric Fry, the man who was ranked “America’s Top Trader” (#1 out of 650 Wall Street legends in a competition)… “There will be winners and losers…”
And while most Americans panic, it’s why the hedge fund billionaires are already moving their money now. Make no mistake, 37 Wall Street banks have been preparing for this AI panic for months.
This is not a prediction; it’s guaranteed to happen.
Watch Eric’s replay tonight to hear his 1,000% AI blueprint before the panic begins.
Demand Lives On
As I have mentioned before, green energy technologies like EVs, solar panels, and wind turbines are all “metal hogs.” The average battery-electric vehicle, for example, contains about 180 pounds of copper – that’s about half as much as the average American home.
The average solar power project requires about five times as much copper per megawatt of capacity as a conventional fossil fuel plant. Offshore wind farms demand about 10 times as much.
These green energy products are supercharging demand for many individual metals. For example, the analysts at Roskill expect total copper demand to double over the next 15 years. The research group forecasts total copper consumption to exceed 43 million tonnes by 2035 – or nearly double the current annual global output of copper.
Similarly, mining industry insider, Robert Friedland, believes the copper market is heading for a supply-crunch “train wreck” that could cause the metal’s price to soar 10-fold from current levels.
He warns that the global copper supply will struggle to keep pace with surging demand. A supply crunch will result, he says, due to the fact that major new deposits are becoming trickier to find and pricier to unearth.
Bloomberg New Energy Finance (BNEF) predicts the combined demand for all EV battery metals will more-then-triple by 2028.
According to BNEF, most of this demand surge is baked in the cake because of the global rush to build EV battery manufacturing capacity. BNEF states that the 1.7TWh per year of commissioned lithium-ion battery manufacturing capacity will surge fivefold to 7.4TWh per year by 2025, based on current company announcements worldwide.
However, despite these powerful demand trends, commodity prices have been dozing in the corner for more than a year. This seeming narcolepsy is leading many investors to assume the commodity supercycle is over already.
Besides, why bother with “old school” investments like mining companies, when artificial intelligence investments are all the rage?
The answer is a simple one. The commodity rally isn’t dead; it is merely taking a rest before starting its next major move higher…
A Super Supercycle
Let’s remember three important factors…
- First, the Russian invasion of Ukraine created an “artificial” spike in commodity prices that has been gradually unwinding during the last few months.
- Second, for more than a year, the Federal Reserve’s aggressive rate-hike campaign has been dumping cold water on the glowing embers of economic growth.
- Third, the nonstop chatter about a “certain” U.S. recession has spooked many companies into slowing their investment plans and/or de-stocking inventories of key inputs, including inputs like copper and nickel.
But the Fed’s rate-hike cycle is finally ending, and the most-predicted recession in history isn’t happening after all. That’s great news for the commodity markets.
Now, the Fed is close to ending its rate-hike cycle and may shift to lowering rates sometime next year. Therefore, if past is prologue, the shift toward lowering rates could be a big boon to commodity prices.
For proof of this tendency, consider March 2020 to March 2022: That’s when the Fed slashed interest rates from 2% to zero. Commodity prices soared almost immediately.
So far, the commodity supercycle I identified in September 2020 is performing as well as expected. Since its start in April of that same year, the CRB Index has delivered a gain of more than 165% – or more than double the S&P 500’s 72% gain over the same timeframe.
But I’m expecting the CRB to double, at least, before the current supercycle has run its course. And since resource stocks tend to magnify the gains that commodities produce, they could deliver high triple-digit gains.
Not all commodities will move higher in unison, of course. Some will advance earlier, and some will produce much bigger gains than others. But one thing is clear: A paradigm shift in commodity demand has burst onto the scene… which means that our current supercycle could be one of the most super of all time.
Because of the potential for surging long-term demand that greatly exceeds supply growth, I believe the recent weakness in resource-focused stocks is presenting a great buying opportunity.
So, don’t forget about the other megatrends. It’s quite possible to make money on a few at once… if you’re patient and know where to look.
Regards,
Eric Fry
Editor, Smart Money
P.S. While AI is my main focus at the moment, as we just discussed, there are several other megatrends that are gaining steam in the shadows. I have a suite of open recommendations in Fry’s Investment Report, with several that capitalize on the energy spectrum, AI, deglobalization, and other massive, highly lucrative megatrends. Go here now for details on how to join – and to get one of my picks in the AI space for free.
