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The Sleeping Giant in Metals Editor’s Note: There is an exciting opportunity in commodities right now, and there is one place you absolutely must look into… India. While we don’t have the perfect penny stock play on this one just yet, you still have to check out what Chris Mayer has to say… “Nature Is Rich, She Is Generous…”
— Paul Gauguin, Noa Noa Paul Gauguin, the famous painter, moved to the South Seas in 1891. There he painted and sketched and also recorded thoughts in his journal, since published as Noa Noa, which I recently read. Among his many observations was the one quoted above. Though he is far apart from us in both time and space, I have had this thought of his in my head of late, because it applies to the current commodity boom. The price of commodities swept higher in late February. Only two months into the year and natural gas was up 26 percent, coal up 56 percent and platinum up 41 percent. This in two months! We know there are tons of this stuff in this big ball of a planet we call home. The trouble, as Gauguin would point out, is that you have to know how to find it, get to it and dig it out. Aye, there is the rub. As global demand explodes for nature’s riches, it takes time for the market to deliver the goods. ************************************ Here’s How the “Millionaire’s Market” Paid Me to Retire From My 9–5 Office Job at 32 Years Old... No more ironing shirts and tying ties at 6:15 in the morning...no more sitting in rush hour...and no more waiting around at 5:00 p.m. on Friday to pick up my weekly check... The Millionaire’s Market changed ALL of that. Now I’m my own boss. You can too, but only if you get in on it now… Read this, before you miss your chance… ************************************ So, too, copper and aluminum were within striking distance of all-time highs. Believe it or not, the consensus heading into 2008 was that the unfolding global slowdown would take these metal prices lower. That certainly didn’t happen. Some of the price rise was due to supply problems in China and South Africa. Producing these metals requires a lot of energy. Yet persistent blackouts and power issues plague producers in these countries. In any event, aluminum topped $3,000 per ton for the first time since May 2006. Copper hit $8,500 per ton, near all-time highs, as Chinese consumption remains high. Global copper inventory covers only about three days worth of global consumption. With a market running that tight, prices remain susceptible to big spikes. Credit Suisse says copper could spike to $12,000 per ton, partly on the rising cost of sulfuric acid, which about a quarter of copper producers use to process copper ore. But the biggest driver behind metal prices such as copper and aluminum is the huge global demand for infrastructure. Morgan Stanley estimates that emerging markets will spend $21.7 trillion on infrastructure over the next 10 years. Power plants, roads, bridges, airports… One sleeping giant in all of this is India. I see it in ABB Ltd. (ABB: NYSE), the world’s biggest maker of electrical grids — and the world’s third largest buyer of copper. India is the fifth largest market for new orders for ABB. In the last quarter, new orders were up 42 percent in India. ABB claims its orders in India will double by 2010! Certainly, when you compare India’s consumption of metal on a per capita basis with that of other countries, you see enormous room for growth. (See next chart.)
This is not idle wondering. This has real merit, like mixing vodka and tomato juice. Increased metal consumption is practically a given. India desperately needs more power. (See chart below.) And India’s government will spend billions of dollars adding around 600 gigawatts of electricity by 2030:
************************************ The Biggest Resource Breakthrough Since the “‘Beaumont Miracle’ of 1901” 64 publicly traded companies are already deeply invested...insiders are already raking in as much as $205,421 per day on the shares... But only one of these cutting-edge companies offers you the “secret wealth advantage” I reveal right here... ************************************ All of this infrastructure requires a lot of metal, especially copper. Hence, one of the hot growth sectors in India is its metals and minerals. Most investors tend to think of India’s famous technology companies. But here is an industry still in the early stages of growth. India has substantial deposits of bauxite, iron ore, copper, zinc and more. In some of these, India’s reserves are among the largest in the world. With all the demand for metals both from India itself and abroad, India’s production has ramped up significantly. Indian companies are also among the lowest-cost producers in the world. In many parts of the world, and especially here, the need for infrastructure is on the rise. But in developing countries like India, we’re seeing some of the biggest demand spikes for these types of resources. Stay tuned to this situation and keep following these exciting price spikes… Regards, P.S.: I recommended that my Capital & Crisis readers buy shares of ABB back in December 2006. So far, they are up 82% on that recommendation. While it is a bit too late to get into that stock, there are tons more that are poised to do even better. To check out my latest picks in India, you have to read this report… |
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Chris Mayer, the editor of Capital & Crisis, began his career in banking, specifically, corporate lending, after earning an MBA with a concentration in finance, He later started writing Capital & Crisis, a monthly newsletter that gave Chris' unique brand of financial commentary a more regular and expanded format. With an unusual fondness for old books, old investors and old ideas, Chris fits perfectly into the Fleet Street mold. |
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