By Andrey Dashkov, analyst, Casey Research
Amidst a potential recession and rising interest rates, commodities have proven that real assets create value.
Since the beginning of this year, the S&P 500 is down 14%.
Meanwhile, the Bloomberg Commodity Index has been up 17%.
Outperforming broad markets by over 30 percentage points is a big deal.
And oil has been responsible for a big part of that performance. But metals and mining companies have managed to hold their own as well.
While the broad markets dropped, the MSCI World Metals & Mining Index gained 1.3% between January 1 and November 30.
Bragging about a one-percent gain seems funny, but 2022 has been one of those years when any gain is to be celebrated.
And in theSuper Spike Advisory portfolio, we have seen gains many times higher than that…
…Such as 37% on a company we recommended back in July, or 34% on a stock that we started covering in October.
This is the time of the year when investors start thinking about what’s going to happen next.
In today’s Dispatch, I’ll share my analysis of the one key factor driving the mining industry in 2023… and how you can take advantage of the bullish setup in this sector.
Mining Will Continue Playing a Key Role in the Energy Transition
The “green transition” will continue playing a massive role in the metals and mining industry.
This year, we have talked about the coming shortages in the lithium and copper market. These metals are key for the energy transition.
2023 will be the first year when the lithium market enters what looks like a decade-long state of deficit. And it will only increase until 2035, when total supply will be 24% less than demand, according to BCG.
Think of it as a “supply-chain issue” that will persist for at least 12 years.
That’s why the setup for lithium couldn’t be more bullish.
Other “battery metals” or “hard tech” will also face increased demand and low supply.
For instance, the copper deficit will amount to about 595,000 metric tons in 2022, according to an estimate by BCA Research.
And over the next 12 to 24 months, copper production could peak.
This is a massive catalyst. “Peak copper” means that in about two years, copper production will start declining every year. It may be impossible for copper output to ever catch up with demand.
New mines will be reaching the production stage slower, and existing resources will continue being depleted.
Meanwhile, demand continues growing. By 2050, it will increase by 50% compared to its 2022 level.
This “copper crunch” is bullish for the metal itself… yet its consumers will have a difficult time ahead.
Cobalt could also dip into a state of deficit next year, according to Kitco.
In other words, most “battery metals” are entering one of the most fundamentally bullish setups.
This is why we continue paying attention to these metals and recommending companies in the space.
If you’re looking to get exposure to the “battery metals” trend, you may want to check out some of the exchange-traded funds (ETFs) that track the prices of either the metals themselves or the companies producing them.
For copper, the Global X Copper Miners ETF (COPX) is a great choice. It holds a portfolio of copper miners. And it pays a dividend of almost 4%.
For lithium, consider the Lithium & Battery Tech ETF (LIT). Its portfolio includes both mining companies and battery makers.
Finally, if you’d like to invest in the broad commodities sector, this ETF is a good way to start: iShares S&P GSCI Commodity-Indexed Trust (GSG). It tracks an index that includes a diversified basket of commodities – including energy, metals, agriculture, and others.
Good investing,
Andrey Dashkov
Analyst, Casey Research