The last time I returned from a trek overseas, I brought back a few souvenirs for my friends: some wooden beads I found in a market in Chiang Mai, Thailand; a few elephant statues from Siem Reap, Cambodia … and a plague I’m pretty sure I picked up on my flight back to the States.
(Something tells me my friends were only pleased with two of those.)
So as I packed for my trip to Europe this week, I made sure to pick up some zinc supplements.
Michael Mauboussin Tips From Great Investors [Pt.2]
This is the second part of a short series on Michael J. Mauboussin's research document reflecting on 30 years of Wall Street analysis published in 2016. Q3 2020 hedge fund letters, conferences and more The document outlined Mauboussin's observations of successful investors throughout his three decades on the Street. This article starts at point six. Read More
A few travel blogs call it a lifesaver. The vitamin is supposed to reinforce your immune system, helping to protect your body from invading bacteria and viruses like a mineral-sized portcullis.
But the uses for zinc go far beyond that — and that’s what I want to highlight for you today. Because this silvery-white metal contains a host of unique qualities that means demand is set to soar…
See, zinc is essential for a healthy body. An average adult has about 1.4 grams to 2.3 grams in their body at a given time. We require the mineral for reproduction and healing since the body uses it to create our proteins and DNA. Even more, kids need zinc to develop — it’s one of the most essential nutrients for building new tissues.
Outside of the body, zinc is equally critical.
Zinc is the fourth most abundant element in the earth, after hydrogen, nickel and copper. And it’s the third most used nonferrous metal after aluminum and copper. In fact, if you mix it with copper, you create brass, one of the world’s most widely used alloys.
Currently, the biggest demand for zinc is to galvanize steel and iron, a process that prevents rusting. The metal is so commonly used for this now that most cars hold about 38 pounds of it — and almost half of that is to protect them from rust. Every day, you’re probably encountering some form of machinery or piece of infrastructure that is chock-full of the metal.
It’s a multiuse material that’s even made it into our money. (The U.S. penny is 99% zinc.)
However, we’re now faced with a problem: Demand for zinc is starting to outpace supply.
As our commodities expert Matt Badiali said: “In 2016, we saw a real deficit of zinc. Demand exceeded supply by nearly 300,000 metric tons, resulting in a rebound in the price.”
Well, two major mines shut down in 2015: Australia’s Century mine and the Lisheen mine in Ireland. Together, they had a combined output of more than 630,000 metric tons. When they shuttered, it helped spur the metal’s supply crunch — all while demand remained relentless.
In fact, since 2000, demand has increased by about 3% annually.
That’s, in part, why zinc saw 60% gains last year both on the London Metal Exchange and the Multi Commodity Exchange of India.
It’s the classic supply-and-demand tug-of-war story that tends to kick off massive rallies.
But if you’re thinking you missed out and that the bull market has already taken off and left you behind, don’t worry. Zinc stockpiles are at multiyear lows.
And this supply crunch isn’t getting solved anytime soon.
For example, in its latest annual outlook, the International Lead and Zinc Study Group forecast that global demand for refined zinc metal will exceed supply by 226,000 metric tons in 2017.
So despite the metal’s recent bull market, there is plenty of upside potential left if you know how to invest in it correctly. In fact, Matt Badiali drafted a special report on a company that’s ideally primed to benefit.
You can read more about the investment here.
Now, before I sign off for the day, I want to turn this over to you for a moment and get your thoughts. Are you interested in opportunities like the zinc bull market? Are there other commodity areas you’d like to learn more about? Please take a moment to leave your thoughts in the comments section below, or write to me at [email protected]
I want to discuss topics that are at the forefront of your minds, so any bit of insight goes a long way.