Summary

Mark began by introducing and outlining Commodity Intelligence’s role as a specialist consultancy grounded in the supply and demand of Commodities that also provides analysis on related equities. They employ artificial intelligence that was built over the last 14 years that reads 20,000 different articles a week across technical journals, scientific journals, local news etc. which has enabled them to be extremely effective in watching the flow of information from origin and alerting their clients to events, or happenings, some time before they end up in mainstream media. Once they reach the front pages, the Alpha has essentially gone. Mark is, for the first time in many years, bullish on Commodities with almost all activity indicators positive. such as ship movements and port congestion levels, meanwhile their findings have shown that a consequence of COVID-19 has been incredibly low inventory levels throughout supply chains. Velocity is collapsing which is an indication that purchasing power in the economy is building up. Therefore, not only are inventories and sales at record lows but there are a lot of unspent dollars sitting in consumer savings accounts. Raw materials, ex-energy, are in a roaring bull market already with plenty of momentum and further still to go. Nominal GNP which drives commodity markets is clearly rising very fast so the revenues of companies in the sectors are rising quickly. The mining stocks are the places to be invested. Very few of the mining, chemical and commodity stocks are above USD 10 billion market cap. The implication being that there is going to be a lot of money flowing into these companies; what now makes up a very small sector. Energy and Commodities used to be about 20% of most of the mainstream indices, now it is but 5%. Expect this to change dramatically. Commodity Intelligence’s AI is picking up ESG everywhere: It's a super-trend. ESG is the defining moment in the supply of commodities. The reason you never bought a commodity equity is because they are highly unpredictable and riddled with corporate governance issues. You could not model them, and they had a ROE that was either sky high or negative. ESG effectively moves the commodity equity complex from being Nescafe with no value-add to the ethically sourced Kopi Luwak with huge value-add. And it's a defining moment because it allows some of the big, dreaded commodity equity players to define a brand, an ESG brand, which has value-add. Mark discussed green aluminium, how solar panels were the most deflationary product out there, and how batteries for cars is only a transitional technology with hydrogen taking over in the long run. The thesis is that copper is the new oil. Demand for copper is lifting as it is the electric metal, irreplaceable by anything else. Whilst demand is in secular rise it is also in cyclical strength, with supply highly constrained and no obvious source of new supply. Copper projects should be coming into play from Chile, Peru, Mexico, the Congo, possibly Zambia and Ecuador over the coming months. Only a small number of countries contain the worlds copper. But the fact is the money is being spent on copper in Australia and Canada where there are few ESG risks. Any marginal increase in demand must be satisfied with price because there's simply no supply we can find anywhere in the near future of any of any significant size. The six major centres where you could get copper supply from are all, for various reasons, political, environmental effectively closed to new supply. Copper stocks are cheap relative to other metal stocks. Moreover, demand is strong, supply is weak, and positioning is lousy.

Topics