End of goods

After college, my first car was a Toyota Corolla hatchback. The engine was well-designed machinery. I’d like to say the same thing for the body panels that quickly took on the look of rusty Swiss cheese; the holes widen year after year.

With such passages, automakers began to use galvanized steel – body panels were immersed in “hot” anti-corrosion zinc baths.

But car companies in the two most populous countries in the world didn’t get that note. At least until recently.

The result? There was a huge rumor in the zinc market at a time when many of the world’s leading analysts least expected it …

Bloomberg “Rusty Chinese cars are set to hold the 2016 Top Metal Rally,” the title says it all. The reaction to zinc prices is the same, rising by 60% since the beginning of this year.

Last year, only a third of the 19 million cars and trucks made in China were built with galvanized steel.

The same is true in India, where consumers bought a record 2 million vehicles last year; About 20% were made of galvanized steel, according to the Bombay Institute of Technology of India.

When you think about vehicle sales forecasts for the two countries by 2020 (24 million in China, 5 million in India), it’s a lot of zinc.

Don’t Look Now, But …

My intention is not to run out and buy shares to exploit zinc. It is noteworthy, above all, that the demand for products is carried out in a way that no one expects, until price increases become too obvious.

See what happens with nickel.

The Philippines is a major supplier of crude nickel ore. The new administration in Duterte, which took office in the summer, is in the midst of a “review” of three dozen mines in the country, threatening to put them off the commission for alleged environmental violations.

That’s not “love” exactly, but it does help to love the ongoing trajectory of nickel prices. Analysts at UBS Group AG expect nickel prices to rise another 25% next year (after a 20% gain this year).

Of all the major industrial metals, copper is one of the most widely seen. The price of red metal barely moved all year. It has fallen by 50% since 2011.

However, Japan’s largest producer, Pan Pacific Copper, is raising the price by 40% to around $ 7,000 a tonne by 2020. Citigroup recently made a similar announcement. Why?

It’s about supply and demand.

Demand for copper has remained relatively strong, although economic growth in China, the world’s largest consumer of copper, has slowed in recent years.

Copper supply is another matter entirely.

Late last year, Glencor – one of the largest copper miners in the world – decided to mix its largest mines in Africa, extracting 400,000 tonnes of copper from the global market. In Chile, the world’s largest copper supplier, the copper commission announced major investment cuts until 2025, eliminating eight mining projects worth nearly $ 23 billion.

You can see where these copper price projections are coming from. At Citigroup, analysts see an increase in deficits between copper supply and demand. At the aforementioned Pan Pacific Copper company, the company’s president said: “The exit will not keep pace with demand because there is no new supply of mines – unless prices are $ 7,000. [per ton]. “

The price of copper is less than $ 5,000 a ton right now, which offers a lot of potential for potential returns – and yet another reason to look closely at this class of “most hated” products.