The Real Infrastructure Story

Commodity bulls finally got a boost this week as President Donald Trump’s much anticipated infrastructure plan takes center stage. Now all he has to do is get the details through Congress. Good luck with that.

Meanwhile, the real infrastructure story that is about to boost metals’ prices in a big way is going on halfway around the world … in China. Here’s what’s going on and which metals stand to benefit the most from it …

China’s New Silk Road …

My friend and colleague Larry Edelson, wrote extensively about China’s NEW Silk Road initiative. It’s an ambitious plan to rebuild ancient trade routes connecting the Middle Kingdom to Europe both by land and sea. Of course, China’s “Belt and Road Initiative” involves massive infrastructure spending the likes of which President Trump can only dream of.

Already, projects worth about $1.3 trillion are underway in the region, which spans 62 Belt-Road countries over the next five years. “From Bangladesh to Belarus, railways, refineries, bridges, industrial parks and much else is being built,” according to a Bloomberg report.

Just one of many multibillion-dollar projects underway intended to speed up trade links between East and West: A railway linking China with London and passing through nine countries and nearly 7,500 miles along the way means freight trains will cross the Eurasian continent in just 18 days!

Today, about one-fifth of total global trade passes through the New Silk Road trade routes, and since China is the world’s largest exporter, this project is a win-win for all of Asia.

The biggest winners: Base metals

But which specific investments will be the biggest winners as a result? Think industrial metals: Copper, iron ore, steel, zinc, etc … the non-precious metals that go through regular boom-and-bust cycles are about to boom again like never before.

Copper prices, for example, are still down over 60% since the pre-financial crisis peak in 2008. And after doubling in value from 2010 to 2012, copper tumbled another 50%-plus since mid-2012.

Zinc, tin, lead, nickel, steel … are all likewise at or very near one-year lows in price, but all that’s about to change.

The bust in base metals prices in recent years took plenty of production capacity offline.

You see, the bust in base metals prices in recent years took plenty of production capacity offline. Many companies went bankrupt. Those that survived slashed production by closing older, less-efficient mines and mills.

They’ve cut exploration and production budgets to the bone. Now the time is fast approaching when “the cure” for low commodity prices – which is low prices – starts to have an upward impact on industrial metals again.

Recently, the world’s largest miner, BHP Billiton Ltd., said China’s New Silk Road infrastructure building will add 150 million tons to global steel demand. And it’s not just steel.

Prices of iron ore, copper, coal, zinc – you name it – they’ve all been on a roller-coaster ride, mostly to the downside, but these not-so-precious metals are about to shine once again.

Bottom line: With gold and silver rallying again, don’t miss out on the undervalued industrial metals, which may have even greater upside potential. And some, that span both investment and industrial uses, like silver and platinum producers, could really take off. Readers of my Real Wealth Report are already well positioned in several leading names, and I’m just about to pull the trigger on a new batch of base-metal recommendations.

Good investing,

Mike Burnick

 

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Comments 2

  1. Will June 12, 2017

    In your bottom line, you mention about gold and silver rallying again. Does that mean that Larry’s prediction of gold dropping to $700 is off the table, or is that prediction still intact?

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  2. Will June 12, 2017

    Looking at the map showing China’s Belt and Road Initiative, I see a road passing through some rather dodgy countryside to reach Rotterdam from China. Perhaps that is part of the reason that there is a cutoff road along the way connecting to the sea route. I should like to see someone comment on the aspect of actually getting this road built, but all I ever read comes out as if this is a done deed with construction soon to begin. Maybe I should make a comment!

    I was on an ADB funded project in Sumatra that included works in Ache Province. This was a couple of years before the Ache tsunami and at the time of the jihadist movement in Ache. It became necessary to shut all construction down because of “terrorist” intervention and we had to close our field office in Ache as well. Only, it was not jihadist activities that were the problem. It was a shakedown by individuals with connections, posing as jihadists. Cheers

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