commodities

Invest in the Top 3 commodities in 2016

The biggest problem for modern financial players is the fact that money has no intrinsic value, and people know it.

The same goes for most other financial instruments, with commodities being one notable exception. No matter what happens, commodities will always be worth something, but even their prices often fluctuate and change. These changes are impossible to accurately predict, although some sound investments can always be made. Metals are always a safe bet, especially precious metals such as gold or platinum, but in the end, it is food and energy that people need on a daily basis, so it all comes down to supply and demand, making their prices far more predictable even in the long run. This list is far from infallible, but having said that, it may prove useful for those looking for a nice investment in the following year.

Since China become one of the biggest players, commodity markets have never been the same. Most prices revolve around their decisions and in accordance with their five-year plans. Since the new plan is likely to focus on the middle class and their living standards, we can reasonably expect a rise in building materials and some metals, and the first on the list are nickel and zinc. The only downside is that you may need to be patient and keep an eye for the right opportunity to make a profit.

A rise in the living standards can only come through increased production and domestic consumption, which means steel industry will require more materials, and nickel

shutterstock_298516250fits nicely. It is used in steel production, but it is also present in various alloys and electroplates. Without nickel, you could forget about stainless steel, coins, batteries (at least those that can be recharged), microphones, strings etc. Even in the worst case scenario, namely China’s reduction in steel production, the supply should still be lower than the demand in the following months. The thing is, Indonesian government is sick and tired of exporting cheap ore and losing money; they seem to want to keep things domestic, and force manufacturers to shift at least some of their capacities and start processing nickel ore locally rather than simply selling it on the open market. The fact that these facilities take years to complete have not persuaded Indonesian authorities to lift the ban on nickel ore export, mostly out of fear that if that were the case, the entire project would get scrapped, as the investors would feel no pressure in completing this project any faster than they have to. Besides, Chinese nickel supplies are running thin and they will need a resupply sometime in 2016 or they would face severe production setbacks, meaning that for at least a brief period, nickel prices should skyrocket (as base metals go, anyway) as high as $12 a pound.

As for zinc, galvanizing is by far the most common application today. If you need something to be resistant to corrosion, you’re going to need it galvanized. Once again, shutterstock_189070544
China comes into play; their car industry is expected to increase production in 2016, and this means they are going to need even more galvanized materials. The important thing to remember is that zinc ore is not exactly in plentiful supply right now; in fact, most known reserves are dangerously close to depletion. The moment any of them is gone, the markets will react – especially if no suitable replacement is found in the meantime, and that seems unlikely in the near future. Besides, car industry is not the only one in need of galvanized metals or zinc alloys. Speaking of zinc alloys, brass is also in high demand in several manufacturing cycles, and you need zinc to make it happen. Not to mention paint and rubber production… All in all, it should come as no surprise if zinc goes as high as $1.70 in the following year, as the increase in value is already becoming evident.

shutterstock_87855436However, if metals are not your thing, and you feel lucky, you could try out some other commodities. Unfortunately, the energy sector is saturated with cheap oil, and the forecast for grains or meats is not exactly favorable, so you might have to hope to get lucky. Fortunately, one thing you can rely on is the good old-fashioned global
warming, if you believe in such things; one commodity, coffee to be precise, is expected to fetch a nice profit in the following years, mostly due to the drop in supply, as the climate changes. In fact, we could be one failed harvest away from a coffee frenzy. This could be it. But then again, they said the same thing in Brazil in 2014 after low rainfall decimated their crops. Still, as far as commodities go, apart from metals, no major shifts are expected in 2016. At best, the prices of energies should stabilize, but unless there are some major events, things should be relatively quiet in 2016.

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2 Comments

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