Manufacturing Metals

Macro Perspectives: Fri 13 Aug 2021

With a $1.2 trillion infrastructure package approved, let's take a look at industrial metals.

We know, from reading the monthly ISM reports, that the manufacturing business is booming - they are dealing with record long lead times on raw materials, due to shortages - and the price of commodity inputs are all going in one direction - UP. With the fresh demand of a massive government funded infrastructure plan coming, the supply problems will only get worse, and that means higher prices.

Let's take a look at some charts...

Above is copper, a commodity known to be an early indicator of economic turning points - among the most widely used metals. As we've discussed, with the global initiative behind electric vehicles, battery electric vehicles use 183 pounds of copper - 4 to 5 times the amount of copper in conventional vehicles. Copper is 11% off of the highs, and trading into technical support of the 50 Day moving average. We should expect new higher highs to come.

Here's a look at aluminum...

As you can see in the chart, aluminum prices have soared off of the pandemic-induced lows, but remain short of record levels. Expect new record high prices to come.

Two ways to get leveraged exposure to a continued rise in these key base metals: Alcoa, the largest U.S. aluminum producer ...and Freeport McMoran, the largest U.S. copper producer.