The demand for copper far exceeds its supply, creating a deficit that may continue for a few years. Investors expect prices to go up when conditions like these exist, but they do not show signs of an increase yet. Matt Badiali describes the current copper market as “out of whack.” Projections for a new supply of 1.8 million metric tons by 2027 come from Teck Resources Ltd. (NYSE: TECK) The market demands 4.4 million metric tons as a minimum to meet the demand. Europe’s Société Générale issued a projection of a deficit of 200,000 metric tons for 2018 and 300,000 in 2019.
Preparing to Advise Investors
Some insights into Matt Badiali’s background may help the investors who rely on his advice understand his dedication to acquiring in-depth knowledge. His intense desire to provide the most incisive and accurate market information for investors gives them a competitive edge. With his entry into the world of finance, he took a path that most do not have an opportunity to follow. While teaching geology at the University of North Carolina, a “famous financial expert” asked Matt Badiali to contribute to his profitable technical research on the energy, mining and natural resource sector.
The expert had a record of selling targeted reports to the world’s leading investors, and he wanted a geologist to confirm the data that companies provided about their successes. The lure of traveling globally to examine core samples, meet CEO’s and confer with precious metal experts while increasing his salary by five times was too much to resist. His travels and his position as a leader in the financial information world has let Badiali confer with T. Boone Pickens, Ross Beaty and his mentor Rick Rule, the CEO of Sprott U.S. Holdings. Badiali’s broad range of experience includes working on oil rigs, exploring abandoned mines, owning oil wells and presenting findings to Exxon Mobile and “major geologic conferences.”
Understanding the 2018 Copper Slump
Badiali attributes some of the market’s performance to investor emotion. He accepts the premise that the fundamentals of supply and demand create long-term forces, but “traders move markets on emotion.” Fears of the trade war with China accompanied hopes that the market may establish balance as it does in usual circumstances. However, he notes that the projection models do not indicate it. Badiali cites a Bloomberg report showing that delays in a Grasberg copper mine construction may worsen the situation. He asserts that mines rarely come in on time, and he has the on-site experience to prove it. He contends that chances of Grasberg’s giant Indonesian gold and copper mine completing on time approach zero. The near impossibility of building a “meaningful mine” in two years contributes to the reason that he expects copper to become “the next huge bull market in metals.”
Tracing Troubles in the Copper Market
With a perspective that spans the period from 2003 to 2018, he notes that arriving at the current state of trouble started in 2003 with a significant bull market. From a price of $0.70 per pound to more than $4.60 eight years later, the metal’s performance encouraged mining companies to do some things that they subsequently realized had unfortunate consequences. They invested huge sums of money into low-grade projects on the expectation of prices remaining the same. The incorrect assumptions complicated matters when the bear market started in 2011. None of the metals escaped the punishment that followed, and copper suffered a significant blow with a slump that put prices below $2 per pound by 2016.
Matt Badiali’s ability to feel the pain that affects investors when a commodity falls more than 50 percent draws many to his advice. The unfortunate circumstances caused many of the small and mid-sized copper companies to declare bankruptcy. With the consequences that had far-reaching effects, the industry contracted. Some companies abandoned their exploration and development investments worth hundreds of millions, putting an end to exploration except for a few projects.
Looking for an Upturn
Undeterred by the lackluster state of the industry, Matt Badiali notes a growing interest in electric power projects and their potential for copper. The swift growth in solar and wind power attract his attention, and he regards electric cars as “the next big thing.” With interest, he observes that they have a greater demand for copper than the “alternatives.” Production in China’s electric power industry over the past five years created a demand for copper wire that rose by 50 percent. He discounts the impact that tariffs have to “derail the trend.” The country’s production of air conditioners and refrigerators, batteries and wind turbines creates a demand while the supply remains low and continues to dwindle. Matt Badiali thinks that a focus on copper mines may give investors the “next big opportunity” to benefit from the bull market that he sees approaching.
Bloomberg’s commentary tends to support Badiali’s expectations. The impetus for the physical demand for copper in China comes from a “combination of lower prices and looser credit conditions.” The country’s stimulus measures contribute as well by unlocking “pent-up demand.” Further, the price differential between the London and Shanghai markets recently offered quick profits for importers. Investing Haven confirms the projections that Badiali and Bloomberg make for the future of copper. However, a crash in the commodities space does not seem likely. However, emerging markets have a close relationship with commodities that have shown weakness “in recent months.” While copper stocks do not seem to offer good value at their current price levels, they may do so in a few months or half a year.
Reviewing the Status of Copper
In a review of the performance of copper prices that started the year on a positive note after 2017, Investopedia found that they remained considerably above $3.00 for “several months.” However, the fears about the impact of an impending trade war impacted the metal’s outlook. The consequences of the apprehension sent the prices to a 52-week low in late summer of 2018. Unable to recover, the metal trades below the $3.00 mark at about $2.82 per pound. The site offers a list of five copper stocks that may do well in late 2018.
Putting Knowledge and Experience to Work
Matt Badiali’s preparation for a career as an academic took a path like that of any other college professor. A B.S from Penn State in science and an M.S. in geology from Florida Atlantic University prepared him to continue his academic preparation at the University of North Carolina. As a graduate student working toward a Ph.D., he was teaching when he received a phone call from a friend that changed his life and the direction of his career.
The friend persuaded Badiali to channel his scientific knowledge of geology into the world of finance as an advisor on technical matters to investors. Some of his readers may not know that he has college teaching credentials to his credit. However, his deep understanding of complex geologic facts that perplex most people lets him translate them into understandable language that provides a basis for investing. Matt Badiali’s Real Wealth Strategist publishing company offers access to the unique brand of financial advice that investors in the natural resource markets need. His advice since entering the finance industry has helped investors generate double-digit returns and even better.
Matt Badiali informs his readers of the risks that characterize the natural resource markets. They follow cyclical patterns and involve high degrees of speculation. He encourages investors to learn the financial aspects of the field and the science as well.