Australia’s Critical Shortage Forming


Well now. Will lithium stocks get a boost today now that the Labor Party has gone on the record with an electric car target for Australia?

This theme certainly stays front and centre as far as mainstream press goes.

In case you didn’t catch the news yet, Bill Shorten and team have an ‘ambitious’ target that 50% of cars sold in Australia should be electric by 2030.

Perhaps they’re playing to the Green and millennial vote or genuinely think it’s achievable. I have no idea except one — there’s probably diddly-squat chance of it happening.

Today’s Profit Watch why…

It’s pretty simple. It’s unlikely there’ll be enough supply of the critical metals needed to deliver the electric vehicle penetration numbers we keep hearing bandied about.

I was at the gym the other day and I saw one of the regulars driving off in a BMW — but not a model I’d ever seen before. It was a funny shape.

The next time I saw him, I asked him about it.

It’s electric,’ he said. ‘Except it has a small back-up tank as well.

I nodded. I murmured something along the line of the car industry going that way.

Oh, half the cars on the road will be electric in five years,’ he declared.

It seemed indicative of the shift in sentiment happening as far as the consumer goes.

However, it conveniently ignores the difficulty mining companies face now in finding — let alone developing — new deposits to bring supply in.

The ones that feed into the batteries — nickel, lithium, tin — come from projects that the junior miners make happen.

That’s true across many commodities…

A major problem for the world

And these junior miners are finding it harder to raise money, according to Reuters columnist Clyde Russell[1].

This is despite the positive demand growth and low supply across most metals and the low cost of credit currently.

The world is setting up for higher commodity prices if this is not addressed. They probably can’t be stopped now.

Inventories of zinc, for example, are at a record low on the London Metal Exchange.

Copper is in dire need of investment considering the demand forecasts.

The only commodity that can attract significant funding is gold.

It’s pretty, no doubt. But it’s also largely useless outside of its monetary angle.

Very few graduates are coming out of Australian universities with mining degrees[2]

That’s a worry for such a significant industry of ours.

One problem is that the pampered Western middle class doesn’t like mining.

Everyone’s become so sensitive about Mother Nature that they think modern life would be better off without mining.

This is despite the fact Australia’s national wealth is built on natural resource exports…and, inconveniently, there is no modern life without mining. 

There wouldn’t be much in the way of imports for Australia without it either, considering our top exports are coal and iron ore.

How would we pay for the electric cars we’re all going to be driving? 

Ah well! We don’t need to sit around speculating about that. All we need to do is keep an eye on the right stocks…

How to get ‘lucky’ in the stock market

There is one benefit to all this. It’s shaping up to be a speculator’s heaven on the stock market.

Rising demand and low supply are the harbingers of a bull market. You can get some great stock buys under this dynamic.

I mentioned zine above. It’s up 24% so far this year. Oil is up around 30%.

I wouldn’t be surprised to see moves like this go higher. So far, Trump’s trade war is suppressing commodity prices a bit like a lid on a pressure cooker.

If you’re asking me, it’s the worry over global growth more than the actual numbers keeping these lower than they otherwise might be.

I might be wrong about that in the short term.

But in the long term, somebody needs to start stumping up some investment cash — or there’ll be critical shortages all over the place.

You can’t drive a Labor press release. 

It does give you a nice advantage. You can pick over the best junior stocks in Australia while nobody is interested. If you’re prepared to hold long term, you could acquire them now.

Or, at the very least, start following them and see how management deliver on what they say.  

Luck, so they say, follows the prepared mind.

Best wishes,

Callum Newman Signature

Callum Newman,
Editor, Profit Watch