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Just What We Need…..Another Acronym

The world of investing is full of acronyms. There are BRICs (shorthand for Brazil, Russia, India, and China), ETF (shorthand for exchange-traded fund), LIFO (shorthand for last in, first out – which is one way to approach the valuation or cost of a company’s inventory) and FOMO (which is shorthand for fear of missing out, though we are guessing that one transcends Wall Street). To this long list of acronyms, we would like to add one more: CANZ, which is shorthand for copper, aluminum, nickel, and zinc, four of the world’s most important industrial metals. Though apparently, CANZ is already shorthand for Canada, Australia, and New Zealand – hopefully, we won’t be getting a tongue lashing by the representatives of any of those great nations.

What got us thinking about copper, aluminum, nickel, and zinc, was their respective prices, or, we should say the trajectory of their respective prices over the past two and half years. Not surprisingly, the price of each metal corrected meaningfully through the spring of 2020 as the world’s economy was shut down due to the coronavirus; then, as economic activity rebounded so did the price of each metal, in parabolic fashion, with all four trading up to 10+ year highs, moves in price that were no doubt aided along by overwhelmed global supply chains. Then, more recently, the price of each metal has come down sharply, likely pushed lower by increased production and an end to panic buying and hoarding by the users of the metals.

Consider the case of copper, which traded at $6,300 per metric ton in January of 2020; $4,800 per metric ton in March of 2020; $10,700 per metric ton in March of 2022, and today is priced at $7,800 per metric ton (see chart). Higher prices for key industrial metals have weighed on the margins of the users of those metals and fed into historically high inflation. All things being equal, lower prices should mean higher margins for the users of those metals and reduced inflationary pressure going forward.

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The views expressed are those of Brinker Capital and are not intended as investment advice or recommendation. For informational purposes only. Brinker Capital Investments, LLC, a registered investment advisor. 1205-BCI-7/11/2022

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