I've spent 15 years in the investment industry. In that time, I've seen many investors struggle and many others make a fortune.
The difference between success and failure usually has little to do with intelligence or analytical skills. Rather, the best investors generally have an ability to stay cool under pressure and the fortitude to break away from the herd when necessary.
Keep that in mind with the metal I'm going to tell you about. Since April 2011, prices for this industrial metal have fallen close to 30% -- from $2,667 per ton to under $1,900.
But the recent selloff has made this metal cheap... too cheap. And investors who buy now have the opportunity to make a lot of money if prices rebound.
The metal I'm talking about is aluminum, a substitute for copper.
Back in 1987, and again in 1997, the two metals were close to parity (they cost about the same). But during the past decade, copper prices have quadrupled to $8,800 per ton, while aluminum has remained stuck at $2,000 per ton.
This is the most extreme pricing disparity (and thus most advantageous climate for buyers to switch to aluminum) in the past 15 years.
This divergence can't last forever. Manufacturers aren't stupid. If there are two industrial metals that can perform similar duties, but one is trading at a discount to the other, then which one do you think they're going to chose?
And this isn't just my prediction either... we're already seeing it happening. Right now, aluminum is displacing 400,000 tons of copper usage annually.
With aluminum rapidly replacing more and more copper every year, I believe prices will converge not by copper falling, but by aluminum rising. And there are several other factors at play that point to the exact same conclusion.
Due to falling prices, many aluminum manufacturers are shutting down some key production operations... helping sop up excess supply.
Last October, several Chinese facilities representing 1.7 million tons of annual aluminum smelting were closed. The Henan province went so far as to ban new aluminum projects for the next three years.
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