Yesterday, Tribeca Global Natural Resources (ASX:TGF) released an investment presentation.
It bodes well for Australian commodity investors if its analysis is correct.
The team at Tribeca believes that the commodity upswing remains in its early stages.
Tribeca sees parallels between the current market and two historic commodity bull markets, suggesting the latest cycle could have much further to run:
Source: Tribeca Global Resources Fund
This is because of previous underinvestment and two major investment themes: artificial intelligence (AI) and rising global military spending.
For Tribeca, the key sectors within this broader dynamic are base and critical minerals, precious metals, and energy.
The argument for critical minerals is familiar, but no less valid because of that. The US military budget is expanding, and the same trend is playing out globally.
Source: Tribeca Global Resources Fund
Rare earths, antimony, and tungsten are all essential for military hardware but are in short supply and often located in geopolitically insecure regions.
Another theme is hyperscaler spending on AI and data centres. Tribeca calls it the “largest physical commodity bid” ever assembled.
It highlights the spending from eight US mega-caps that is lifting copper, zinc, and lithium prices already.
Source: Tribeca Global Natural Resources Fund
The global data centre buildout is outgrowing power infrastructure and will require ‘bespoke’ solutions to keep pace with the accelerated rollout.
It’s also causing the South Korean economy to boom. The Financial Times reports:
“South Korea has been in an economic sweet spot, thanks to the global AI boom, which has created explosive demand for its memory chips, boosted the profits of its largest chipmakers, and driven dizzying rallies on domestic markets. Some of that revenue has also begun to trickle down to employees, with windfall bonuses for semiconductor workers.”
There’s no reason to think this is going to stop anytime soon. S&P Global reported on 27 August that AI investment could exceed US$1.3 trillion ($1.82 trillion) by 2027.
Google parent Alphabet recently raised money in Australia via a so-called ‘Kangaroo bond’, and Amazon is likely to follow suit soon, according to The Australian Financial Review. Microsoft could follow as well.
Continued debt issuance like this bodes well for ongoing demand across global commodity markets.
Write to Callum Newman at Mining.com.au
Images: Unsplash
