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Population Boom Will Drive Metals and Minerals Prices

Every new baby drives commodities demand.
Frank Holmes is the CEO and chief investment officer of U.S. Global Investors.
Frank Holmes is the CEO and chief investment officer of U.S. Global Investors.

Image source: tonywuphotography / Pixabay

Eight billion.

That’s what the global population is expected to reach in November, for the first time ever. Even as birth rates are retreating worldwide, couples continue to have babies, and later this year we will be sharing the planet with 8 billion fellow humans, according to a new report by the United Nations Population Fund (UNFPA).

This incredible milestone underscores the need to solve a number of ongoing challenges related to population growth, but it also presents what I believe are some very attractive investment opportunities. Depending on the country, every new baby requires additional amounts of commodities and raw materials, from aluminum to zinc.

And with the size of the global middle class expanding rapidly, demand for new materials should remain high going forward. This favors exploration and production companies in particular, but it’s also good news for companies involved in food and beverages, pharmaceuticals, health care, luxury goods, transportation and much more.

India’s Population to Surpass That of China

Among the fastest growing countries on earth, in population terms, are emerging economies such as China and India, home to a combined 2.8 billion people.

China has long been the world’s most populous country, but this decade—perhaps as soon as next year—India is projected to surpass its northern neighbor. According to the UN, India is among a group of eight countries that will contribute more than half to the world’s total population growth from now until 2050, the others being the Democratic Republic of the Congo, Egypt, Ethiopia, Nigeria, Pakistan, the Philippines and Tanzania. In the chart below, I include the U.S. for comparison’s sake.

That high population growth has shifted to emerging and developing economies shouldn’t surprise anyone. Globally, birth rates are the lowest they’ve been since the 1950s, with fewer and fewer countries producing more than 2.1 babies per woman, which is considered to be the “replacement rate.” The U.S., for instance, has been steadily creeping below this rate for the past 15 years, and in 2020, it hit an all-time low of 1.6 births per woman, likely due in large part to the pandemic.

The provisional data for 2021 shows that the number of U.S. births increased slightly from the prior year, but it’s still well below the replacement level, despite the reproductive efforts of Elon Musk. (The Tesla and SpaceX chief has called population collapse the number one problem facing civilization.)

2.97 Million Pounds of Metals, Minerals and Fuels Needed… Per American

Even so, every new baby born means that additional metals, minerals and other resources will need to be brought online. According to one estimate, nearly 3 million pounds of materials on average are necessary to support each American during their lifetime, factoring in a life expectancy of 77.3 years. That includes over 17,000 pounds of iron ore, used to make steel; nearly a quarter of a billion pounds of coal; 1.32 million pounds of stone, sand and gravel; 52,000 pounds of cement; and 65,000 gallons of oil.

Not everyone around the globe enjoys high living standards like the average American, but any amount of these resources multiplied by 8 billion people is, to put it mildly, a lot.

As you may have heard me say if you’ve attended one of my presentations, babies will continue to be born every year, even if growth has slowed, meaning we’ll need to keep exploring for new mineral deposits. Demand will always be there, but as we saw as a result of pandemic-related lockdowns, new supply can sometimes dry up, and when that happens, prices accelerate.

I believe this makes companies involved in mining and processing these commodities very attractive.

Frank Holmes is CEO and Chief Investment Officer of US Global Investors.

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Equities News Contributor: Frank Holmes

Source: Equities News