Round III: The Commodities Shift Nobody Sees Coming

As you know, geopolitics has been a key theme in our commodity coverage.

From superpowers sweeping control over mines across Africa to mineral-rich nations hitting back by nationalising mines and bringing them under state control.

Today’s geopolitical manoeuvring is all about accessing resources. And those who control the supply chains own the leverage.

For a long time, China has tightened its grip on critical minerals, the outright winner in this contest, front-running the West in securing supply.

‘Round I’ of this geopolitical arm-wrestle undoubtedly goes to China.

But this contest is still running.

America is hitting back making strategic moves against China…

Piercing the country’s vulnerable supply chain in energy. Venezuela and Iran certainly fit into that strategy. How this episode ends is anybody’s guess.

But securing the value chain across the entire carbon chain of fossil fuels could be the next major phase of this geopolitical arm-wrestle.

And much to everyone’s surprise, America is clawing back control of vital resources, perhaps edging out China and on a path towards winning ‘Round II’ of this global contest.

But who really wins?

China must have a stable energy supply to power its manufacturing base.

It also needs a healthy US economy to buy the vast volume of goods it produces.

Meanwhile, the US needs critical minerals from China to expand its tech infrastructure, promote innovation and feed its oversized defence budget.

That’s why the Yin and Yang balance of power between China and the US could reach a state of equilibrium.

Where both sides realise neither can win.

Earlier in the week, I shared an assessment with my paid readership group… A scenario where China and the US restore balance to their strained relationship.

That might seem ridiculous, given the geopolitical storm underway across the global economy at this moment.

But think of it like this…

We’re fed a lot of narratives from our mainstream media; often, it’s designed around a negative perception of China, and proposes an inevitable war breaking out between the East and West.

Who knows why that is or the motives driving this news flow? Be wary of the war propagandists.

That’s why it’s refreshing to hear alternative voices.

Recently, I read a well-thought-out piece by Wu Xinbo, a Chinese scholar who’s carved out a niche in the study of the US/China geopolitical relationship.

If you’ve got the time, you can read it here.

The key element is this: Rather than conflict, Wu sees an increasingly stable path towards peace between the world’s two superpowers.

Now, that’s not something you’d pick up in your regular news feed!

And I understand that may contradict some of the ideas we’ve covered in the past.

But there are some key reasons why this academic could be proven right.

Wu believes that China and the US both need a ‘Grand Bargain.’

Rather than each side increasingly pushing its own agenda towards inevitable conflict, a Grand Bargain involves an era of unprecedented compromise between the two nations.

He references certain key players in the Trump Administration who have stated that the US-China trade relationship is now far too intertwined to fall apart. Resolution (according to them) is the only solution.

It’s in neither country’s interest to separate or continue along the path of diplomatic degeneration.

That’s why the scholar believes the icy dialogue that’s clouded this vital relationship could start to shift.

Leading to (what he thinks) could be substantial concessions from both sides.

On the US’s part, that might mean a reduction in its containment strategy across the naval waters surrounding China.

In terms of the Middle Kingdom, it might play a more active role in helping the Trump Administration broker a peace deal between Russia and Ukraine.

Given China’s strong relationship with Russia, it’s certainly positioned to help that cause.

Those are two examples, but it goes deeper than this.

The idea of a ‘Grand Bargain’ involves a pivot towards resolution, not worsening friction, like we’ve been accustomed to.

And that’s certainly not a conventional way to think about the world’s two most crucial players in world affairs.

Up until now, I’ve made recommendations for my paid readership group revolving around the conventional idea that China and the US relationship would continue to sour.

This is a key reason we built exposure towards critical mineral stocks, like rare earths, a commodity leveraged to diplomatic entanglement.

And so far, that’s certainly how things have unfolded.

But will it continue?

As I highlighted to my readership group earlier in the week, it might be time to start questioning this narrative.

Could China and the US actually be on a path towards a more harmonious relationship? At least in the short-term?

That idea is certainly off the table for most market observers.

You might even consider it absurd given the geopolitical meltdown that’s happening at this moment.

But what if it actually happens? How could it affect your investments?

That’s the opportunity I’ll detail next week.

Stay tuned.