Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Are You Positioned for a Copper Price Explosion?

Commodities / Copper Aug 27, 2020 - 06:47 PM GMT

By: Metals_Report

Commodities

Independent financial analyst Matt Badiali presents the investment case for copper.

Copper will be the next metal to break out in 2020, and it's all about demand.

The price of copper just broke through $3.00 per pound. The red metal's price rose 45% so far in 2020. But that is still well below its 2011 high of $4.50 per pound.

That could change in the second half of this year.


The reason for copper's looming breakout has its roots in cheap money.

Today, savers take a beating. Government bonds, traditional sources of steady income, are dead. In Europe, bonds cost you money. In the U.S., the yield is less than 1%...which means you lose money to inflation.

That's a disincentive to save. And there is a benefit to borrowing. Interest rates are at or near all time lows. According to Bankrate.com's 30-year fixed mortgage data, our current level of 3.1% is the lowest since they began tracking the data in the 1980s.

The result of that monetary policy is a massive building boom. Construction demand sent the price of lumber soaring:

About 25% of the copper demand comes from construction. That means it is affecting copper demand already.

The demand for copper showed up in warehouse supply recently. According to the London Metals Exchange, the total copper supply in warehouses just hit its lowest point since 2008.

Demand is up and the global pandemic complicated supplies. In South America, where most the world's copper comes from, the coronavirus is starting to take hold.

Initially, giant miners cut staff and worked longer hours to continue to produce. Majors cut staff by around 40%. However, they kept working. And now the coronavirus is moving into the mines.

According to Juan Carlos Guajardo, head of mining consultancy Plusmining,

"We're in the worst moment of the health crisis with respect to the mining industry. (Chile) bet that the sanitary crisis would be manageable, but that's not what's happened."

According to Reuters, Chile's mining unions are calling for slowing production to sanitize the mines.

Analysts at Refinitiv cut copper mine production forecast by 2.4% for 2020. It came down to 19.6 million metric tons from 20.4 million metric tons in 2019. That may not seem like much, but in this market, it's enough to send metal prices soaring.

According to the Copper Development Association, 65% of copper demand comes from electrical manufacturing. That means the red metal is in everything—computers, televisions, mobile phones…not to mention the burgeoning electric vehicle (EV) market.

An electric vehicle requires 183 pounds of copper and a hybrid vehicle requires 88 pounds. A gas-powered car only uses 48 pounds. And all those EV charging station requires between 2 and 17 pounds of copper.

And while the pandemic put a damper on sales (down 25% in the first quarter of 2020), they still sold 59,100 cars in the U.S. And another 133,100 in China, 52,800 in Germany and 40,000 in France.

That adds up to about 37,700 metric tons of copper in the first quarter of 2020 alone. At that rate, the full year of EV sales will eat up about 150,800 metric tons of copper.

Another huge source of copper demand comes from wind and solar power plants. One windmill can use up to 6.4 metric tons of copper per megawatt. In 2020, new wind power construction set a new record. There are 24,690 megawatts under construction. And there's another 19,751 megawatts in advanced development.

That adds up to as much as 284,000 metric tons of copper in U.S. wind farms alone.

The demand side adds up quickly. Add to that a lack of supply due to the pandemic and it's a recipe for much higher copper prices.

If you don't have a position in a copper miner yet, it's time to get one.

Best Regards,

Matt Badiali

Matt Badiali is a geologist and independent financial analyst. He spent fifteen years researching and writing about great investments inside the natural resources sectors. He can be reached at www.mattbadiali.net.

Disclosure: 1) Statements and opinions expressed are the opinions of the author and not of Streetwise Reports or its officers. The author is wholly responsible for the validity of the statements. Streetwise Reports was not involved in any aspect of the article preparation. The author was not paid by Streetwise Reports LLC for this article. Streetwise Reports was not paid by the author to publish or syndicate this article. 2) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports. 3) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article until three business days after the publication of the interview or article. The foregoing prohibition does not apply to articles that in substance only restate previously published company releases.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in