Why Invest in Copper?
Copper has a well documented, and very attractive supply/demand fundamental dynamic. Copper development projects are set to benefit from rising prices and scarcity of competition to fill demand gaps predicted to open up in the market.
Copper Has Long Been a Critical Industrial Metal
Copper has a very large underlying demand base of ~25mt, which has grown strongly historically. It faces little substitution risk as is a key component in construction, electronics, transportation, and power generation. With the global economy continuously expanding, particularly in emerging markets, the demand for copper remains robust.
Green Energy Transition Is Compounding Demand Growth
Copper is the common denominator in the electrification of the economy. Regardless what generating or storage technologies prevail, copper is required to move the electrons around. The impact on copper demand is seismic: current projections anticipate doubling of demand between 2022 – 2035.
Major Supply Shortage Looming
The copper market is facing pronounced deficits, as predicted by almost all market analysts. Strong forces such lack of discoveries, declining ore grades, labour strikes, and geopolitical tensions have depleted the pipeline of potential production capacity, against a backdrop of ever-increasing supply. New mines are required every year to replace depleting production capacity, as well as service incremental demand growth, yet the funding of discovery and derisking has been decimated over the last 10 years and there are limited advanced projects to meet this demand.
Strong Pricing Dynamic
The above factors create an excellent backdrop for commodity price strength. BHP, one of the worlds largest copper producers, “believes that in the final third of the 2020s, it is entirely possible that at times the cost curve will cease to be binding on price”, meaning the price of copper will not be set by the marginal cost of production. Rather it will be defined by a willingness to pay, when access to physical metal is paramount for continued functioning of businesses, society and government.
