Challenge my Thesis, “Copper is the Opportunity of the Decade”

CategoriesIssue 2023Q3, Issue 2023Q3-2

u/ goobint  writes:

Both the supply and demand dynamics in the copper market are looking incredibly favorable.

From a 2022 Goldman Sachs report, “Copper is so integral to the green transition – a global effort underpinned by government support – that the supply requirements necessitate a spike in copper prices”

Demand will increase

  • EVs, EV charging, electrical transmission, and renewables all use a lot of copper, and are set to grow for the foreseeable future.
    • For example, an EV uses at least 2x more copper than a gas powered car.
  • There also isn’t a clear replacement for copper in these products, meaning the price can continue to rise without destroying demand.
    • Aluminum is the most likely potential replacement, but not nearly as efficient (it would require a much higher volume of aluminum to do the same job).

Supply will not keep up

  • Supply is expected to fall well short of demand in the 2nd half of this decade.
  • Ore grades are declining at many of the largest copper mines and there have been almost no major new discoveries in recent years.
  • New copper mines can take 10 years to get up to full production, so they would not contribute to the supply equation until 2033.

TL;DR: the world is going to need a lot of copper, there is no viable substitute, and the supply wont be there.

Disclosure: I am long COPX, FCX, IVPAF and IE, though these do not constitute a large % of my portfolio yet.

What are your thoughts? Am I missing anything? The most likely threat to the thesis above as far as I can see would be a breakthrough in extraction technology that dramatically increases supply.


GS Report “Copper is the New Oil”

Copper Stocks List

IEA Critical Minerals Market Review

Escondida Ore Grade Decline

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