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Visualizing The Copper Investment Opportunity In One Chart

Visualizing The Copper Investment Opportunity In One Chart

Copper is essential for clean energy applications such as solar panels, wind turbines, and electric vehicles (EVs), as well as for expanding electrical grids.

The surge in demand for the metal, driven by the growing adoption of these technologies, presents a unique investment opportunity for early investors in copper mining companies.

Visual Capitalist’s Bruno Venditti introduces this chart by Sprott exploring the growing gap between copper supply and demand until 2050, based on projections from BloombergNEF’s Transition Metals Outlook 2023.

Projected Copper Supply vs. Demand

Copper is naturally abundant on Earth, but extracting the metal at the pace necessary for an electrified economy could be a challenge. The timeline for bringing a copper mine from discovery to production is lengthy, averaging over 16 years.

Top producers like Chile and Peru are facing strikes and protests, along with declining ore grades. Russia, ranked seventh in copper production, faces an expected decline in production due to the ongoing war in Ukraine.

Meanwhile, the increasing adoption of carbon-free technology only highlights copper’s significance.

High Demand for Transport and Electricity Grid

The demand for copper in the transport sector is projected to increase by 11.1 times by 2050, from 2022. EVs, for example, can contain more than a mile of copper wiring.

Additionally, the demand for copper needed to expand the global electricity grid is projected to increase by 4.8 times by 2050, from 2022.

By 2030, the copper supply gap is projected to approach 10 million metric tons, with both copper prices and copper mining stocks potentially set to benefit.

As the world embraces clean technologies, the search for and expansion of copper mines will be essential. Early investors who gain exposure to copper miners may benefit from the rapidly increasing demand.

Sprott offers convenient exchange-traded alternatives for investors seeking exposure to copper miners.

 

The Copper Supply Shortage Is Here

The Copper Supply Shortage Is Here

With the AI boom and green energy push fueling fresh copper demand, and with copper mines aging and not enough projects to match demand with supply, the forecasted copper shortage has finally arrived in earnest. Coupled with persistently high inflation in the US, EU, and elsewhere, I predict the industrial metal will surpass its 2022 top to reach a new all-time high this year:

Copper vs USD, 5-Year Graph:

The AI boom is stoking the need for more data centers, which will require around a million metric tons of copper by 2030. Meanwhile, this year’s deficit of 35,000 tons is expected to rocket up to a staggering 100,000 tons in 2025.

Electric car batteries and EV charging stations also depend on copper, adding to the problem of there not being enough activity at existing mines, or the development of new ones, to satisfy the industrial need. Says Bank of America analyst Michael Widmer:

“The much-discussed lack of mine projects is becoming an increasing issue for copper.”

While many mainstream forecasts depend on a solid economic rebound to keep demand for copper up, inflation is here to stay, especially as the Fed is likely going to be forced to cut interest rates at some point this year. Even with just one 2024 rate cut instead of the three that markets originally expected, higher USD prices for copper and other commodities like gold are on the way. Out-of-control inflation will drive prices higher even if the oomph gets sucked out of the AI bubble, or we see other signs of an economic “hard landing.” As Peter Schiff said last month,

“I think we’re on the verge of the biggest bull market in commodities since the 1970s…They’re cutting rates because they have to avoid a financial crisis — a banking crisis.”

…click on the above link to read the rest of the article…

World Could Be At The “Foothills Of The Next Copper Cycle” 

World Could Be At The “Foothills Of The Next Copper Cycle” 

The world is sliding into a copper deficit over the next couple of years as one of the world’s largest copper mines was forced to shutter operations while demand for the refined metal remains elevated due to renewable energy infrastructure and electric vehicles demand.

Warnings of a copper squeeze come as the Panamanian government recently closed First Quantum Minerals Ltd.’s $10 billion Cobre Panama copper mine, which produces 400,000 tons of copper annually and is considered one of the largest copper mines in the world. This decision emerged after protests and political disputes, culminating in the nation’s Supreme Court canceling the mine’s operating license.

The supply forecast faced further complications with unexpected news from Anglo American Plc last Friday. The miner downgraded copper production forecasts for its operations in South America for the next two years.

Anglo slashed its copper production target for 2024 by 200,000 tons. The forecast noted production levels will drop through 2025. The decline in production is equivalent to a large mine going offline.

Bloomberg pointed out the unexpected removal of 600,000 tons of copper production from First Quantum and Anglo American “would move the market from a large expected surplus into balance, or even a deficit,” adding, It’s also a major warning for the future: copper is an essential metal needed to decarbonize the global economy, which means mining companies will play a key role in facilitating the shift to green energy.”

In June, billionaire mining investor Robert Friedland explained to Bloomberg TV in an interview that copper prices are set to soar because the mining industry is failing to increase supply ahead of ‘accelerating demand.’ He warned:

“We’re heading for a train wreck here.” 

Friedland is the founder of Ivanhoe Mines Ltd. He continued, “My fear is that when push finally comes to shove,” copper prices might explode ten times.

…click on the above link to read the rest…

The Copper Conundrum

Photo by Denis Yosifov on Unsplash

Copper is at the heart of everything electric. It is no exaggeration to say, that our entire “renewable, clean, green” future hinges upon its uninterrupted supply. In fact, according to a recently released report, we would need to mine more of it than what we did during the course of our entire written history, in order to transform the world economy to using electricity alone. This is not to mention the fact that this amount of material would only cover the build-out of the first generation of wind and solar power plants (together with the many electric engines, batteries, inverters, transformers etc) needed for the change. Where do we get all that copper from? A riddle? To some, maybe, but not for those who dare to look into the eye of the monster standing in between achieving our net zero dreams and the actual reality.

As usual, amateurs (and unfortunately I have to list our entire leadership class trained in law and economics here) discuss strategy, while professionals (whose job is to actually turn this clean green Technutopia into reality) deal with logistics. Those who haven’t lost all their critical thinking skills and do not consume government propaganda as scientific fact, should immediately start asking their superiors talking about the green transition: how we are about to do this…?

This is an extremely important question. Why? Well, because if it turns out that the proposed “clean, green, renewable” Technutopia is physically unattainable, then we would immediately need to start working on an alternative, a plan B if you like, before we cook ourselves soft and tender, or run out of the materials which could be used for a better purpose than to maintain industrial civilization eating this planet alive.

…click on the above link to read the rest…

The Energy Transition Will Run Through the Copper Gauntlet

And it may not survive

Since the 2018 IPCC climate report laid out the calamitous consequences of our unbridled carbon emissions, every pathway published by academics and think tanks that claim to save us from ourselves involves the expansion of solar and wind farms as well as net-zero and carbon capture dreams of unbridled optimism.

Net-Zero, the idea that we can keep emitting greenhouse gasses only if we somehow capture or offset those emissions by some yet-to-be-determined means was a dubious proposition at best. It relies on untested-at-scale projects such as carbon capture and sequester (CCS) as well as accounting fantasies that pretend a young sapling that takes 50 years to grow offsets the carbon released from the burning of a mature tree today after being shipped overseas.

Net-Zero plans also assume a rapid and universal deployment of renewable energy-capturing machines a.k.a. solar panels and wind generators. Unfortunately, contrary to their portrayal in mainstream media, solar panels and windmills do not produce renewable energy. These are machines designed to capture and transform energy (electromagnetic or kinetic) available to them and they are manufactured, installed, maintained, and replaced using fossil fuels.

It’s astonishing how the continual absence of any credible carbon removal technology seems to never affect net-zero policies. Whatever is thrown at it, net zero carries on without a dent in the fender.

James Dyke

Senior Lecturer in Global Systems, University of Exeter

Many other metals and rare earth elements have received a great deal of attention due to their exotic-sounding names, relative scarcity, and utilization in cutting-edge technologies, but one of the most critical minerals to the energy transition that is essential to curtailing the most serious effect of climate change is also one that the human race has learned to work earliest — copper.

…click on the above link to read the rest…

Glencore Says This Time Is Different for Coming Copper Shortage

Glencore Says This Time Is Different for Coming Copper Shortage

(Bloomberg) — Glencore Plc added its voice to a chorus of miners warning of coming copper shortages, arguing that a “huge deficit” is looming for the crucial industrial metal.

Chief Executive Officer Gary Nagle said that while some people were assuming that the industry would lift supplies as it had in previous cycles to meet a forecast increase in demand driven by the energy transition, “this time it is going to be a bit different.”

He presented estimates showing a cumulative gap between projected demand and supply of 50 million tons between 2022 and 2030. That compares with current world copper demand of about 25 million tons a year.

“There’s a huge deficit coming in copper, and as much as people write about it, the price is not yet reflecting it,” Nagle said.

Copper miners and analysts have been warning of growing deficits starting in the mid-2020s, driven by rising demand for copper in wind and solar farms, high voltage cables, and electric vehicles. While most analysts believe that prices will rise from current levels around $8,500 a ton, there is some disagreement about how large the copper shortages might be.

Still, Nagle said that Glencore, which is one of the world’s top copper miners and traders, will wait to lift its own output of the metal until the world is “screaming” for it. “We want to see that deficit,” he said.

Nagle said that Glencore could lift its annual copper production by more than 60% from current levels of 1 million tons with expansions of its current assets. The company is also eyeing a $5.6 billion new-build project at El Pachon in Argentina.

New bull chart for $30,000 copper price: porphyries nearly mined out

New bull chart for $30,000 copper price: porphyries nearly mined out

Bad moon rising over porphyry deposits. Radomiro Tomic, Chile. Image from Codelco.

Predictions for copper at double or triple today’s level is a fairly recent phenomenon – and bears still outnumber bulls as to what’s next for the bellwether metal.

Wall Street natural resource investment house Goehring & Rozencwajg Associates confirmed their place in the superbull camp this week, predicting a copper price north of $30,000:

“The previous copper bull market took place between 2001 and 2011 and saw prices rise seven-fold: from $0.60 to $4.62 per pound. The fundamentals today are even more bullish.

“We would not be surprised to see copper prices again advance a minimum of seven-fold before this bull market is over.  Using $1.95 as our starting point, we expect copper prices to potentially peak near $15 per pound by the latter part of this decade.”

The rosy demand side for copper has been well documented and Goehring & Rozencwajg focuses on supply, specifically depletion in their latest commentary.

Depletion, surprisingly, is not discussed that often in the industry and according to the authors is little understood, despite its fundamental importance for long-term supply trends.

Low and declining grades, uninspiring green and brownfield discoveries (with a few exceptions) and thin, slow project pipelines have become rules of thumb in the copper mining industry.

To those issues, the report adds copper miners’ habit of high-grading (mining your best quality ore first) and growing your reserves with a simple ploy – lowering cut-off grades when prices rise.

Even with prices well above $10,000 a tonne, these paper reserves cannot keep growing, according to  Goehring & Rozencwajg, specifically at porphyry deposits which produce 80% of the world’s copper.

…click on the above link to read the rest of the article…

Babine Lake Mines Leaking Dangerous Contaminants into Salmon Habitat, Say Critics

Babine Lake Mines Leaking Dangerous Contaminants into Salmon Habitat, Say Critics

Advocates want greater oversight as a mapping project identifies more than 170 mines putting waterways at risk.

Two closed mines on islands in Babine Lake are leaking dangerous levels of copper that could be damaging the Skeena watershed’s most valuable sockeye salmon spawning lake, The Tyee has learned.

In a report due out this week, SkeenaWild Conservation Trust and the Lake Babine Nation say an analysis of monitoring data from mine owner Glencore shows wastewater from the mines has included elevated levels of heavy metals, including copper contamination up to 20 times greater than provincial water quality guidelines.

It’s unclear what impact that could be having on Babine Lake’s salmon stocks, which account for 90 per cent of the Skeena watershed’s sockeye.

But Donna Macintyre, fisheries director for Lake Babine Nation, says there is clearly a threat.

“Does it affect salmon? Obviously, if we’re putting discharge into the lake, and we’ve got zooplankton that the fish depend upon for food, it will affect them,” Macintyre told The Tyee.

“We have these guidelines for copper, all of the heavy metals that are discharged into the lake, but they’re basically for human consumption. Nobody has really done major studies on fish.”

Lake Babine Nation worked with SkeenaWild to analyze data that dates back to the mines’ operation in the 1970s. But the research focused on the past 12 years since the start of Glencore’s monitoring program at the sites. The studies were done on samples of water, sediment and tissue taken from lake trout and sculpin.

…click on the above link to read the rest of the article…

THE FORMER INDUSTRIAL METAL: The Silver Price Surges As Copper & Oil Get Crushed

THE FORMER INDUSTRIAL METAL: The Silver Price Surges As Copper & Oil Get Crushed

The notion that silver is just an “Industrial Metal” was utterly destroyed today as both the copper and oil prices were crushed as silver surged higher.  This is precisely what I was looking for as a positive sign showing that silver is now disconnecting itself from the INDUSTRIAL METAL BALL & CHAIN.

While analysts will continue to regurgitate that the future silver price depends on industrial demand, we can now take this analysis and throw it into the dustbin.  The world is heading into a new paradigm of “Building Wealth to Protecting Wealth.”  And let me tell you, you cannot protect wealth in most STOCKS, BONDS, or REAL ESTATE.  Those days are over for good.

Unfortunately, 99% of investors still haven’t figured that one out yet… but they will.

Today, it was quite an impressive day for silver (and gold) as the metals surged higher while copper, the king industrial metal, got destroyed.  Here is a chart of the copper price versus silver.

As we can see, copper is down 5% while silver is up 2%.  Thus, the leading indicator of the global economy, COPPER, just put out a very BAD SIGNAL, indeed.  Now, if silver was just a mere industrial commodity, why didn’t it’s price follow along with copper???

And, if that isn’t bad enough, take a look at the WTI Oil price.  The West Texas Intermediate oil price was down 5% as well.

With the U.S. oil price falling $2 in one day, that just wiped out $21 million in oil revenues to the oil companies.  This is also terrible news for the U.S. Shale Oil Industry is being held together by DUCT TAPE, BAILING WIRE, and ELMERS GLUE.

Today, I also posted the broad selloff in oil on my SRSrocco Report Twitter feed:

…click on the above link to read the rest of the article…

The Coming Copper Peak

The Coming Copper Peak

Elon Musk told a closed-door Washington conference of miners, regulators and lawmakers that he sees a shortage of EV minerals coming, including copper and nickel (Scheyder 2019).   Other rare metals used in cars include neodymium, lanthanum, terbium, and dysprosium (Gorman 2009).

***

Richard A. Kerr. February 14, 2014. The Coming Copper Peak.  Science 343:722-724.

Production of the vital metal will top out and decline within decades, according to a new model that may hold lessons for other resources.

If you take social unrest and environmental factors into account, the peak could be as early as the 2020s

As a crude way of taking account of social and environmental constraints on production, Northey and colleagues reduced the amount of copper available for extraction in their model by 50%. Then the peak that came in the late 2030s falls to the early 2020s, just a decade away.

After peak Copper

Whenever it comes, the copper peak will bring change.  Graedel and his Yale colleagues reported in a paper published on 2 December 2013 in the Proceedings of the National Academy of Sciences that copper is one of four metals—chromium, manganese, and lead being the others—for which “no good substitutes are presently available for their major uses.”

If electrons are the lifeblood of a modern economy, copper makes up its blood vessels. In cables, wires, and contacts, copper is at the core of the electrical distribution system, from power stations to the internet. A small car has 20 kilograms (44 lbs) of copper in everything from its starter motor to the radiator; hybrid cars have twice that. But even in the face of exponentially rising consumption—reaching 17 million metric tons in 2012—miners have for 10,000 years met the world’s demand for copper.

 …click on the above link to read the rest of the article…

“The Outlook For The Global Economy Has Deteriorated”: Oil, Copper And Lumber Are All Telling Us The Next Economic Downturn Is Here

“The Outlook For The Global Economy Has Deteriorated”: Oil, Copper And Lumber Are All Telling Us The Next Economic Downturn Is Here

Oil, copper and lumber are all telling us the exact same thing, and it isn’t good news for the global economy.  When economic activity is booming, demand for commodities such as oil, copper and lumber goes up and that generally causes prices to rise.  But when economic activity is slowing down, demand for such commodities falls and that generally causes prices to decline.  In recent weeks, we have witnessed a decline in commodity prices unlike anything that we have witnessed in years, and many are concerned that this is a very clear indication that hard times are ahead for the global economy.

Let’s talk about oil first.  The price of oil peaked in early October, but since that time it has fallen more than 25 percent, and the IEA is warning of “relatively weak” demand out of Asia and Europe

The International Energy Agency said on Wednesday that while US demand for oil has been “very robust,” demand in Europe and developed Asian countries “continues to be relatively weak.” The IEA also warned of a “slowdown” in demand in developing nations such as India, Brazil and Argentina caused by high oil prices, weak currencies and deteriorating economic activity.

“The outlook for the global economy has deteriorated,” the IEA wrote.

Meanwhile, the price of copper has been declining for quite some time now.  The price of copper also fell substantially just before the last recession, and many analysts are pointing out that “Dr. Copper” is now waving a red flag once again

The message of weakening demand on the oil front was reinforced by the falling price of copper.

…click on the above link to read the rest of the article…

After Noble, Here Are The Next 18 US Energy Companies To Be Junked

After Noble, Here Are The Next 18 US Energy Companies To Be Junked

Following Noble Group’s downgrade to junk and “Enron moment,” we thought it worth considering who is next to be junked?

Judging by the market’s expectations, there are now 110 credits that are rated “investment grade” but trade like junk, and as Markit’s Neil Mehta notes, this is up from just 21 in November.

Source: @NeilCredit

There are 18 US Energy names (and 23 globally) that are currently traded at CDS levels implying junk status, with Diamond Offshore, Nabors, and Encana top of the list.

*  *  *

And finally, away from the energy complex, we note that Freeport McMoran is at the top of the list of likely junk downgrades and today’s carnage has extended Carl Icahn’s losses…

 

as it seems FCX stockholders are getting the joke…

Freeport-McMoRan Inc

(1739bps; Av BBB; Imp CCC)

The US copper and gold producer has seen its 5-yr CDS spread trading at implied junk levels for the last six months. Troubles have intensified over the past month and credit spreads now imply a 79% chance of default within the next five years. Moody’s placed the $6bn company on review for a possible downgrade just last week.

The Financial Crisis Of 2016 Rolls On – China, Oil, Copper And Junk Bonds All Continue To Crash

The Financial Crisis Of 2016 Rolls On – China, Oil, Copper And Junk Bonds All Continue To Crash

Buy Sell - Public DomainNever before have we seen a year start like this.  On Monday, Chinese stocks crashed once again.  The Shanghai Composite Index plummeted another 5.29 percent, and this comes on the heels of two historic single day crashes last week.  All of this chaos over in China is one of the factors that continues to push commodity prices even lower.  Today the price of copper fell another 2.40 percent to $1.97, and the price of oil continued to implode.  At one point the price of U.S. oil plunged all the way down to $30.99 a barrel before rebounding just a little bit.  As I write this article, oil is down a total of 6.12 percent for the day and is currently sitting at $31.13.  U.S. stocks were mixed on Monday, but it is important to note that the Russell 2000 did officially enter bear market territory.  This is yet another confirmation of what I was talking about yesterday.  And junk bonds continue to plummet.  As I write this, JNK is down to 33.42.  All of these numbers are huge red flags that are screaming that big trouble is ahead.  Unfortunately, the mainstream media continues to insist that there is absolutely nothing to be concerned about.

A little over a year ago, I wrote an article that explained that anyone that believed that low oil prices were good for the economy was “crazy“.  At the time, many people really didn’t understand what I was trying to communicate, but now it is becoming exceedingly clear.  On Monday, one veteran oil and gas analyst told CNBC that “half of U.S. shale oil producers could go bankrupt” over the next couple of years…

…click on the above link to read the rest of the article…

For Commodities, This Is The Next Great Depression

For Commodities, This Is The Next Great Depression

While the “sell in 1973, and go away” plan had worked out for some in the commodity space, the destruction of the last decade has only one historical comparison… the middle of The Great Depression.

The 10-year rolling annualized return for commodities is -5.1% – the lowest since 1938…

During the same period Stocks are up 7.3% annualized, Bonds 6.6%, and Cash unchanged. Dip-buying opportunity? Maybe.

UBS thinks so: Tactically we can see a bounce in Q1 before the capitulation starts

Tactically, in September 2015, we actually expected a more significant oversold bounce in commodities from last year’s late September risk bottom into ideally early Q2 2016 before we anticipated more weakness into later 2016. So far, the bounce failed since particularly in the energy complex we saw further weakness into December and the metals have been actually just trading sideways. Nonetheless, according to our Q1 US dollar pullback call, we still see the chance for another rebound attempt in commodities into later Q1, and if so the move can be significant (short covering). Such a rebound would however not change our underlying cyclical roadmap for commodities, and this means that any rebound in Q1 should be limited in price and time before we expect another and potential final capitulation wave to start into H2 2016, where we expect the CCI index to minimum test its 2008 low at 350 to worst case 320.

Commodities… on the way into a multi-year buying opportunity

All in all we are sticking to our last year’s projection and strategy call that commodities are on the way into an important H2 2016/early2017 cyclical bottom. What is missing in our view is the final act in this first bear market.

…click on the above link to read the rest of the article…

Plunging Commodities Interfere With The New World Order

Anglo American, a British company, and one of the world’s biggest miners, and a ‘producer’ (actually just a miner, how did those two terms ever get mixed up?!) of platinum (world no. 1), diamonds, copper, nickel, iron ore and coal, said today it would scrap dividends AND fire 85,000 of it 135,000 global workforce (that’s 63%!). 
Anglo is just the first in a long litany line we’ll see going forward. Commodities ‘producers’ are being completely wiped out, hammered, killed, murdered. They’ve been able to hedge their downside risks so far, but now find they can’t even afford the price of the hedges (insurance) anymore. And then there’s all the banks and funds that financed them.

And they’ve all been gearing up for production increases too, with grandiose plans and -leveraged- investments aiming for infinity and beyond. You know, it’s the business model. 2016 will be a year for the record books.

Just check this Bloomberg graph for copper supply and demand as an example. How ugly would you like it today?

And what’s true for copper goes for the whole range of raw materials. Because China went from double-digit growth to shrinking imports and exports in pretty much no time flat. And China was all they had left.

Iron ore is dropping below $40, and that’s about the break-even point. Of course, oil has done that quite a while ago already. It’s just that we like to think oil’s some kind of stand-alone freak incident. It is not. With oil today plunging below $37 (down some 15% since the OPEC meeting last week), it doesn’t matter anymore how much more efficient shale companies can get.

They’re toast. They’re done. And with them are their lenders. Who have hedged their bets too, obviously, but hedging has a price. Or else you could throw money at any losing enterprise.

…click on the above link to read the rest of the article…

Olduvai IV: Courage
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Olduvai II: Exodus
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