Macquarie on Copper:
In conclusion, there is a significant opportunity for increased scrap processing to feed into the supply demand balance going forward. This will come from an increased base level as the world moves towards a more circular economy, together with scrap’s ability to respond in the short term to higher prices when the market is tight.
The magnitude of the structural deficit for copper is such that scrap alone is not going to be sufficient to fill it, but combined with new greenfield and brownfield projects (Copper projects: 1.0Mt of additional supply could be approved this year) and technologies currently under development to increase recoveries and / or make lower grades economic (Filling the copper supply gap: the potential of lowgrade sulphide leaching), it is plausible that the hypothetical supply gap will continue to remain just on the horizon. By definition, the market will ultimately balance but, as always, prices will need to do the heavy lifting of both incentivising this supply and, most likely, generating incremental demand destruction through thrifting and substitution.
Damien Klassen from Nucleus Wealth has penned another well thought out contrarian view on Copper - posted on Livewire:
...
The upshot of all of this is that if you are sure that:
then copper is probably the right commodity for you
If you have doubts over any or all of these, you might not want to go all-in on copper investments
DISC: I hold a little SFR both IRL and on SM
I think we've seen numerous articles and home it's not group think but another fund manager 718a37_3bc0278b487a4c69988e2ef2f44627ca.pdf (oldwestim.com)
"In our view copper prices will likely have to at least double from here and stay elevated to give the proper signal for additional investment in new supply. We believe structural supply deficits in many commodities will lead to sharply higher prices in the coming years, even if current market conditions suggest otherwise. This disconnect between short term concerns and long term fundamentals presents a compelling opportunity for investors, and we have been actively raising capital to deploy into these areas. "
And then on Livewire - The growing disconnect between copper stocks and outlook for copper demand-supply - Barry FitzGerald | Livewire (livewiremarkets.com)
Freeport Preso:
5 hours ago
Newly formed copper cathode sheets at a smelting plant in Poland. The metal is crucial for ‘greening’ the economy © Bartek Sadowski/Bloomberg
Global plans to electrify economies and cut carbon emissions could be slowed down by copper shortages, the head of the world’s largest listed producer of the metal has warned.
Richard Adkerson, chief executive and chair of US mining group Freeport-McMoran, said surging global demand for copper for the rapid rollout of electric cars, renewable electricity and power lines would cause a shortfall.
“There is going to be a very significant shortage in copper,” he said. “It’s going to be very difficult to meet the aspirations that have been set.”
Copper is crucial for “greening” the economy because of its ability to conduct electricity. An electric car can use three times the amount of copper as a combustion engine counterpart, while renewable energy projects tend to need five times the volume of the metal as traditional gas, coal and nuclear power plants.
In a report issued last week, consultancy Wood Mackenzie said 9.7mn tonnes of annual supply needs to come from projects yet to be sanctioned over the next decade. The market size is currently 25mn tonnes a year.
“To date, a shortfall of this magnitude has never been overcome,” the authors wrote, predicting that $23bn of annual investment in new projects was needed, two-thirds more than the average over the past 30 years.
Maximo Pacheco, chair of Codelco, the world’s largest copper producer, told the Financial Times he expected a deficit of 6mn-7mn tonnes of copper over the next decade.
Codelco has been struggling to maintain output at its mines, with Pacheco saying it would not be able to recover to last year’s production levels for up to four years. “It’s a tremendous effort to replace the resources.”
Mining executives say the supply challenge is compounded by the downturn in the global economy, which has dragged copper prices lower and led commodity strategists to predict a market surplus next year.
“This current economic turmoil is only making the problem worse,” Adkerson said. “Companies are reluctant to invest in today’s world.”
Visible copper stocks, which make up a small fraction of the inventory held but heavily influence purchasing managers’ decisions, are running at record lows, creating a risk of volatile price changes.
Geopolitical tensions are also shaking up supplies of metals, including copper. Industry executives said the shunning of Russian supplies had led to a more immediate scramble in Europe, where buyers have been willing to pay hefty premiums or sign longer-term deals to secure material.
Copper producers say a host of factors from lengthy government permitting processes and projects where extraction is more difficult to a lack of shovel-ready projects makes it challenging to meet long-term demand growth.
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Jonathan Price, chief executive of Teck Resources, which is developing one of the world’s largest copper projects in Chile, said at the FT Mining Summit last week that “the equation just doesn’t add up” between the rise in demand and obstacles for new supply.
However, a supply response by increasing production from scrap copper could ease some of the pressure, and Adkerson said unforeseen technological advances could also unlock supply.
“If we just stick with today’s technology and you look at the challenges, the aspirations are outrunning the reality,” he said.