Copper’s new supercycle

Fresh highs and the long-term story

There has been much optimism around copper of late. Copper futures climbed as high as $9,164 per metric ton in March, reaching an 11-month high. There is evidence that the commodity is entering a new supercycle.

So why is this happening? Firstly, it’s important to provide some background about the metal. Copper comprises the third largest metals market by U.S. dollar value, behind iron ore and gold.

Its durability and malleability have diversified its application profile, with its uses ranging from construction, to transportation, to machinery, to consumer goods. Copper plays a critical role in society, and its large market size and wide-ranging applications have historically made its price a barometer of the global economy.

But perhaps most importantly, copper has superior conductivity, second only to silver. This has made it central to electricity transmission. And as decarbonisation means electrification, copper’s importance has surged.

As the energy transition begins to accelerate, we are seeing increased demand for copper to be used for upgrades and expansions to electricity grids, in electric vehicles (EVs), and in clean energy sources themselves.

 To achieve net-zero, copper demand may increase by around 1.6x. Bearing in mind we are focusing on the world’s third largest metals market, this is quite a jump.

According to the IEA, EVs require 2.4x more copper than a conventional internal combustion engine car, solar and onshore wind require 2.5x more copper than their fossil fuel counterparts – and offshore wind requires 7x more copper. The bottom line, is that decarbonisation requires a large amount of copper.

To achieve net-zero, copper demand may increase by around 1.6x. Bearing in mind we are focusing on the world’s third largest metals market, this is quite a jump.

However, as the below chart demonstrates, supply is potentially unable to keep pace with this demand, with a deficit beginning to form.

Source: BloombergNEF Transition Metals Outlook 2023. For illustrative purposes only. 

Another driver for copper may be a growth in infrastructure projects more generally. It is increasingly recognised that states have neglected significant infrastructure investments for several decades. The emerging deglobalisation trend is expected to boost these construction undertakings. Copper could be a major beneficiary.

From the chart below, looking at copper-to-S&P 500, we can see that China’s 2000s buildout had a strongly positive effect on copper. If the rest of the world is set for a growth in infrastructure spending, copper prices may behave in a similar manner.

Source: Bloomberg; U.S. Global Investors. For illustrative purposes only.

As sentiment around China’s economy improves, and data from the manufacturing industry shows signs of a recovery, the outlook for copper could improve even further.

So, this may only be the beginning of copper’s surge in demand. As the energy transition begins to truly take hold, and China’s economy stabilises, demand should continue to grow. Supply will need to keep pace, putting pressure on copper miners to plug the gap.

More Articles

Taking a U-turn: the world may be ready to embrace nuclear

Juni 2024

AI adds to positive natural gas outlook

Juni 2024

Copper – the defining metal of a new age

Juni 2024

Trump stance will force NATO countries to spend more whether elected or not

Mai 2024

The great travel industry rebound

Mai 2024

ESG Mining – Turning a brown industry greener

Mai 2024

ESG and defence investing: a balancing act

Mai 2024

Dominant Magnificent 7 could lose ground to broader tech rally

Mai 2024

The fall of Russian defence spending, and the rise of NATO

April 2024

Die KI-Revolution – ein Spiel mit Rohstoffen?

April 2024

Recycled gold and traceability

April 2024

Warum Investoren den Verteidigungssektor in Betracht ziehen sollten

April 2024

Bitcoin in 2024 – a monumental year so far

März 2024

Gold price rallies but miners need to catch up

März 2024

Investing in India’s rise – what makes India an ideal emerging market?

Februar 2024

Global instability – three potential ways to hedge

Februar 2024

Energy Transition: The Metal Elephant in the Room

Januar 2024

HANetf’s 2024 Outlook

Dezember 2023

The Road Ahead for Digital Infrastructure

August 2023

HANetf Model Portfolios Performance Review – Q2

August 2023

Two Ways to Invest in Low-carbon Gold

März 2023

US ETFs are not the only ETF wrapper with a tax advantage; Irish domiciled ETFs have one too!

März 2023

Article | There is no Walt Disney Company in crypto yet…

Januar 2023

Gold Shining in 2023?

Januar 2023

HANetf 2022 wrap up and outlook for 2023: Where did the inflows go?

Januar 2023

Key Dates for Digital Assets in 2022

Januar 2023

Article | The Merge and Ethereum – what you need to know

September 2022

Article | The innovative US funds that HANetf has brought to Europe

Juli 2022

Article | Why small ETFs are not necessarily less liquid

Februar 2022

Article | HANetf Outlook 2022: Covid; gold; crypto and more

Januar 2022

Solar Energy 101 | Understanding the Solar Energy UCITS ETF

Juni 2021

The Investment Case for Solar Energy | Executive Summary

Juni 2021

The Royal Mint ESG Credentials

Mai 2021

Five Things to Know about Investing in a Gold ETC

August 2020

Don’t Look | The Case For Non-Transparent Active ETFs

Juni 2020

Wie man kauft