#5. Copper: Structural Supply Deficit and Demand Shock

-

 

#5. Copper: Structural Supply Deficit and Demand Shock

Copper is one of the most vital metals powering the global energy transition, especially given that it is essential for electricity generation and transmission. Copper is critical for wind, solar, hydroelectric and thermal renewable energy and electric vehicles, and the amount required as demand for electricity increases is potentially immense. Renewable energy systems require 5-7x the amount of copper versus traditional designs, and electric vehicles (EVs) require 3x the amount of copper compared to gasoline-powered cars.

Inventory levels for copper (and all industrial metals) are critically low (see Figure 2). Over a decade of underinvestment followed by COVID-induced restrictions and supply chain issues hampered supply growth leading to structural supply shortages with the tightest supply-demand balance in decades. The surprisingly post-COVID solid global recovery in demand has put copper in a deficit situation, requiring draws on inventories to balance supply and demand.

In times of low inventories, physical deliverable contracts for copper are highly susceptible to price volatility from financial markets. The risk of a global recession, continuing growth struggles in China and typical Q1 seasonal weakness could produce near-term price weakness in copper. But into Q2 seasonal buying strength, a price squeeze higher is likely as physical deliveries (with low inventories) are required into expiry. Insufficient stock and inventory cover will likely prevent sustained copper price weakness, and the demand from the energy transition argues for higher long-term copper prices.

Figure 2. Copper Price and Chronic Low Copper Inventories (2013-2022)

Figure 2. Copper Price and Chronic Low Copper Inventories (2013-2022)

Source: Bloomberg. Data as of 12/31/2022. Included for illustrative purposes only. Past performance is no guarantee of future results.


Copper is used in home, cars, electric vehicle and for transition of electricity so will be in demand.


Comments

Post a Comment

Popular posts from this blog

Fossil Fuel not dead yet

-
Image
Fossil Fuel not dead yet “Old energy” will carry most of the load during the early years of the transition, as it guides “new energy” to the pinnacle of global power production. Producing an electric vehicle (EV), for example, requires about twice as much energy as producing an internal combustion engine vehicle. That’s because EVs are essentially batteries on wheels… and batteries are basically just hunks of metal. Mining and processing all of that metal demands a lot of energy. To unearth enough raw ore to produce a  single  midsize EV battery, for example, mining operators must excavate about 250 tons of terrain. After that, they must transport roughly 50 tons of ore to various facilities around the world that can extract the targeted metals and then refine them to battery-grade standards. With a few exceptions, every step of the process consumes some form of fossil fuel. Most other renewable technologies are even more energy-intensive than EVs. Therefore, far from replacing fossil
Read more

3D Printing

-
  3D Printing 3D printing saves time, Cost, and Waste while creating radically new parts.  3D printing is a form of additive manufacturing that builds objects layer-by-layer. 3D printing reduces the time between design and production, moves power to designers and reduce supply chain complexity and at a fraction of the cost of traditional manufacturing. 3D printing will revolutionise manufacturing, privacy, costs and timescales of creating a prototype. Applications include Medical Devices, Testing Devices, Training and Visualization aids, Personal Protective Equipment, Personal Accessories, Emergency Dwellings. 3D printing can be used for prototypes, molds and tools and End-Use Parts. Other 3D opportunities include Hobbies, toys and Games Semiconductors and Semiconductor equipment Die Sets, Jigs and Industrial Molds Foundries and Metal Products Footwear Plastic Products Healthcare equipment and supplies Machinery Automobiles and Auto Parts and Equipment Aerospace This is a massive game
Read more

All is flashing in 2023 for a good year

-
Image
All is flashing in 2023 for a good year The  Breakaway Momentum    indicator compares the number of advancing stocks to the number of declining stocks in the market over a 10-day period. And it’s triggered when the amount of advancing stocks outnumbers declining stocks by about 2-to-1. This is very rare and usually only happens when bear markets are ending and bull markets are starting.   The  Whaley Breadth Thrust  indicator is similar. It compares the number of advancing stocks to the number of declining stocks in the market over a five-day period. And it’s triggered when the amount of advancing stocks outnumbers declining stocks by about 3-to-1. This, too, is very rare and usually only happens when bear markets are ending and bull markets are starting.  The    Triple 70 Thrust  indicator was also triggered. This happens when the percentage of rising stocks in the market exceeds 70% for three consecutive days. This is also a rare indicator, and it also tends to mark the start of a ne
Read more