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Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com. 

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Jeff Currie: Copper Is The Best Trade Of My Career

  • The red-hot copper rally has propelled prices close to an all-time high of $5.10 per pound.
  • Copper investors are enjoying another banner year, with the Global X Copper Miners ETF (NYSEARCA:COPX) up 36.7% in the year-to-date.
  • Jeff Currie, Chief Strategy Officer at The Carlyle Group and former Global Head of Commodities Research at Goldman Sachs, has declared that copper is the new oil.
Copper wire

A couple of years ago, commodity pundits predicted that the green metal quartet of copper, lithium, nickel and cobalt would become the new age oil rivaling the total value of crude oil production amid the clean energy transition. A 2021 Eurasia Review analysis forecast that prices for the four metals could reach historical peaks for an unprecedented, sustained period in a net zero emissions scenario, with total value of production rising more than four-fold for the period 2021-2040. 

Unfortunately, the renewable energy revolution has not unfolded as many experts predicted, with metal prices sharply lower from their 2022 peak. However, there’s one notable exception: copper. The red-hot copper rally has propelled prices close to an all-time high of $5.10 per pound ($11,245 per ton), slightly lower than the historical peak of $5.13 per pound touched on May 15th. Copper prices are up 33.2% over the past 12 months.

Copper investors are enjoying another banner year, with the Global X Copper Miners ETF (NYSEARCA:COPX) up 36.7% in the year-to-date while its smaller peer,  Sprott Copper Miners ETF (NASDAQ:COPP),  has returned 38.4% over the timeframe. COPX is a relatively large ETF launched and managed by Global X Management Company LLC. COPX has $2.1B in Assets Under Management (AUM) and a 0.65% expense ratio. The fund is designed to measure broad-based equity market performance of global companies involved in the copper mining industry. COPP is a much smaller copper fund launched and managed by Sprott Asset Management USA Inc. COPP tracks the Nasdaq Sprott Copper Miners Index, which includes global companies within the copper industry, namely developers, explorers, and copper producers. COPP has just $21.0M in AUM and a 0.65% expense ratio.

Related: Oil Prices Remain Rangebound but a Breakout May Be Coming

Not surprisingly, Wall Street is growing increasingly bullish on the copper outlook. Jeff Currie, Chief Strategy Officer at The Carlyle Group and former Global Head of Commodities Research at Goldman Sachs, has declared that copper is the new oil and the best trade he has seen in his career. The analyst has pointed out that copper has long been touted as a big winner from the world's drive towards electrification including electric vehicles and huge grid upgrades. At the same time, Currie notes that it takes years for new copper mining capacity to actually come on stream. However, copper prices have, unexpectedly, pulled back sharply several times over the past two years. Currie says this has created a mismatch between short-term prices and long-term supply, making copper his highest-conviction trade ever.. That said, Currie says he believes that oil demand remains robust and does not see a bear market coming. 

Wall Street Bullish On Copper

Currie is hardly the only copper bull here. Citi shares his sentiment, saying copper has entered a second secular bull market this century, "driven by booming decarbonization related demand growth,’’ and that "only higher prices will solve these deficits." 

Citi says the last copper mega-bull market was in the 2000s when prices jumped 5x in three years, driven by rapid urbanization and industrialization in China. Citi has predicted that copper prices could skyrocket to $12k/t over the next two months, driven by a sharp fall in LME and SHFE copper stocks over the timeframe.

‘The lack of mine projects is increasingly becoming an issue for copper. This, along with investment in green technologies and a rebound of the global economy, should lift prices to US$10,250/ton by Q4,’’ Bank of America metals strategists have predicted, adding that a copper supply crisis is already here.

Meanwhile, Swiss multinational commodity trading company Trafigura has predicted that the electric vehicle, Artificial Intelligence (AI), power infrastructure and automation boom will drive at least 10 million metric tons of additional copper demand by 2035,. According to Graeme Train, Trafigura’s head of metals analysis, one third of the 10 million tons of new demand will come from the electric vehicle sector, "A third is electricity generation, transmission and distribution, and the rest is for things like automation, manufacturing capex and cooling systems within data centers," he said. 

Previously, Saad Rahim, Trafigura’s chief economist, projected that the AI boom has the potential to add one million tonnes per annum of copper demand by 2030,

If you look at the demand that is coming from data centers and related to that from AI, that growth has suddenly exploded,” said Rahim. ‘‘That one million tonnes is on top of what we have as 4-5 million tonne deficit gap by 2030 anyway. That’s not something that anyone has actually factored into a lot of these supply and demand balances.” the analyst added.

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By Alex Kimani for Oilprice.com

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