Why Demand for Copper Will Continue to Rise

Brian Hicks

Written By Brian Hicks

Posted June 8, 2024

Before I get into today’s article, I want to invite you to my MoneyShow speech I’ll be giving on Tuesday, July 9, 2:45 pm – 3:15 pm EST. You can watch, listen and ask me direct questions about my discussion.

Reserve your spot online here: https://online.moneyshow.com/2024/march/accredited-virtual-expo/speakers/5558eb95c3d149b99d1b48e027f1ad41/brian-hicks/?scode=062952

Now, let’s get started…

For the last couple of years, we’ve been predicting the birth of a new commodities bull market, or a commodities super cycle, if you will.

It’s here… and I believe we are in the first inning of this commodities supercycle.

Speaking of “this being the first inning,” famed economist and market analyst Ed Yardeni recently said “the roaring 20’s are back, and a 30% rally in the S&P 500 is coming in the next 2 years.” He likened the current market scenario to the 1920s when the world was coming out of a pandemic (the 1918 Spanish Flu) and World War 1. 

This is an important point. The 1920s was a boon for commodities as the global economy had to rebuild cities that were destroyed by the war. In addition, technology revolutions in electricity, indoor plumbing and refrigeration were becoming common. 

Today, it’s no different.

And the reason this is so important is because a lot of our premium services are either in natural resource stocks or in companies that use a massive amount of commodities; renewable energy, electric vehicles and even in the booming tech industries –  cryptocurrencies and artificial intelligence

Commodities like gold, silver, and copper are all hitting new highs. I’m about to give you a lot of bullet points to explain why commodities – particularly copper – is the one metal you should be watching very closely. I’ll explain it in much detail.

What Happened During the Last Commodities Supercycle?

To understand where we’re heading, let’s take a quick trip back to the early 2000s. 

That’s when the last commodities supercycle kicked off, lasting until around 2014. Back then, a few key factors drove commodity prices through the roof:

  1. Booming Emerging Markets: Countries like China and India were rapidly industrializing and urbanizing, driving massive demand for raw materials.
  2. Infrastructure Overhaul: These nations were undertaking huge infrastructure projects, needing loads of steel, copper, oil and other industrial materials.
  3. Supply Constraints: The 1990s saw limited investment in new mining projects, so when demand surged, supply couldn’t keep up. If you remember our investment thesis on Peak Oil, behind the idea of Peak Oil was the notion of “Peak Discoveries.” What that meant was oil companies were no longer discovering giant oil fields. They’ve all been discovered and were well past their peak production rates.
  4. Currency Dynamics: A weaker U.S. dollar made commodities cheaper for foreign buyers, pushing demand even higher.

Performance Highlights from the Last Supercycle

During that period, commodities experienced incredible price hikes. Here are a few examples:

  • Copper: Prices jumped from around $0.60 per pound in 2000 to over $4.00 per pound by 2011. Freeport-McMoRan (FCX), a leading copper producer, saw its stock price soar from $10 to over $60.
  • Gold: Prices climbed from $250 per ounce in 2000 to around $1,900 per ounce by 2011. Barrick Gold (ABX) enjoyed a stock price rise from $10 to over $50.
  • Oil: Crude oil prices surged from $20 per barrel in the early 2000s to over $140 per barrel in 2008. ExxonMobil (XOM) stock rose from $30 to over $90.
  • Iron Ore: Prices increased from $30 per metric ton in 2000 to over $180 per metric ton by 2011. Vale S.A. (VALE), a major iron ore producer, saw its stock rise from $2 to over $30.

Why This New Commodities Supercycle is Just Getting Started

Fast forward to today, and we’re seeing the early signs of another commodities supercycle. Here’s why I think this bull market is just beginning and why it will last for years:

  1. Global Rebuilding Efforts: The devastating wars in Ukraine and Palestine have caused massive destruction. Rebuilding these regions will require enormous amounts of raw materials, driving demand for commodities like steel, copper, and concrete.
  2. Green Energy Transition: The world is shifting towards renewable energy sources. Electric vehicles (EVs), wind turbines, and solar panels need a lot of copper, silver, lithium, cobalt, and other metals.
  3. Infrastructure Investments: Many countries are investing heavily in upgrading their infrastructure. From bridges to broadband networks, these projects need substantial amounts of raw materials.
  4. Supply Chain Challenges: The COVID-19 pandemic highlighted vulnerabilities in global supply chains. Companies are now investing to make supply chains more resilient, which will further increase demand for commodities.

Commodities Hitting New Highs

We’re already seeing the early signs of this supercycle. Gold, silver, and copper are all making new highs:

  • Gold: Investors are flocking to gold as a hedge against inflation and economic uncertainty.
  • Silver: With its dual role as a precious and industrial metal, silver benefits from both investor demand and its use in electronics and solar panels.
  • Copper: The demand for copper is skyrocketing due to its essential role in EVs, renewable energy systems, and infrastructure projects.

The fact copper is making record highs really is the catalyst for this new commodities supercycle.

Let me explain…

Copper: The Metal That Built Modern Civilization

Copper, often referred to as the “metal that built modern civilization,” has been crucial to human development for thousands of years. Its unique properties have made it indispensable from ancient times to today’s high-tech world. 

Let’s take a journey through copper’s history and explore why it’s perhaps the most important industrial metal, and why its demand will continue to rise.

Ancient Times:

  • Early Use: Copper’s use dates back to around 8000 BCE. Early humans fashioned tools, weapons, and ornaments from native copper, appreciating its workability and durability.
  • Bronze Age: Around 3300 BCE, humans discovered alloying copper with tin created bronze, creating a much harder metal. This marked the beginning of the Bronze Age, which revolutionized tool and weapon manufacturing, enhancing agricultural productivity and warfare capabilities.

Medieval and Early Modern Periods:

  • Coins and Currency: Copper and its alloys were used to mint coins, becoming a foundation of early economies.
  • Architecture and Art: Copper’s malleability and corrosion resistance made it popular in architectural features like roofs and statues, many of which have survived for centuries.

Industrial Revolution to Modern Era:

  • Electrical Revolution: The late 19th and early 20th centuries saw copper’s essential role in the exploding electrical industry. Its superior electrical conductivity made it the material of choice for wiring and electrical components.
  • Modern Infrastructure: Copper’s use expanded into plumbing, telecommunications, and electronics, solidifying its role in modern infrastructure.

Why Demand for Copper Will Continue to Rise

  1. Electric Vehicles (EVs): EVs use significantly more copper than traditional vehicles. With the global push towards greener transportation, the demand for copper is set to soar.
  2. Renewable Energy Systems: Solar and wind energy systems require vast amounts of copper for wiring, transformers, and inverters.
  3. Infrastructure Modernization: Many countries are investing in upgrading their infrastructure. This includes expanding electrical grids, modernizing telecommunications networks, and enhancing public transportation systems — all of which require substantial copper.
  4. Urbanization: As developing countries continue to urbanize, the need for copper in construction, electrical systems, and public infrastructure will grow.
  5. Technological Advancements: The rise of the Internet of Things (IoT), 5G networks, and other technological advancements will further drive copper demand.

Copper, the “metal that built modern civilization,” also plays a significant role in the cryptocurrency and artificial intelligence (AI) markets. 

Here are a few reasons why demand for copper will remain strong:

  1. Increased Computing Power: Both cryptocurrency mining and AI require powerful computing hardware, driving demand for copper in components and infrastructure.
  2. Expansion of Data Centers: The growth of data-intensive applications necessitates more data centers, which rely heavily on copper.
  3. Advancements in Networking: The push for faster, more reliable data transfer and connectivity will continue to drive the need for copper in networking equipment.

In conclusion, copper is integral to the infrastructure of both cryptocurrency mining and AI. Its unique properties make it indispensable in the hardware and systems that power these advanced technologies. 

As these fields continue to expand and evolve, copper’s role will only become more critical, further solidifying its status as a key industrial metal in the digital age.

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Brian Hicks

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Brian is a founding member and President of Angel Publishing. He writes about general investment strategies for Wealth Daily and Energy and Capital. For more on Brian, take a look at his editor’s page.

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