A decade of low capex? Check. Trillions of dollars of spending on green energy? Check. Inventories near 17 year lows? Check. Sufficient copper supply coming online in the next few years? ………
This is a slam dunk (>medium term) investment case if I've ever seen one. It's a future 'crisis' in plain site.
- Global mining capex extremely muted relative to earnings (Mining.com)
- Chile, one of the biggest producers, seeing production at lowest level in 6 years. (Bloomberg) Chile represents “a quarter of the world's mined copper.”
- Future projected refined copper usage by source. Note that the green bar is just the non-energy-transition related spending and would have occurred no matter what. (S&P Global)
- Consumption per capita and future projections (S&P Global)
- Copper usage per megawatt by source (S&P Global)
- Bringing mines online is an arduous process (S&P Global)
- Record low base metal inventories, including copper. (Goehring & Rozencwajg)
- Metals needed for net-zero plans (Bloomberg)
- Copper shortages might even be imminent (FT)
- Fewer copper mining discoveries are being made
- Future Capex requirements broken down by decade
- Trafigura: “I would highlight copper as the most critical metal globally given the shortage in the market. We only had 3.5 days of copper stock equivalent at the end of last year.”
- Goldman Sachs: “We’ll be at the lowest observable inventories that have ever been recorded at 125,000 tonnes. We have peak supply occuring in 2024.”
- “An electric vehicle (“EV”) requires 3½ times as much copper as an internal combustion engine vehicle [Wood Mackenzie].” Buses “require approximately 11 times as much.” (Forbes)
- “Grid infrastructure necessary to support the expected number of charging stations in 2030 is expected to consume 250 percent more copper than the decade prior.” (Forbes)
What's the catch? Well:
- All the proposed spending on 'green energy' could be a great big lie? Actually we love ICE vehicles and fossil fuels.
- Environmental activists, politicians, local residents suddenly drop all opposition to new mines in their region; actually we all love mines in our backyards now. And it's totally okay if this rare bird's migratory pattern is disrupted and these loud vehicles have to scare some deer.
- New scientific breakthrough, but probably only going to matter in a few decades (the shortages are coming this decade)
- Substitution of aluminum? Well, unfortunately aluminum production is extremely polluting; it has poor conductivity; requires 40 times more energy (Bloomberg); has corrosion issues. We are nearing the limits of substitution barring more scientific breakthroughs.
- A recession will put all of this on pause (for a month or two)
List your favorite copper miners below. Teck, FCX, SCCO, the more diversified mining giants (BHP, Vale, Rio, Glencore), …
I made a post about this last week but this one has newer graphs/headlines
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