Fluctuating Copper Prices & the Role of Fund Flows
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- เผยแพร่เมื่อ 12 ก.ย. 2024
- Recording date: 18th July 2024
The Battery Show (Copper Bottomed, Episode 16)
The copper market has seen significant action over the past two months, with prices rising to around $5/lb before pulling back to current levels of $4.41/lb. This volatility has been driven by fund flows and aggressive trading by financial institutions, sometimes at odds with on-the-ground market conditions in China. While Chinese copper traders were seeing weakness in housing completions, which typically drive copper demand, prices rose due to strong US demand and bullish sentiment around copper's long-term prospects.
Demand for copper continues to grow from electric vehicles, with global EV sales expected to reach 17 million units this year. The rapid growth of data centers is also driving significant copper demand, with global data center electricity usage now exceeding that of most countries. However, there are some headwinds, including China's state grid shifting to aluminum for some high-voltage transmission lines.
The long-term outlook for copper remains very bullish due to the difficulty in bringing new supply online. It takes an average of 23 years from discovery to production for new copper mines, and the pipeline of new projects is insufficient to meet projected demand growth. This supply crunch is expected to drive significant price volatility in the coming years.
M&A activity is heating up in the copper space as major miners look to acquire assets rather than develop them from scratch. There are rumors of potential bids for companies like Teck Resources and Filo Mining. Meanwhile, developers like Marimaca Copper and Foran Mining have successfully raised capital to advance their projects.
On the exploration front, several companies reported promising drill results. Highlights include Filo Mining's continued expansion of its high-grade zone, NGX Minerals' bonanza-grade intercepts at its Luna project, and Solaris Resources' restart of drilling at Warintza. Smaller explorers like Atex Resources, Aldebaran Resources, and C3 Metals also reported encouraging results that expand the potential of their respective projects.
For investors, the copper sector offers opportunities across the risk spectrum. Major producers and advanced developers provide more stable exposure to rising copper prices. Exploration-stage companies offer higher risk-reward potential, with the possibility of significant share price appreciation on discovery success. Given the strong long-term fundamentals, a basket approach of copper-focused investments could be an attractive way to gain exposure to the sector.
Key factors for investors to watch include Chinese copper demand trends, particularly in the property sector; the pace of global EV adoption and grid infrastructure buildout; progress on permitting and construction of new mines, especially in challenging jurisdictions; and potential technology breakthroughs in areas like extraction techniques or recycling that could impact the supply-demand balance. Overall, the copper market appears poised for an extended period of tight supply and rising prices, creating a favorable environment for well-positioned companies across the value chain.
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Merlin's copper exploration reviews are always good but this one is especially good because of the copper supply forecast discussion at the start. Thanks !
Brilliant work again, Merlin. BHP announced the Filo jv with Lundin today here in Australia. Keep these coming through oh brilliant one.
Aluminum is commonly used in high voltage wiring source: Nassau National Cable. "Copeer and aluminum are two common types of electricity conductors in electrical cables. Power transmission lines span for hundreds of meters between the towers, so overhead cables have to be cost-efficient. Copper wires can be used in overhead wires to a satisfactory outcome. However, aluminum power cables are two times lighter compared to their copper counterparts and six times cheaper while maintaining the same resistance rate. These properties make aluminum the best material for high-voltage transmission lines on the market, as overhead power cable has to be light and flexible in addition to being durable"
Aluminium is an often overlooked, but an important component in the energy transition. Aluminium is a key component in EVs, solar panels and wind turbines. If you think Copper will perform well, then Aluminium also deserves attention.
Thank you¡¡¡I'm learning day to day from your so intresting videos¡¡All the best¡¡
Thanks
I am now 180% levered long Nine Mile Metals. I expect a buyout from BHP or Anglo by Sept 30th for $2 B.
Thanks Merlin. Keep em coming!
Thanks for the update, good to see you again. I own a little Solaris, looking for an entry on Aldebaran.
Very good thanks.
pls comment on Arizona Sonoran Copper
If you go to Merlin's video titled 'Markets Wobble but Copper Prices Hold Firm', go to 22:11, Arizona Sonoran Copper is discussed.