Is Copper Going to Benefit During The Green Transition?
Skerdian Meta • 2 min read
Copper prices have taken a deep dive since early May as commodities declined and they still remain bearish. The last decade was choppy for Copper, which closed it lower than in 2010, but this decade Copper will probably be one of the best trades.
It’s well understood to the government level, that we’re going to need a lot of copper in the green transition which has been initiated by the elites and that existing mines aren’t enough. At the same time, investors are reluctant to invest in new mine construction because of the bearish momentum in spot Copper during summer and prices aren’t great, as well as because of inflationary cost increases in mine construction everywhere.
I’m tempted to think that’s a story that’s so well understood that there’s no money to be made, but if you look at how copper miners trade, that’s not the case at all. The general consensus is that the big shortage will emerge in 2024 or 2025 as the green transition ramps up and China rebounds but at some point there will be stockpiling ahead of that.
Is that what’s happening now? Bloomberg noted that Thursday’s 2.4% rally in copper was the most in a day since early June and that front month copper in London is trading with a $145/ton premium over the third month. That kind of backwardation is usually a sign of a tight physical market.
Copper Weekly Chart – The 200 SMA Held As Support
Can the rebound continue higher in Copper?
China has been going through an economic slowdown, but even so, imports there are up 8.1% so far this year until September. At the same time, Chilean copper exports are down since the beginning of the year. ZeroHedge also wrote this weekabout the looming copper shortage and cites an S&P Platts report that warns the green transition could be derailed by the unavailability of copper.
Again, this is all well known to anyone who is paying attention. It all really comes down to the question of when to buy copper. It’s certainly cheap now but it’s fallen because of economic worries. However note that copper prices have held up better than many risk assets lately. The weekly chart here also shows that it found support at the 61.8% retracement of the 2020-2022 rally.