Is Copper the New Oil?
One of the greatest conductors of electricity known to man is now being compared to oil as a commodity needed to power the world in its transition to green energy/zero carbon emission. While this might seem out of reach at the moment, there are some strategic moves investors can make to capitalize on this transition.
In a recent commentary by Financial News Media, experts at Goldman Sachs had this to say about copper…
Copper has the necessary physical properties to transform and transmit these sources of energy to their useful final state, such as moving a vehicle or heating a home, the report said… Leveraging our equity analysts’ carbonomics analysis across EVs, wind, solar, and battery technology, we quantify this demand in a bottom-up model, estimating that by 2030, copper demand from the transition will grow nearly 600% to 5.4Mt in our base case and 900% to 8.7Mt in the case of hyper adoption of green technologies”, Goldman Sachs said. It concluded: “We estimate that by-mid decade this growth in green demand alone will match, and then quickly surpass, the incremental demand China generated during the 2000s. Ripple effects into non-green channels mean the 2020s are expected to be the strongest phase of volume growth in global copper demand in history”, it added.
Obviously a demand increase anywhere between 600-900% is going to increase the price of the underlying commodity, in this case copper. There is also the phase of ramp up for copper miners as well as additional costs they will need to undertake in order to move more metal out of the ground and get it to the manufacturers that need it.
Copper’s Role in Renewable Energy
There is a great visual below, from the Visual Capitalist, that shows the role of copper in renewable energy including future demand that continues to increase.
How to Invest in Copper
In the most basic way, you could purchase tons of copper and try to figure out a place to store it and then find someone to sell it to when the price goes up. The easy answer would include listing out all of the copper mining companies that are publicly traded, but as mentioned previously, there is a strong likelihood that the cost of mining copper and other metals will continue to rise along with the value of the metals being mined.
So, what does that leave as an investment option? Just like nearly all mined metals, royalties on the producing and yet to be producing mines give the investor exposure to the metal without the associated costs of pulling it out of the ground. There are at least a few companies that are focusing on acquiring royalties with exposure to metals that are heavily used in renewable energy, but for the most part those are all still trading OTC or not on a public stock exchange. If you look closely at precious metal royalty companies, many have diversified their royalties to include other metals, including copper. One in particular brings in 38% of their revenue (as of the writing of this post) using copper royalties. This means, their cost of acquiring the royalties has already been fixed and any increase in the price of copper only increases their profit margin on that book of business.
If you are interested in investing in copper, royalty companies, or just looking for a second opinion on your portfolio, don’t hesitate to reach out today!