Copper

[mattee2264]

Copper recently took out the 2022 high and hit over $5 per lb. And sits at double the 2016 and COVID lows. Copper producing companies are on a roll as well and as you'd expect they've seen stock price appreciation even better with Southern Copper and Antofagasta up 3x from those lows and Freeport up 5x. Usually I would just assume it was a cyclical trap and usually the best time to buy commodities is when commodity companies are making losses, commodity prices have slumped and sentiment is negative. But there seem to be good reasons to expect another super cycle and if that is the case we are probably still in the early innings and there is a lot more gains to come. 

 

Copper seems as though it will be the new oil. Needed for all of the clean energies, needed for AI data centres, needed for electric vehicles, and also for the military as geopolitical tensions ramp up globally. And there do not seem to be any good substitutes. So demand seems set to grow rapidly in coming decades.

 

Meanwhile supply is scarce. There has been underinvestment for many years. And unlike iron ore which is relatively abundant, there isn't that much copper in the world. And it isn't easy to bring new supply online so there could be structural shortages for quite some time. 

 

And it also does very well in inflationary environments so you get an inflation hedge to boot if you are worried of monetarization of the insane amounts of government debt. 

 

Any thoughts?

 

 

 

 

[Ulti]

https://open.spotify.com/episode/3Db5ucUk7wDiGznnaH0r7k?si=mFKkaeYjRAKsonmOOQr_ew

Jeff Currie on Copper

[nwoodman]

Timely post.  Been starting to get my head around this because of Fairfax’s investment in  Foran Mining.  I was listening to this podcast with Arvind Sanger.  Had some useful stats on Copper and worth a listen.

 

He argues that we need more copper over the next 20 years than we have found in human history.

https://podcasts.apple.com/au/podcast/we-study-billionaires-the-investors-podcast-network/id928933489?i=1000655863672

 

“Arvind Sanger is the founder and managing partner of Geosphere Capital Management, a global long-short equity hedge fund focused on natural resources and industrial companies worldwide.”

[Gamecock-YT]

Those of us that follow Altius have heard the CEO pounding the table for the past few years that this was eventually going to happen. I've positioned accordingly. 

[TwoCitiesCapital]

On 5/18/2024 at 6:23 AM, Gamecock-YT said:

Those of us that follow Altius have heard the CEO pounding the table for the past few years that this was eventually going to happen. I've positioned accordingly. 

+1 

 

Have been rebuilding my stake in Altius that was sold in 2021. 

 

Have been rolling short puts on FCX monthly for a bit. 

 

The call in copper was obvious with the political will to electrify everything.

[rogermunibond]

Robert Friedland has been banging the copper bull story for years.

 

If the prices do rise 4-5x, what's the likelihood big substitution effect comes into play - electrical uses of copper move to aluminum or home building uses to PVC etc.

 

The total value of some copper uses in electrical and home building is pretty low right.

[gfp]

42 minutes ago, rogermunibond said:

Robert Friedland has been banging the copper bull story for years.

 

If the prices do rise 4-5x, what's the likelihood big substitution effect comes into play - electrical uses of copper move to aluminum or home building uses to PVC etc.

 

The total value of some copper uses in electrical and home building is pretty low right.

 

Most copper used in new home building in the US is the Romex-style NM cable - the 10, 12 and 14 gauge type stuff.  This could be substituted with aluminum but I think sheathed copper NM cable is pretty well entrenched in the code books so it would persist for a long time.  When we put in a big cable for a 100 amp sub panel or something, we already use aluminum.  That must be like 2 AWG aluminum cable or something like that - they are some big thick cables.

 

I would assume solar installations still use copper wire for most everything.

 

Plumbing in the US  has switched away from copper water supply lines to pex a long time ago.  There are still some brass fittings, which use copper.  The rest of the copper is just general electrical stuff like appliances, air conditioner motors, etc.

[rkbabang]

22 hours ago, gfp said:

 

Most copper used in new home building in the US is the Romex-style NM cable - the 10, 12 and 14 gauge type stuff.  This could be substituted with aluminum but I think sheathed copper NM cable is pretty well entrenched in the code books so it would persist for a long time.  When we put in a big cable for a 100 amp sub panel or something, we already use aluminum.  That must be like 2 AWG aluminum cable or something like that - they are some big thick cables.

 

I would assume solar installations still use copper wire for most everything.

 

Plumbing in the US  has switched away from copper water supply lines to pex a long time ago.  There are still some brass fittings, which use copper.  The rest of the copper is just general electrical stuff like appliances, air conditioner motors, etc.

 

Yes, those thick aluminum cables are super hard to work with, but dirt cheap compared to copper.  We had an April snow storm that took down my drop wire between my house and my detached garage, so I decided rather than put it back up the way it was to run a line underground.  It's a 100A panel in the garage and I needed ~170' of cable.   I bought 175' of 1/0-1/0-1/0 aluminum cable for $292.25 at an electrical supply.  That would have been thousands in cable costs to do in the appropriate gauge copper.  I know in-wall aluminum house wiring was used in the 1970s when copper prices were high and there were some house fires due to contractors not using the correct gauge.  Aluminum house wiring became a red-flag when looking at properties built in the 70s.

 

EDIT:  I just looked it up the aluminum house wiring fires were due to the type of wire used and not being compatible with the outlets and light switches.  Aluminum to Copper connections caused corrosion at the connections which caused the fires.

 

Edited May 21 by rkbabang

[rogermunibond]

What about power generation/utility usage of copper?  No substitute for turbine electrical generation or for high voltage transmission cable?  

[rkbabang]

22 minutes ago, rogermunibond said:

What about power generation/utility usage of copper?  No substitute for turbine electrical generation or for high voltage transmission cable?  

 

 

I think the only thing better than copper in a generator would be silver and that is even more expensive.

 

[gfp]

38 minutes ago, rogermunibond said:

What about power generation/utility usage of copper?  No substitute for turbine electrical generation or for high voltage transmission cable?  

High voltage transmission lines are already aluminum - it would cost a fortune otherwise. They put steel in there to make it strong but the conductor is Aluminum 

[rkbabang]

7 minutes ago, gfp said:

High voltage transmission lines are already aluminum - it would cost a fortune otherwise. They put steel in there to make it strong but the conductor is Aluminum 

 

Yes, also I know there are companies researching replacing the steel with different carbon fiber like materials to make them stronger and lighter, but I can't see a switch away from aluminum for the conductor, unless they find some type of engineered material that has both a strength to weight ratio improvement over steel and at least the conductivity of Aluminum. EDIT: at a reasonable cost.

 

Edited May 21 by rkbabang

[ValueArb]

I'm thinking any spike in copper prices will help initiate the inevitable switch to wireless power transmission;)

[Ross812]

@mattee2264 I pitched Grupo Mexico which is the cheapest way to buy Southern Copper in the investment ideas section a couple of years ago. The idea didn't get any traction.