Why it’s Time to Buy CopperJune 25, 2018
The explosion in global demand for renewable energy is sparking a bull market for a wide variety for metals, most notably copper. The reddish metal is one of the most useful on Earth.
Not only is it an efficient conductor of electricity. It’s flexible and strong and won’t corrode easily. It’s used for heating, air conditioning, plumbing, roofing, adapters, computers, cars, mobile phones, wiring, electrical leads, transformers, motors and lighting units.
In short, copper is used in nearly every major industry of the world: transportation, engineering, machinery and equipment, electrical, building, automotive and computers.
However, to ensure that copper really is worth buying at the moment, we must answer three key questions that legendary investor, Jim Rogers has posed:
- How much production is there worldwide?
- Are there new sources of supply?
- Are there potential supplies?
After finding bullish responses to each, we’ve found that copper is clearly presenting us with quite an opportunity, especially at recent lows. All as global demand for copper — a crucial component for green energy, including solar, wind, and electric vehicles – explodes.
In fact, many green energy systems require more copper than traditional energy sources.
Photovoltaic (PV) solar cells, for example, can use up to 5.5 tons per megawatt (MW). Grid energy installations need between three tons and four tons per MW. Even a single wind farm can use as much as 15 million pounds of copper.
BMO Capital Markets projects that due to copper’s importance in both solar and wind energy, demand is expected to grow at a double-digit compound annual growth rate (CAGR) over the coming years, reports Kitco.com.
On top of that, roughly three times more copper is used in an electric vehicle (EV) than in a conventional-gas powered vehicle. On top of that, according to a recent study by IDTech Ex, the growth of the EV market will produce an eightfold rise in copper demand over the next 10 years.
By 2035, Bloomberg projects 43% penetration just in the light-duty vehicle market, which would equate to about 110 million cars, as reported by Mining.com. To meet that demand, the market would need up to 3.6 million extra tons of copper, equal to 15% of the market.
The copper story is “incredibly bullish,” says Leigh Goehring, managing partner at Goehring & Rozencwajg Associates, as quoted by InvestingNews.com.
Even though copper is under pressure, it’s time to start buying the “blood in the streets” opportunity with stocks such as Freeport-McMoRan (FCX) and Southern Copper (SCCO) at bottom of trend.