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Copper surge: Navigating price booms and demand peaks

Copper stands as a linchpin in various industries, from construction to power generation, owing to its versatility. Often dubbed “Doctor Copper,” its price movements serve as a reliable gauge of global economic health.

Recently, copper prices have skyrocketed to around $10,000/tonne, spotlighting a critical challenge facing the industry: an inadequate supply to meet long-term demand. This surge stems from multiple factors, including supply constraints, a resurgent Chinese market, the integration of copper in Artificial Intelligence (AI) technology and the global energy transition, particularly in electric vehicles.

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The majority of the world’s copper comes from Latin America, with Chile and Peru alone contributing a third of the supply. However, projected supply surpluses from planned projects have dwindled. Challenges such as electricity shortages in Zambian mines, lower-grade ore in Chile’s aging mines operated by Codelco, and recurrent protests at Peru’s Las Bambas Copper Mine owned by MMG have further compounded supply issues, driving prices to a two-year high.

On the demand side, China accounts for approximately 55% of copper consumption. The country’s focus on infrastructure and real estate investment has bolstered industrial output and fixed-asset investments, signaling robust copper demand. Additionally, the rise in AI data centers necessitates upgrades in power infrastructure, driving further copper demand growth.

Moreover, the global energy transition emphasizes copper’s importance, given its superior conductivity. Electric vehicles, charging infrastructure, solar panels, and wind turbines all rely heavily on copper. Despite recent fluctuations in EV demand, the long-term investment case for copper in the green transition remains compelling.

As the gap between copper supply and demand widens, investors have a unique opportunity to capitalize on rising prices. Copper miners, known for their leverage to commodity prices, offer potential gains in bullish markets. However, exposure comes with risks, including geographic and market volatility. Therefore, accessing the copper market as a whole through a single investment vehicle may provide the best risk-adjusted returns amidst sustained high demand.

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