Why You Should be Looking at ASX-listed Copper Stocks Today

Three years ago, Bill Gates said there would be almost no poor countries left in the world by 2035.

It sounds crazy. But imagine if he’s right.

What would that mean for energy demand?

Millions of people around the world would join the middle class. That would mean more demand for dishwashers, air conditioners, smartphones and cars. In other words, thousands more megawatts of electricity would be required.

This poses a problem.

The current grid can’t handle that much power demand. Regardless of whether there are no poor countries left in the world in 20 years’ time, it’s a problem. The electricity grid needs a major upgrade. That’s good news for most commodities. But it’s great news for copper.

The metallic gold

In my opinion, copper is one of the most — if not the most — important metals on the planet. It’s used in multiple industries, especially in infrastructure and building construction. It’s also an important component in vehicles and military equipment.

You may have heard the metal referred to as ‘Dr Copper’. That’s because copper is so widely used that some pundits rely on it to measure the pulse of the global economy. And as you may know, the copper price has surged over the past year. The metal is up 21% since 30 December — the best start to any year since 2009. Take a look:

Copper price chart 10-10-17

Source: Tradingview.com; Resource Speculator
[Click to enlarge]

Copper remains in an uptrend, which you can see by the pink channel in the chart. That’s good news for copper stocks today.

Billionaire mining tycoon Robert Friedland agrees. He’s a big long-term copper bull. His company, Ivanhoe Mines Ltd [TSX:IVN], owns a massive, high-grade copper project. Friedland believes copper will become the world’s best asset.

And it’s easy to see why…

Investing News reported on 25 July 2017:

According to Friedland, by 2030 the Earth’s population will reach 8.5 billion, with at least 5 billion people living in urban areas. As the population grows, the need for quality clean air will increase. He explained the medical dangers related to prolonged exposure to contaminated air and how different cities around the world are now turning to green energy.

Old cars are one of the main sources of pollution, and they are now being banned in cities from Shanghai to Barcelona. They are being replaced by electric cars, which will push demand for copper even higher. That’s because while cars using internal combustion engines require up to 23 kilograms of copper each, a hybrid electric vehicle uses nearly double that amount, at 40 kilograms of copper.

“Electric vehicle sales are expected to overtake internal combustion cars by 2038,” Friedland said.

Copper is a key component in electric vehicles (EVs). The average pure-battery-powered electric car uses about four times more copper than conventional petrol-powered vehicles. That’s good news for copper’s medium-to-long-term demand. But it might be different in the short term. Look at Tesla, Inc.’s [NASDAQ:TSLA] development as an indicator. 

Tesla’s story matters for copper

The Wall Street Journal reported on Friday:

Unknown to analysts, investors and the hundreds of thousands of customers who signed up to buy it, as recently as early September major portions of the Model 3 were still being banged out by hand, away from the automated production line, according to people familiar with the matter.

While the car’s production began in early July, the advanced assembly line Tesla has boasted of building still wasn’t fully ready as of a few weeks ago, the people said.’

The company still hasn’t become a mass-producing EV company. And, with multiple delays, it could be a few years away. Tesla, which rolled out its first mass-market Model 3 on 8 July, plans to produce 500,000 EVs in 2018.

The question, however, is whether Tesla can sell mass-market EVs without tax credits. Maybe not, argues Michelle Krebs of Autotrader. She told Quartz on 11 July:

“There isn’t enough consumer demand on their own to drive sales, even with the tax credit,” she argued in an interview, pointing to dealer discounting and an inventory build-up as signs of a soft market for EVs.

‘GM’s Chevy Bolt, its first all-electric, 236-mile range car which has sold about 7,600 cars this year, hasn’t exactly taken the US market by storm.

EVs make up 1% of car demand worldwide today. That’s not much. But it should change over time. Remember, aside from electric-car demand, the world needs a major power grid upgrade to handle EV demand. When the power grid gets an upgrade and EV demand starts to boom, copper demand should rise along with it.

We could see both take place within the next decade. And even if it doesn’t, the initial phase of the EV boom should demand more copper. That’s why I believe you should consider looking at ASX-listed copper stocks today as an investment.


Jason Stevenson,
Editor, Resource Speculator

We believe Markets & Money is unlike any other finance newsletter. Our mission is to look at the world of investments and finance in a sceptical and contrarian way. Our editorial team looks beyond the headlines and obvious explanations to bring you what we think is really moving the market. More importantly, we’re trying to show you where the next big opportunities and  big risks could be that you might not be aware of. In Markets & Money, you’ll read about the state of the Australian housing market, the future of the commodity boom, China’s rise to an economic superpower, the fate of the US dollar, and of course, a whole lot more.

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