I’m just back from Mexico, where I met up with a few colleagues to go look at a new mine project.
While the project is gold, we had an interesting discussion about a completely different metal. You see, in Sweden, they just finished putting in 1.2 miles of electrified road. It holds a rail buried in the concrete that will charge your electric car while you drive.
We were sitting around the bar after our day in the mountains when this came up. An Ivy League professor of energy and mining was on the trip. His comment was: “Just think about all that copper!”
The fact is, the mining industry is not ready for the kind of copper demand that it will soon face.
The demand for copper from electric vehicles, grid-storage batteries, roadways that can recharge cars and the infrastructure needed to support those things will be enormous.
Rising Demand for Copper | Chief Copper Analyst
The chief copper analyst for metals and mining research group CRU believes that electric vehicles alone will drive an additional 1 million metric tons per year by 2025.
But it isn’t just electric vehicles in modern countries. There is also rising demand in developing nations.
In India, copper demand is rising rapidly. Luxury goods like cars, air conditioning and refrigerators use a lot of copper. India should add another 500,000 metric tons of demand by 2026.
Copper prices are already feeling the rising demand. As you can see from the chart below, the price of the red metal rose about 50% over the last two years:
What’s important to understand, from an investment point of view, is that this will make existing copper miners extremely profitable.
Companies like Freeport-McMoRan Inc. (NYSE: FCX), BHP Billiton Ltd. (NYSE: BHP) and Southern Copper Corp. (NYSE: SCCO) will see huge windfalls as the copper price continues to rise.
That was a hot conversation, as you can imagine. As I sat among some of the smartest geologists, analysts and fund managers in the mining sector, it really hit home. The copper market is going to boom.
The Bottom Line
It will be incredibly difficult to replace aging mines and find enough new supply to fill the rising demand coming from our high-tech society. There just aren’t many new copper discoveries. And the giant old mines have less ore every day.
Don’t get me wrong, this won’t happen tomorrow.
It isn’t an immediate thing. We have time to prepare. We can pick our prices and build our positions in these big miners. But make no mistake, like the rising tide, much higher copper prices are coming.
Good investing,
Matt Badiali
Editor, Real Wealth Strategist
