A case for copper?

[Reealjrd]

Top 20 car sales in the US include 5 hybrid types.
Note in the below chart that small cars are dominating sales.
The Chev Malibu was voted "car of the year" in 2008 and has great sales to date: It also is available as a (Mickey Mouse) hybrid!!!

Hello rederob,

This chart which you have give is good. As copper cannot come down because the automobile industry requires a lot. Till the automobile industry is alive copper cannot have any problem.

 

[ducati916]

I think my copper price estimates will be blown out of the water in the next bull run.
Careful reading of the post you quoted states that I was looking at an 18 month time frame for the subprime meltdown to wear through. Given you were not posting here I have no idea of your thoughts on this at that time. I think my time frame is reasonable, although "globalisation" seems to add a new spin on old themes.
You might notice that LME inventories are where they were over 4 years ago, and remain well below historical highs. I am confident copper inventories will rise substantially in the near term as present market conditions are dire, so prices will drop further still.
There remains a questionmark over copper stock builds in terms of percentage increases week on week. Overall copper inventories have been rising at a subdued pace. If you were using copper as a "barometer" for industrial activity the forecast would be for fair weather, not foul.

rederob,

With regard to your 18mths timeframe, I actually agree that that is probably a reasonable estimation.

The next ride is likely to be stronger and longer, as by then the impact of emerging economies will be considerably greater. Cap this off with benign western economies consuming to their heart's content and we have the critical ingredients for a massive bull market.

I'm not sure that Western economies will once again consume quite so freely in the immediate future. Bubbles, once popped, tend to avoid that asset class for some time. Thus the housing bubbles that inflated worldwide, will not re-inflate within the timeframe that you are postulating.

Building of infastructure, particularly in the emerging economies, while necessary will be financed how?

Trade surpluses were built through massive US consumption. Will that return? Thus will paying "cash" still be an option?

If not, then debt.
Will emerging economies want to incur debt on this scale?
Who will lend to them? Huge amounts of capital are evaporating currently.

Thus, I do not agree with your assessment of a continued and stronger commodities bull market.

jog on
duc

 

[rederob]

Thus, I do not agree with your assessment of a continued and stronger commodities bull market.

I began this thread over 11 years ago and so much has changed.
We now know a lot more about the actual quantities of copper used in all forms of electric vehicles. My original figures were very conservative for HEVs and as BEVs were not on the scene back then, we now have a new metric. HEVs will disappear and BEVs will become the new normal, consuming about 4 times the amount of copper as an ICE (internal combustion engine) alternative.
What I did do in my first post in 2007 was to look at at how much copper would be needed to convert the entire car fleet to EVs by 2027, just to show the massive volumes of copper involved. (There was no way that our manufacturing base could achieve that, even if every vehicle manufactured since 2007 was an EV.)
WRT to the ducati quote, I never assumed that after the subprime meltdown there would be an immediate shift to a bull market of any sort. Commodity bulls are very few and far between - just look at oil and gold as examples. However, as the BEV market accelerates, there is every chance that a number of metals essential to EVs will stretch the supply chain such that in a flat world economy there will be areas of significant outperformance.
Over the next few weeks I will look around to see if the major copper producers have any data or specific reports on what they regard as probable.

 

[Ann]

I began this thread over 11 years ago and so much has changed.
We now know a lot more about the actual quantities of copper used in all forms of electric vehicles. My original figures were very conservative for HEVs and as BEVs were not on the scene back then, we now have a new metric. HEVs will disappear and BEVs will become the new normal, consuming about 4 times the amount of copper as an ICE (internal combustion engine) alternative.
What I did do in my first post in 2007 was to look at at how much copper would be needed to convert the entire car fleet to EVs by 2027, just to show the massive volumes of copper involved. (There was no way that our manufacturing base could achieve that, even if every vehicle manufactured since 2007 was an EV.)
WRT to the ducati quote, I never assumed that after the subprime meltdown there would be an immediate shift to a bull market of any sort. Commodity bulls are very few and far between - just look at oil and gold as examples. However, as the BEV market accelerates, there is every chance that a number of metals essential to EVs will stretch the supply chain such that in a flat world economy there will be areas of significant outperformance.
Over the next few weeks I will look around to see if the major copper producers have any data or specific reports on what they regard as probable.

Rob, would you mind if I copy and pasted this post over to the Copper Charts thread? I always apprciate what you have to say and I would like to hang onto it where I can find it?

 

[rederob]

Rob, would you mind if I copy and pasted this post over to the Copper Charts thread? I always apprciate what you have to say and I would like to hang onto it where I can find it?

There is no chart Ann, but feel free.

 

[Ann]

There is no chart Ann, but feel free.

Thanks Rob, I think I will get Joe to change the heading to just Copper. Once it was up I realized it precluded FA and that is always interesting and a valuable asset in any discussion.

 

[rederob]

"Fitch Solutions Macro Research ... expects the global copper market will see a persistent undersupply over the coming years, as global consumption, driven by China's power and infrastructure sectors, and increasingly by rising electric vehicle production, continues to outpace supply growth."

 

[rederob]

Yesterday copper went into backwardation again as LME inventories have continued to decline:


Available LME stock is a tad over 50k tonnes:


Next target prices for copper?


How far does copper run in a bull market?

 

[rederob]

Sorry that the legend to the last chart above did not show:

As you can see, copper and nickel have similar trends over the past 20 years, except for when nickel went ballistic early in 2007 due to a massive deficit.
Interestingly, when BEV's make their batteries to the 8.1.1ratio then a 60kwh NMC811 battery uses 5kg of cobalt, 5kg of manganese, 6kg of lithium and 39kg of nickel. This is almost the same weight used to calculate the increased demand I proposed for just Hybrid Electric Vehicles when this thread began 13 years ago.
By way of comparison copper content of "electric" vehicles is nowadays as follows:


As manufacturers are currently switching to greater numbers of pure BEVs, more than twice the copper content now needs to be used as the basis for this thread.
Elsewhere lithium can be discussed, as that market has recently also bounced back as the BEV evolution continues:

 

[rederob]

Copper producers are in for a bonanza if they are supplying into the price upside right now:

LME forwards remain in backwardation, while LME inventories are relatively unchanged over the past week.
I don't know how much copper is available for recycling, but anything out there will be prized.
And leading the charge is:

 

[frugal.rock]

Posted elsewhere, if there's anyone else out there like me, they've been collecting scrap for over 15 years waiting for times such as these.... I'm holding out for over $4...

Well Copperheads everywhere must be cheering today, POC breaking to new highs.
Nearly stepped on a copperhead once, good thing it was earlish morning and it was sluggish... I jumped like a gazelle mid stride!

I believe I should start digging out my scrap copper collection and get stripping again.... insulation that is!
Have a air conditioner I picked up about a year ago, someone chucking it out.
It's an old school in wall jobbie, and has 2 copper cored exchangers... I'm guessing that maybe their worth around $100

Also have a bunch of old heavy duty HV mains cable, the stuff that has petroleum jelly and paper wrap as insulation and the outside sheath is lead...yeehaa.

Last trip to the scrappies was around late 2006, early 2007 and bright shiny wire was around $9.50 per kilo.
I remember driving past Lucas Heights nuclear reactor area and saw someone had dumped an old car radiator, mostly copper it was.
Got $40 in scrap for the U turn to jump out and pick that up.... I reckon a radiator like that is probably worth $300 as a spare part now though, after a recore that is.
Anyway, enough of me reliving the dream...
60 year chart
View attachment 119857

20year chart
View attachment 119858

 

[Dona Ferentes]

been collecting scrap for over 15 years waiting for times such as these.... I'm holding out for over $4...

When does the thieving start, when functional equipment is rendered useless by opportunism(= vandalism)?

 

[rederob]

Looking back at copper prices over the past 20 years or so there are some interesting observations to be made.

The initial bull market led into the GFC, and subsequently saw prices crash to levels 4 years previous.
Interestingly, the 2005 bull market went parabolic, while the 2009 did not.
So far the 2021 bull market remains linear, and incredibly narrow. That is unlikely to continue as there are always corrections. However, both of the previous bull markets ran to further highs before failing.
Takeaways:

• Each of the previous bull markets ran for at least 2 years, whereas the current one is not yet a year old
• Each of the previous started from higher lows, and ended higher again
• If a similar trend repeated, then this bull run will exceed $5.25/lb

As this thread was premised on an EV evolution increasing copper demand, and that demand is barely in its infancy right now, I envisage this bull market to be significantly stronger and longer than any previous. Moreover, even if there is a shift to hydrogen over batteries, the electric platform remains.

 

[rederob]

Since last posting a chart, copper prices breached $4/lb and have held up in that range for most of the past month.
Despite strong copper prices, LME warehouses are not seeing the usual large inflows that have been a feature in Kitco's charts:


Here's a conservative take on where things stand:

https://www.tradingview.com/x/B9bnMSMB/

 

[Dona Ferentes]

if there's anyone else out there like me, they've been collecting scrap for over 15 years waiting for times such as these.

Scenes from Council clean-up day.... All electric fans and other machinery with copper,, put out for collection; busted open and coils taken, plastic and housing scattered and left lying around

 

[frugal.rock]

Scenes from Council clean-up day.... All electric fans and other machinery with copper,, put out for collection; busted open and coils taken, plastic and housing scattered and left lying around

Grubs.

Myself and society operate modus Vivendi.

If I see grubs like that I want to yell at them. Filthy animals.

That's why I like to hear of the occasional "death by misadventure"....

 

[rederob]

As you can see, spot prices have remained in the $4 range over the past month.


That's despite a solid inventory build:

The reason is simple. Cancelled warrants comprise a third of LME inventory and backwardation remains firmly in place:



And who else is exposed to this lingering upside?

 

[Garpal Gumnut]

Thanks @rederob . You cannot beat copper to hold its value in the long term, nor iron ore. Which copper stocks turn your fancy ?

gg

 

[rederob]

Thanks @rederob . You cannot beat copper to hold its value in the long term, nor iron ore. Which copper stocks turn your fancy ?

gg

I like OZL most as their gold byproduct credits mean every ounce of copper is profitable.
Of the explorers, I several times have bought into SVY and have an average entry price of about 65cents. But they seem like the gunners - gunna be a biggie! - yet haven't delivered to date.

 

[rederob]

Spot copper prices overnight hit a recent-record high of $3.32/lb before dipping 4 cents, and closed at its highest since June 2011:




Backwardation has continued to increase (from around $150/tonne in January to well over $200 now), suggesting demand is known to be strong:



Cancelled warrants remain at above 30% of LME total warehouse stock.