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Copper Ready to Explode

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Websim is the retail division of Intermonte, the primary intermediary of the Italian stock exchange for institutional investors. Leverage Shares often features in its speculative analysis based on macros/fundamentals. However, the information is published in Italian. To provide better information for our non-Italian investors, we bring to you a quick translation of the analysis they present to Italian retail investors. To ensure rapid delivery, text in the charts will not be translated. The views expressed here are of Websim. Leverage Shares in no way endorses these views. If you are unsure about the suitability of an investment, please seek financial advice. View the original at
  • Declining mine quality and geopolitical tensions reduce copper availability
  • Rising needs from renewable energy and tech sectors boost copper prices
  • US interest rates impact copper costs; potential rate cuts could drive prices up

Copper Squeeze

Copper possesses exceptional thermal and electrical conductivity, making it a critical component in energy technologies and essential for all electricity-related infrastructure.

Due to its extensive usage, the demand for this non-precious metal is increasing while supply has been scarce.

If this trend continues, copper prices will likely experience a significant upside.

Shortage supply

Given that Russia is a key global supplier of copper, Washington and London’s ban on metal supplies from Russia has heightened fears of disruptions in the global supply.

wisevoter

The problem with copper supply is worsening as the quality of existing mines declines.

Additionally, developing newly discovered mines is a lengthy process, often taking about 20 years from discovery to operation.

This has resulted in reduced mining activities, sparking worries about an insufficient supply of copper for the green energy transition.

The scarcity of this essential metal poses a threat to global efforts toward electrification, a key component of shifting from fossil fuels to more sustainable energy sources.

Hence, it seems inevitable that the price will continue to rise.

In fact, on Monday, copper touched $9,815 per metric ton on the London Metal Exchange (LME), the highest price in two years.

Westmetall

Huge demand

The demand for copper is set to rise due to the growing adoption of renewable energy.

Beyond its role in the energy transition, copper is also integral to expanding artificial intelligence and data centers.

Demand from AI and data centers is anticipated to boost copper consumption by 1 million[1] tons by 2030, marking a significant catalyst in copper’s bullish trend.

Overall, copper usage is expected to increase as demand continues to grow.

Tradingview

Copper futures have surged by 18%[2] in just the past three months, reflects optimism about global growth and increasing demand.

Fed & Copper

The US dollar and interest rates significantly influence copper prices.

When US rates rise, and the dollar strengthens, it becomes more expensive to hold copper inventories, which can depress copper prices.

The market does not anticipate the Federal Reserve cutting interest rates until this summer or possibly later.

Following a period of economic tightening, the subsequent phase involves reducing interest rates, which will ease constraints on economies. This change will likely boost copper demand due to its extensive applications across various sectors.

Conclusion

The renewed interest in copper appears to be part of a larger trend of investors shifting towards commodities. With gold soaring to all-time highs, other metals are also gaining momentum.

Factors fueling this bullish outlook include supply limitations, a revival in the manufacturing cycle, and rapid growth in sectors that heavily use copper, such as renewable energy.

Additionally, some investors are turning to commodities as a hedge against the recent uptick in inflation in the US.

 

Professional investors looking for exposure to copper may consider Leverage Shares Copper ETCs , which track the performance of the most liquid copper futures traded on COMEX.

 

[1] Trafigura

[2] Tradingview

Your capital is at risk if you invest. You could lose all your investment. Please see the full risk warning here.

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