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Dr. Copper’s Forecast Is Looking Good

by Lobo Tiggre
Tuesday, June 19, 11:39am, UTC, 2018

I’ve been writing for years that copper is headed for a major structural supply deficit. Governments in major copper-producing countries are strangling supply, and it’s getting more difficult to permit new copper mines everywhere in the world.

Even a global economic meltdown would only delay the coming supply crunch temporarily. The escalating global trade war could tip the world in that direction—but nobody wants to happen. The odds favor negotiations leading to new trade agreements. That will be good news for copper and all industrial minerals.

Add to this copper’s key role in the new energy paradigm, which goes well beyond the copper used in electric vehicles (EVs), and we’ve got an extremely bullish case for investment.

Even with the recent pullback due to trade-war fears, copper is still up over 20% compared to a year ago. According to my projections, that’s just a beginning.

The Model

I’ve developed a model for forecasting supply surpluses and deficits in the key minerals essential to the new energy paradigm, including copper. My model takes conventional copper industry trends into account, and assumes an estimated average of 71.5 kg of copper per EV. Instead of predicting a single most probable case for EV adoption, I show a range of probable outcomes (scale on the right). My model also includes new mines coming online and old mines being depleted.

As you can see below, my model shows copper going into a modest supply deficit now. That only gets worse (or better, depending on your perspective) as far as can be reasonably projected into the future.

As a resource speculator who prefers to go long rather than short, I’m looking for supply deficits to drive prices higher. If my full range of likely outcomes shows a supply deficit, I know I’m likely on to a good speculation. That’s exactly what we have here.

There’s no need to beat this one to death. Copper is already a great speculation today—with or without the boost I expect from EVs—and it looks set to become an even better speculation for years to come.

That’s why I wrote about two copper companies I’m buying into in this month’s Independent Speculator. (One of these gives me exposure to nickel and cobalt as well, which I’m also bullish on.)

If you have your own picks, that’s great. A day like today, when scary headlines have prices dropping sharply while value remains largely unchanged, is a great day for buying.

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