We have discussed recently the geopolitical forces which are shaping the short term outlook for copper. POTUS is facing a very delicate and fragile situation in the global economy with a very tired bull market in general equities which is weathering the twitter storms during the trade war with China against the USA. The very smart idea of resetting this very extended bull market in the 2020 election cycle by blowing off extra steam can backfire if the global economic engine continues to choke on the dry economic data showing early recession signs and inverted yield curves all over the globe.
FED is coming "very unwillingly" to the rescue, as usual, and all BIS club of Central Bankers is easing again in concert even after "the end of globalisation era". After very sobering August the floodgates are wide open increasing money supply in order to keep markets going. China is cutting reserves rates for banks in order to stimulate the economy before October celebrations and ready to fight before the deal can be reached.
As we have discussed previously, you can always find all the bad news which are being discussed by very smart people on the wires. I do not know what to do in the very sad case of total global mutual annihilation and the coming end of the world. Even our Shotgun Gold project will not bring us enough joy if hungry people will be chasing tanks on the streets. In all other cases, we can return and review our brave case for the entry point in copper investment stories. Please do not forget to do your own research and you will have to pick the winners.
Wood Mackenzie report reminds us about the big picture for copper demand during Energy rEVolution:
“The amount goes up as the size of the vehicle increases. For example, a fully electric bus uses between 11 and 16 times more copper than an ICE passenger vehicle - depending on the size of the battery and the actual bus,” he said. ““By 2040, we predict that passenger EVs will consume more than 3.7Mt of copper every year. In comparison, passenger internal combustion engine (ICE) vehicles will need just over 1Mt. If we look at cumulative demand, between now and 2040 passenger EVs will consume 35.4Mt of copper – around 5 Mt more than is required to meet current passenger ICE demand.”
We have addressed the huge coming gap between this demand and the available supply of copper in our previous posts. Today let's have a look at some chart providing potential evidence of the "green shoots" in the global economy reflecting the unleashed global stimulus impulse.
A lot of people are talking that copper on the chart above signals that the worst is yet to come to the global economy and gold must go down in order to bring this Copper/Gold ratio in line with historical averages. My brave scientific thesis is that we are in the reset stage for the global financial system and gold will consolidate closer to $1,500 level than $500 now before reaching the new all-time high in US Dollar.
In this version of our distorted by Energy rEVolution universe copper will have to catch up with gold snapping back like a coiled spring. Flood of liquidity and search for the real economic growth in the age of negative rates will drive Energy rEVolution and copper demand for years to come. Nobody will be building new giant copper mines which are needed to address the "severe deficit" as Goldman Sachs puts it, with copper prices below $3/lb.
This brilliant chart from Macro Charts is showing some positive movement in Copper/Gold ratio which is turning up. Further improvement in the copper price above $2.6/lb must confirm it as gold was recently in the correction mode sliding from $1,557 to just below $1,490.
The following few charts are showing that we have some "green shoots" to report about already which are pushing up through the trade war headlines. China credit impulse is leading by 12 months normally the global manufacturing PMIs. Cutting the reserves rates for banks in China will work through the system and relaxed investment rules for foreigners can bring some liquidity searching for positive returns as well.
Frank Holmes is pointing out that after his previous warning about the sluggish global PMIs readings China PMIs beat expectations in August. This data must be confirmed with further normalisation in September. I will leave the rhetorical question of whether any data from China can be trusted at this stage. We can all talk ourselves in the global recession as well.
The chart above is representing Global Monetary Policy Stimulus which is leading Global Manufacturing PMIs by 8 months normally.
The chart showing 40% of the probability of a recession in the US is keeping FED awake at night reading POTUS tweets which are demanding to pump money into the system. It should remind you also that every investment thesis must be proven right before you can make any money but on another side, you can hardly cross any river without entering the water.
The charts from brilliant Northstar and Nicholas Winton are showing that we can be now at that magical entry point into the best copper stories you can find in case if the annihilation of the global economy will be postponed again.
Energy rEVolution And The Big Picture For Copper During A Mexican Standoff In The Trade War Against The USA: Barron's - Copper Prices May Take Off As Supply Tightens.
"Always do your own research - I do not honestly know how to prepare to that sad end. In all other potential cases, I can only point out to my personal experience of making the best investments by buying when "blood was almost literally on the streets" like with Tenke Mining starting my acquisitions at CAD 40 cents during the civil war in DRC and following Lukas Lundin with his motto: "politics will change, resources in the best projects will stay". Later, Lukas made a lot of investors of Tenke Mining very happy during his buy out by Lundin Mining at CAD$20 dollars. I have followed him and found TNR Gold many years ago - now we have Los Azules Copper NSR Royalty among our other assets and building The Green Energy Metals Royalty and Gold Company."
Tesla Energy rEVolution And The Golden Age For Copper: Kirill Klip GEM Royalty TNR Gold Copper Presentation May 2019.
LEGAL DISCLAIMER
Please read legal disclaimer. There is no investment advice on this blog. Always consult a qualified financial adviser before any investment decisions. DYOR.
Kitco:
Growing EV Infrastructure To Drive Copper Demand For Decades Says WoodMac.
"Growing fears of a global economic slowdown continue to weigh on the copper demand, but one research firm sees potential growth as demand grows for electrical vehicles.
Although electrical vehicles (EV) demand more copper, Henry Salsibury, research analyst at Wood Mackenzie, noted that the potential infrastructure growth is a bullish factor for the base metal.
In a report released Monday, Salsibury said that more than 20 million electric vehicle charging stations are expected to be deployed globally by 20230, consuming 250% more copper compared to 2019.
"As it stands, range anxiety – worrying that a battery will run out of power mid-journey – is a key psychological barrier standing in the way of more widespread EV adoption,” he said in the report. “One way to address this is to roll out more charging infrastructure. As this happens, more connections to the electrical grid will be required and more copper will be needed as the network expands.”
According to the research firm, coppers physical properties make it the best base metal to conduct electricity and accommodate the higher temperatures common in electric vehicles. While aluminium is the closest alternatives, aluminium cables need to have a cross-sectional area that is double the size of any copper equivalent to conduct the same amount of electricity, the company said.
"Copper is a cornerstone of the EV revolution. At the heart of the electric vehicle, it is used throughout because of its high electrical conductivity, durability and malleability,” Salsibury said. “The need for copper is even more significant when it comes to charging stations and supporting electrical grid infrastructure.”
Along with meeting growing infrastructure demand, Salsibury noted that electric vehicles consume about three times more copper than internal combustion engines (ICE).
“The amount goes up as the size of the vehicle increases. For example, a fully electric bus uses between 11 and 16 times more copper than an ICE passenger vehicle - depending on the size of the battery and the actual bus,” he said. ““By 2040, we predict that passenger EVs will consume more than 3.7Mt of copper every year. In comparison, passenger internal combustion engine (ICE) vehicles will need just over 1Mt. If we look at cumulative demand, between now and 2040 passenger EVs will consume 35.4Mt of copper – around 5 Mt more than is required to meet current passenger ICE demand.”
The report comes as copper prices struggle to find momentum after falling to a two-year low at the start of the month. September high-grade copper prices last traded at $2.5815 a pound, down 0.29% on the day.
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