This Metal Will Skyrocket in the Energy Transformation

Here's the metal that's set to take off as the electrification wave takes off.

Copper is a remarkable metal. It goes into just about everything we use today – from plumbing to power lines, computers to motors.

In fact, it’s in so many of the things we use daily that its price can act as a signal for what’s going on in the overall economy.

As such, it’s hardly a surprise that copper has been one of the top performers this year. In May 2024, for instance, it hit a new all-time high of about $5 per pound ($10,870 per metric ton). This was driven by strong electrification demand and increased renewable energy initiatives worldwide.

Granted, concerns over the impact of new challenges in the global economy have affected the commodities market as a whole in recent months. Yet, copper has held its ground.

There are several reasons why the market remains so bullish on this unique metal... and why we believe it will continue to soar next year and beyond.

You see, copper is set to play a massive role in the energy transformation we’ve been telling you about (and it's equally crucial for the electrification of the developing world). And as the world moves to a clean energy economy, it will need a whole lot of it to make this transition a reality.

Global Governments Are Committed to an Electric Economy

Since mid-2020, governments worldwide have pulled out all the stops to spend their way out of the COVID crisis, with a big focus on pushing the electric energy transition.

The U.S. is a case in point.

President Biden’s $1.2 trillion Bipartisan Infrastructure Law, signed in November 2021, has funded thousands of projects, many of which are clean energy-focused. The Inflation Reduction Act (IRA) of 2022 has also attracted more than $1 trillion in investments across clean energy sectors by late 2024.

With Trump re-elected and his strong connection to Elon Musk – who’s driving energy initiatives through Tesla, solar, and storage projects – we could see even better conditions for EVs, battery tech, and renewable energy. It may seem counterintuitive, given Trump's "drill, baby, drill" image, but his push to boost American industry, affordability and energy independence lines up well with a lot of that.

Elsewhere, Europe is still pushing hard on renewable energy. They have something called the European Green Deal, which aims to mobilize around $1.1 trillion in sustainable investments over the next decade, speeding up solar and wind installations. China’s been stepping up too, putting over $400 billion into renewables over the last two years (making it the biggest investor to date).

The bottom line is that global governments remain committed to a cleaner future, and that means a lot more investment – public and private – into more efficient, clean and resilient technologies over the next few years.

And whether it’s improving the and making the power grid more reliable or ramping up solar panel production, anything that advances resilient clean energy efforts will require copper. Lots of it.

Copper Is Vital for the New Energy Transformation

Let’s look at some examples.

Electric vehicles (EVs) are a big part of the story. By 2023, roughly 18% of new vehicles sold globally were electric. Bloomberg now estimates that by 2030, around 50% of new vehicles sold globally will be electric. All those EVs need copper – for batteries, wiring, and charging stations.

Sure, EVs are having a bit of a rough patch with production delays and higher costs right now, but it's just a temporary setback in an otherwise strong growth trend.

The wind power buildout is another big factor. Offshore wind currently contributes about 0.5% of global electricity capacity. However, global offshore wind installations are expected to grow tenfold by 2035. With this expected growth, copper demand for offshore wind could surge from around 400,000 metric tons today to 7 million metric tons. That's nearly 18 times the amount currently used.

Here’s the thing you should know: many other renewable energy generation systems, like solar, hydro, and heat pumps, use significantly more copper than traditional fossil-fuel setups. So, demand will keep climbing – any short-term market jitters notwithstanding.

Perfect Setup for Higher Copper Prices

But just as demand is set to soar, copper inventories remain under pressure. As of late 2024, copper stockpiles in the Shanghai Futures Exchange (SHFE) warehouse are down to just 30,000 tons. That’s a drop of nearly 90% from 285,000 tons earlier this year. It's also less than half of the stock level at the end of 2022. Inventories in the London Metal Exchange (LME) also remain well below levels needed to keep up with rising demand.

Why is that happening?

Well, the supply side is still struggling. In 2023 and 2024, several major mines faced challenges, but one, in particular, stands out: First Quantum’s Cobre Panama mine, a key source of global copper, was shut down about a year ago following a Panamanian court ruling, taking about 2% of global supply offline. And it remains shut to this day.

And here’s the problem. It takes about 15-20 years to go from discovering a new copper deposit to building a mine, so it's not like this copper can materialize quickly from somewhere else. Bureaucracy and red tape don't help either—and this is a global phenomenon. Permitting new copper projects is hard.

Consider that even in the U.S., the largest undeveloped copper deposit in the U.S., the Resolution Project in Arizona, has been stuck in permitting for 26 years. That’s despite being in an ideal location with access to infrastructure and skilled labor.

Then there are the ongoing problems in Peru and Chile – which together produce 40% of the world's copper output – with miners cutting production guidance, and more.

But the key point here is that while demand is rising, meeting it isn’t easy. Miners can't just flip a switch to boost output. And this bodes very well for the price of copper.

How to Unlock This Transformation

So, how do you take advantage of this setup?

Copper is bulky. So, unless you’re willing to pay hefty storage costs, buying the physical metal is probably not an option. Instead, consider the United States Copper Index Fund ETF (CPER). It closely tracks the price of the metal, offering convenient exposure.

Another consideration is to invest in copper indirectly by purchasing companies that mine it. In this month's issue of Prinsights Pulse Premium, we'll have a new, exciting copper recommendation for you (potentially two, as we're still doing our analysis). So please stay tuned, we’ll have more to share with you soon.