News in the world of commodities often goes unnoticed by the general public. But the commodities market, in its own unassuming way, drives many aspects of our daily lives. Today, we are considering a commodity that’s becoming increasingly indispensable – copper. Jeff Currie, a top commodities analyst and chief strategy officer of Energy Pathways at Carlyle, recently claimed that copper is fast becoming the new oil.
Why is Copper the New Oil?
According to Currie, copper has long been a significant industrial bellwether with its uses extending from manufacturing and construction to electronics and other high-tech products. However, the current economic landscape, driven by novel forces such as the advent of artificial intelligence, the explosion of data centers, and the green energy revolution, is boosting copper demand.
Weapons development is another factor adding to the demand for copper. The bullishness in the copper market is not just Currie’s personal opinion. His conversations with traders also reinforce this sentiment. He confidently stated on Bloomberg TV, “Copper is the new oil. It is the highest-conviction trade I’ve ever seen.”
Billions of dollars flowing into artificial intelligence and renewable energy have become a relatively new component of copper’s outlook. This was something Currie had predicted back in 2021 when he was an analyst at Goldman Sachs.
What Makes Copper’s Current Outlook Different?
The difference now, as Currie points out, is that there are three sources of demand for copper instead of just one a few years ago. The demand is now coming from artificial intelligence, green energy, and the military. And while the demand is soaring, the supply remains tight.
Bringing new copper mines online is a lengthy process, often taking anywhere between 12 to 26 years. This mismatch in supply and demand dynamics can potentially send copper prices soaring. Currently, copper prices are at record highs, with benchmark prices in London at about $10,000 per ton – more than double from the pandemic-era lows in early 2020.
Currie predicts that copper prices could eventually hit $15,000 per ton. “So the upside on copper here is very significant,” he added.
The Impact of High Copper Prices
At some point, copper prices will get so high that it will result in “demand destruction,” meaning buyers will resist paying such high prices. But predicting that level is challenging. Currie draws parallels with the oil market in the 2000s, where he witnessed crude oil prices shooting up from $20 to $140 per barrel.
The growing importance of copper was also a key factor in BHP proposing a takeover of Anglo American, a $40 billion deal that would create the world’s top copper producer. However, Anglo has rejected the offer and recently announced plans to restructure the group, which includes selling its diamond business De Beers.
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