When investors invest in future technologies, it is often about digital business models, future sales opportunities or the use of data as a raw material. But sometimes aspiring companies like Tesla, BYD or Nio run into very classic problems – like the scarcity of raw materials. While the discussions in connection with electromobility often revolve around lithium or rare earths, another raw material is now extremely scarce: copper. The industrial metal has been a benchmark for economic development for decades. Whenever there is construction in the world or other investments in infrastructure, we need copper.
There is 3x more copper in e-cars
Not for nothing the copper award will also be awarded to Dr. Called Copper. The price of the industrial metal is an indicator of the state of the world economy. If copper is expensive, the economy is usually good too. If copper collapses, a recession is not uncommon. Since the outbreak of the pandemic, the price of copper has increased by more than 40 percent. At first the industrial metal also collapsed, but then quickly recovered and eventually pulled away from many other raw materials. Why is that?
In addition to the many classic areas of application of copper, the metal plays around electromobility plays a central role. Every electric car contains around three times more copper than every classic combustion engine. There is also the charging infrastructure, which also cannot do without copper. If the goals for climate neutrality and clean inner cities are to be achieved, it will not work without copper – this is exactly what the price has been showing for months.
Also interesting: the number of investors in Germany is increasing rapidly
Thanks to “Dr. Copper “lean back and relax
Now you could get the idea that the copper rally has already reached its potential. But that’s not the case. China, which is responsible for around 50 percent of global copper consumption, is currently pausing on the world market, but there are other signals that are promising. Firstly, the stocks on the largest commodity futures exchanges have recently steadily decreased. Anyone who deals with the commodity markets concludes that the demand is real and is not driven exclusively by speculation, since the copper is delivered. In addition, many mines, especially the giant projects in South America, are reaching their limits. Not to mention the often negative consequences of the poorly regulated mining. Experts anticipate that the copper supply will increase compared to the previous year due to the dwindling threat posed by the pandemic in 2021, but this cannot yet meet demand.
For investors, the rising copper price is a good sign. He interprets in the style of “Dr. Copper ”claims that the economy is in good shape. There is also the possibility of benefiting directly from the copper boom. This can be done, for example, by investing in large copper producers such as Rio Tinto, BHP Group or Vale. The bonds from these companies can also be interesting as part of a balanced investment concept. In addition, there are numerous smaller companies that have not yet received much attention from the market.
Sustainability also reaches the mining industry
One development that could pick up speed within the copper trend is sustainable mining of raw materials. Customers of Tesla or other providers of electromobility consider it important that the entire value chain in the production of electric cars is sustainable. Raw materials companies that are already focusing on the implementation of ESG criteria could soon be ahead if the new industrial giants transfer their sustainable agenda to the supply chains. Even if copper seems like a boring investment at first glance, the market is predestined for a positive development. At the same time, there is a healthy dose of future fantasy. Copper is therefore worth a look.
Please note the disclaimer.