Copper Fortunes Are Coming: Here's What You Need to Know

Written by Jason Simpkins
Posted November 2, 2017 at 8:00PM

Copper prices have surged more than 50% over the past year, blowing past $7,000 a tonne. It’s the first time the metal’s crossed that threshold since 2014.

Even Goldman Sachs, a longtime bear-turned-bull, is now saying copper will surpass $8,000.

Furthermore, Goldman says the market isn’t “fully appreciating” what's sending copper higher — namely strong demand in China.

“Copper net speculative length, although at a multi-year high, still tracks China manufacturing PMI closely, suggesting that the recent rally is not completely out of line with fundamentals," the firm says. The markets "have not fully appreciated the synchronized nature of global growth and reduced downside risks from China."

No doubt, China is the main driver. The country already makes up about 35% of worldwide copper demand. And that figure will climb to 50% by 2020.

To put that a little more bluntly: In just two years, China will account for half the world’s copper demand.

Looking ahead to next year, China's refined copper demand is forecast to rise 3.6% to 11.15 million tonnes in 2018. And its mined copper demand is expected to rise 6% to 6.15 million tonnes.

China’s influence on copper is so great, in fact, that on Halloween, the CME Group announced the launch of a copper premium Shanghai contract. The premium contract will launch on Nov. 20. It'll be settled against Chinese spot copper prices. And the group hopes it will become a reference price for copper traded in or delivered to China.

Of course, it’s not just China. The rise in copper demand is a global phenomenon, and it’s occurring precisely at a time when supplies can least afford.

Initially, a six-year copper surplus was expected to last into 2018. But that’s no longer the case. Instead, the market faces a supply deficit next year.

Indeed, what was originally expected to be a 150 kiloton surplus next year has morphed into an expected 130 kiloton deficit.

This is what led Goldman to raise its average 12-month copper price target from $5,500 per tonne to $7,050. It now says copper has the potential to rise above $8,000 per tonne by 2022.

Again, that mainly has to do with supply/demand dynamics, but the bank is also factoring in a decline in the U.S. dollar.

That, too, is something of a surprise, since many analysts and observers believed the dollar would strengthen. Instead, the dollar index is down 8% this year. The dollar’s decline, alone, was enough to push copper prices to $6,600 per tonne, according to Goldman. But the supply and demand imbalance ensures an even higher price.

Hence copper’s near 30% rise, year-to-date.

December futures on the CME are now back above $3 per pound, up some 60% from their 2016 trough.

And there’s really no reason to believe they’ll decline any time soon.

All the factors for a major copper bull market are not just present, but durable.

And if you’re looking for a way to play it, our resource expert Gerardo Del Real just came up with a doozy.

Having spent a decade doing research for large institutional players, Gerardo now writes and publishes Junior Mining Monthly and Junior Mining Trader.

Earlier this year he traveled out to the Buckskin Mountains in northwestern Nevada to personally investigate a copper play there.

It’s a tremendous project with 2.7 billion pounds of copper, and an additional 2.6 million ounces of gold and 5.3 million ounces of silver. And there could be even more yet to be discovered in the surrounding area.

The project is permit ready and the company that’s working it has a carried interest agreement with a much larger firm that’s footing all of the mine’s expenses.

It’s the perfect investment opportunity at exactly the right moment. And I encourage you to check it out.

You can get the details here.

Fight on,

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Jason Simpkins

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Jason Simpkins is Assistant Managing Editor of the Outsider Club and Investment Director of The Wealth Warrior, a financial advisory focused on security companies and defense contractors. For more on Jason, check out his editor's page. 

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