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Win us with honest trifles

Why copper in 2022

Because at some point, even The USA under Biden is going to notice China’s Achilles’ Heel and do something about it. China may want to buy all the raw materials in the world, (with palladium in the post below a prime example), but there’s only one it truly needs that it doesn’t have. Its name is copper, the one metal China doesn’t have much of to mine inside its own borders and, by no coincidence, the one it most covets when buying up mines and projects around the world. Yes for sure gold mines are nice to have and will come into their own over China’s longer term, then zinc and tin and others are also clearly interesting, but China has reasonable internal production of most other metals and, in effect, only needs to top up on the world markets. But copper is different, that’s the one China needs now and in very large quantities in order to fuel its growth motor. Copper is one of the vital ingredients of its infrastructure plans and is one of the key targets of its Belt+Road strategy, as the most cursory look around the world will tell you. China isn’t just buying all the produced concentrates and blister, it’s also moving as quickly as possible to secure assets in any copper-rich region willing to entertain them, Asia, Africa and LatAm. For those of you with a sense of history, the phrase “workers’ control of the means of production” will resonate at this point.

Roughly speaking, China is now 50% of the world demand for copper and while we in the mining world are used to that stat, it’s still truly mind-boggling if you step back and think about it. Therefore, the assumption that “China controls the market” is corollary and in many respects is true, because it’s difficult to see much competition in this price chart at the moment:

If The USA and other democracies are serious about tackling their growing “China Problem” they need to use their most efficient weapon and, with fears that Omicron will cause another deflationary pulse now diminishing, it’s time for Captain Capitalism to do its thing. That’s copper in 2022, esteemed readership of IKN, we’re about to enter the year when the rest of the world wakes up and realizes copper is not just the world’s most important non-ferrous metal, it’s now also the world’s most important strategic metal. That means there’s going to be an awful lot of money to be made from its market, because demand will become as political as it is industrial.

Be long copper in 2022.

7 Comments

    What’s your opinion on stuff like this? Is it a real threat to Cu prices or are “they” just grasping at straws here:

    https://www.mining.com/web/after-copper-chaos-lme-mulls-rules-to-keep-from-running-out-of-metal/

    Reply

      I’m going to take the 30,000 feet view instead of commenting on one particular initiative. Also, let’s try to keep the “They” or “Them” concept out of this, there are enough conspiracy nutbars in the metals sphere without encouraging others. That said, there’s commonality with those market entities with control of, or at least with some influence upon, price discovery in the metals market. There are many more, but two good examples are LME for copper and Comex for silver. They are both in business, they are both keen on retaining their business, they both want to make money for themselves. It therefore stands to reason that the market entities with greater or lesser control over their corner of the trading world would greatly like to keep that control (and the flipside of course, it also means they attract standard competitive jealousy).

      There’s nothing wrong with that per se, but they will often get accused of unfair competition as they try to keep their edge. Or get accused of moving the goalposts at whim. Or new ideas get judged by others as being heavy-handed (conspiracies start here) or ineffective (for example the pushback you suggest from the linked article). In the end, the LME isn’t in business for you or me or the greater benefits of fairness and world government, it’s doing it for the members and stakeholders of the LME! It’s capitalism, after all.

      Reply

    Appreciate the reply. A big 2022 for all.

    Reply

    Many good points made in this article/post. However let’s keep an eye on the extent and influence of new Chinese investment in Chile and its copper once the new government decides its fiscal attitude to mining and how it is going to finance its social reforms. Probably Peru too where it already has a reasonable foothold. It will soon have its foot on all the copper it needs.

    Reply

      LatAm quicklist: China has relatively little in Chile and it will stay that way, it’s the least of the region’s sino-headaches on the assets fronts. As for where the conc ends up, that’s another story; markets are markets and Chile would like a demand battle to hot up. As for Peru, it sold its soul a long time ago (Toromocho, Bambas, Mina Justa, Galeno, etc). In other news, Ecuador is already in hock up to its neck with China on several fronts and Lasso won’t play geopolitics, he just wants the money (and even if Australia moves into Ecuador it will sell the product to China). Mexico has been flirting for a while, but it never seems to commit. Then there’s Nicaragua, China’s new BFF. However, the one that most interests me is Argentina. It has geology, scale, a new policy and above all, needs FDI and hard dollars in short order.

      Reply

    thanks Mark.

    $NGEX in Argentina?

    $QCCU, $CMMC, $OCO, $FIL

    which other companies are interesting?

    Reply

      The Australian Carnaby resources (CNB.AX) seems to have a discovery today, Dec-29: “Major Copper Gold Discovery 41m @ 4.1% Cu Inc 9m @ 10.3% Cu”

      Reply

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