Nowadays Money Morning… watching copper… copper supplies look shaky… goods – this is a great place… and more…
Want to make money? Engage in lithium mining… at least, this is Ilona Mask’s advice.
As he said when announcing Tesla’s first quarter results late last week:
‘To be clear, it’s not that the world is deficient in lithium … it’s present almost everywhere.
‘This is a very common element. However, you still need to dig up the clay with lithium, and then you need to go through a number of stages of refinement. And that’s a lot of industrial equipment that’s needed.
‘Lithium stocks are now virtually margin software. Correct me if I’m wrong, but I think we’re seeing cases where the spot price of lithium is 10 times higher than the cost of mining.
‘So we talked about 90% margin. More people, please get involved in the foundry business. This … do you like to mint money? Well, the lithium business is for you. ‘
As I mentioned, Tesla is not the only carmaker concerned about lithium supplies.
Lithium is a key commodity for electric vehicles.
And as countries move toward a transition to green energy, there is a big gap between lithium supply and demand.
That’s why lithium was in an incredible run. Lithium carbonate prices have risen more than 450% in the last 12 months … and have risen 122% since the beginning of the year.
You see, although we have seen that more than $ 500 billion has been spent on the construction of 285 gig plants around the world, not much has been invested in mining and raw materials needed for batteries.
And building that stock takes time.
Although it takes only a few years to set up a gig factory, it can take almost ten years to launch and launch a lithium project.
Of course, lithium is not the only product we need more for energy transfer. To name a few, we need more graphite, nickel, copper … and speaking of copper …
Watch out for the copper
Copper is also a key material for energy transfer.
Copper has many properties such as high conductivity, making it ideal for use in many types of clean energy such as wind turbines and solar panels.
But also electric cars.
While a conventional gasoline car has about 20 kg of copper, an electric car with a battery needs much more copper, about four times as much, or about 83 kg.
Not only that, but you also need copper for the EV infrastructure needed to charge all of these EVs.
So we will need a lot of copper and investment in copper if we move on with the transition.
Ristad, for example, estimates that global demand for copper could exceed supply by more than six million tons by 2030.
Goldman is even more disposed. They even went so far as to call copper “new oil‘.
They expect the metal to reach $ 15,000 per tonne as early as 2025, and the transition to renewable energy will create a long-term supply gap of 8.2 million tonnes by 2030.
In short, we need more copper, and over time the gap between supply and demand may widen.
Therefore, prices rose.
When the pandemic began in 2020, copper prices were trading at just under $ 5,000 per tonne. In March this year, they reached a record high of $ 10,910 per tonne.
And this is an interesting time for copper.
First, global stocks are running out. This is mainly due to lower investment, but also the cost of copper mining is rising.
And then there were supply problems.
The copper supply looks shaky
Chile is the largest producer in the world and then Peru. Both countries account for about 40% of world copper production.
But both had fiscal and social instability.
In Peru, protests have even forced the closure of the Las Bambas and Cuahone mines, which account for about 20% of Peru’s copper production.
And then, of course, copper supplies could get another blow from the Ukrainian-Russian conflict. In 2021, Russia produced about 5% of the world’s copper, or 850,000 tons.
So far, copper from Russia continues to come in, but last month the London Metal Exchange Committee recommended banning new supplies of Russian metals from the exchange, which, if it happens, could affect the market.
At the moment, copper prices have fallen below $ 10,000 per tonne, largely due to concerns about how the COVID blockade will affect demand from China. China is the largest consumer of copper in the world, accounting for 55% of total oil consumption.
Of course, much depends on what happens to China’s demand. But copper prices may remain high for some time as supply looks shaky and demand increases for the transition to energy.
The fact is that with negative interest rates, inflation and increased demand after the transition to energy, in my opinion, goods are a great place.
Until next week,
For Morning money
Selva is also the editor of of New Energy Investor, a newsletter looking for opportunities in the energy transition. For information on how to subscribe, Click here.