Publication le 15 mai sur Les Echos Le Cercle
Copper prices at the beginning of last year were the third lowest since the beginning of the third millennium. Is metal expensive?
We need to go back to 2009 to understand why copper prices will increase, specifically as of September 16, 2009. We indicated in this post at that time the important fundamentals of this metal and a recent seminar at the School of Economic Warfare was an opportunity to recall some fundamentals.
Travelling back in time in the mining world means accepting without reservation the law of general relativity so well illustrated in the film Interstellar, a second here is equal to 9 years there. 2009-2018, these 9 years will have been the time of a small mining cycle in every respect equal to the second that passes during the cycle bringing together your favorite financial operation. The gravitational curvature of a copper mine is not the same as that of a financial market!
The copper price cycle is interesting because of its lows. 1,500$/T in the early 2000s, $3,000/T in the middle of the 2009 crisis, 4,500 in early 2017, the increment is $1,500 over these three seconds on the mining time scale.
Conversely, over the same cycle period the two highest were successively around $5,000/t and then $10,000. Quite logically after the 2016-2017 contraction, we are starting to rise again, driven by several factors.
Inflation in mining costs is a powerful macroeconomic factor driving up copper prices; the value of the dollar is another, and there is a high risk of heckling.
In addition, as I mentioned at a conference a few years ago, in some parts of the world the only holes that can be made in the ground are those that children make in the sand on the beach in summer. It is increasingly difficult to open mines around the world, and when they are open they sometimes lead to resource nationalism on the part of host countries, see the example of the Grasberg mine. These difficulties and nationalism of resources, which are an expression of the power strategies of producing countries, naturally come up against the influence strategies of consuming countries; this instability is an additional factor in an increase in metal prices, particularly copper prices.
Ultimo, consumption. The electric car, for example. It carries 4 to 5 times more copper than the conventional car and prepares a higher demand for us as this vehicle will be autonomous (without driver) and therefore connected via 5G, whose multiplication of networks will only reinforce the global demand for metals.
All this is good news for producers.