For the past few months, mining experts have warned that there isn’t enough copper to sustain global industrial needs. Higher demand coupled with constrained supply from South America has exacerbated an ongoing copper shortage that experts predict could last for the rest of the decade.
Slower projections of growth in China, which is the global leading importer of copper ore, coupled with higher interest rates, and a banking crisis in the United States have also dampened copper’s outlook for the year. Since copper plays a critical role in industrial machinery and electrical equipment, products largely responsible for keeping our economies up and running, it is often seen as an indicator of economic health at a set time.
The red metal will be especially crucial to the green-energy transition because it is a critical component in electric vehicles and EV charging infrastructure.
Despite predictions of increased short-term challenges, the copper industry has incredible potential for growth over the long term. Countries such as the U.S. have already begun investing billions of dollars into building EVs and developing EV infrastructure. Furthermore, wind and solar energy, which are expected to replace fossil fuels over the next few decades, rely on copper for wiring because it is extremely conductive and has a high corrosion resistance.
Investors who focus on short-term predictions and avoid copper may lose significant windfalls they could have made in the long-term once the copper market corrects itself and supply becomes sufficient enough to meet the increasing demand.
A look back at copper prices in the aftermath of the coronavirus pandemic, around March 2020, shows that copper futures sank to historically low prices as a stock market panic resulted in a major sell-off of global equities. Sine then, copper prices steadily increased through 2020 and 2021 to achieve an all-time high of more than $10,700 per ton in March 2022, signifying the metal’s extreme resilience in the face of major roadblocks.
Although copper prices have since fallen from these highs, the metal has managed to remain on an upward trajectory over the long-term despite a global recession, increasing interest rates across the world and lockdowns in the major copper importer China.
Copper has maintained its long-term upward trajectory amid a multitude of opposing factors and short-term volatility. The red metal will most likely maintain that upward growth due to its importance in economies, and investors who ignore the short-term volatility currently plaguing the industry stand to gain massive copper investment opportunities in the future.
Some of those opportunities could come through doing due diligence and acquiring stocks in leading firms, such as Southern Copper Corporation (NYSE: SCCO), if one is satisfied by what they discover when they study the financial books and reports of these extraction companies.
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