Copper price moving up nicely

Back in February, I questioned whether the world was on the cusp of a new commodity supercycle or a false start, with a stop/start situation materialising with respect to the vaccine rollout and widespread suppression of the coronavirus. As things have turned out, it appears to be a bit of both. Metal prices have improved nicely but many parts of the world are still in lockdown and vaccine rollout in South Africa and some other parts of the world is painfully slow.

Industrial metals & minerals prices have continued to rise as China’s infrastructure boom gathers pace. US President Joe Biden’s commitment to a massive infrastructure campaign should also help to further improve demand for these metal and minerals.

And short-term factors are also playing a part. Just last week in Peru, the spectre of a far left-wing candidate winning in the upcoming presidential election put fear into the minds of investors and speculators alike. Peru produces approximately 11% of the world’s copper and if copper production in Peru were to be nationalised it would have an immediate upwards impact on the copper price. The price of copper on the London Metal Exchange is now around $9 300 per tonne, with every indication that the $10 000/tonne level will be breached later this year.

Copper is a huge opportunity for retail investors to consider. Electric Vehicles (EVs) consume a lot of copper and so too do charging stations and many other parts of the EV value chain With the copper price rising almost exponentially and forecast by some observers to break through $10 000/tonne this year, there are two main companies worth looking at-Glencore and Antofagasta.

Glencore is well known to South African investors and has a secondary listing on the JSE. Its other attraction lies in the fact that Glencore also has an extensive trading arm, unlike the other major mining houses such as Rio Tinto, BHP and Anglo American. The Glencore share price has more than doubled since the dark days of March last year. It has moved up nicely since my February note and is now trading at GBP303, though it is still a long way from its all-time high of GBP524 achieved in May 2011.

Antofagasta is a pure copper play, listed in London and with interests in Chile. It has had a spectacular ride in recent times and is at an all-time high of GBP1897/share, 21% higher than two months ago. The price has more than doubled since troughing in March last year at GBP648. Obviously the price is being driven by the high and rising copper price, as Antofagasta mines no other metals.

So you pays you money and you takes your choice. Glencore offers diversification, coupled with the attractions of its unique trading arm. Antofagasta is a much riskier single-commodity stock but there can be no denying its very close correlation with the underlying copper price.

Tshepiso Shabalala