Copper has been in demand since ancient times thanks to its beauty and strength, but 2023 could be the year that investors should pay it the most attention.
The current push for sustainability has led to a wave of investment in green technologies, centering around replacing energy from fossil fuels with electric power derived from green and renewable sources. With electricity infrastructure and electric vehicles (EVs) relying heavily on copper, copper stocks or ETFs could be on the cusp of a prolonged rise in value that would make 2023 an excellent time to invest in copper.
Clean energy needs copper
There's a growing global consensus about the need to cut fossil fuels and switch to cleaner power. Debate is ongoing about the best green energy sources, but all the options involve using renewable energy to create electric power.
According to the US Energy Information Administration, roughly 70% of electricity generated in the US will be from renewable sources by 2050, representing a global shift from a fuel intensive to a material-intensive energy system. On a broader basis, power generation from renewables is expected to grow 500% by 2035.
This change in power usage will require extending and renewing much of the world's existing electric grids, which in turn demands a great deal of copper. Copper is vital for energy storage, wind turbines, and solar panels, and for connective wiring across and between energy infrastructure and electric-powered devices.
Electric vehicles are copper-hungry
As well as overhauling electricity infrastructure, green technologies are focusing heavily on electric vehicles (EVs). Every scenario for a green future requires electric vehicles to replace internal combustion engine vehicles (ICEVs). 70% of all cars on the road across the entire world will need to be electric in order to achieve net-zero emissions.
And EVs are copper-hungry. The average EV requires around 80kg of copper, close to four times as much as the average ICEV. EV charging stations and other infrastructure will need even more copper, pushing demand ever higher.
Only copper can save mankind
$4+ trillion has been committed to green technologies and initiatives as part of the Global Energy Transition; more than all other human endeavors combined across the whole of history, after adjusting for inflation. That's a lot of funds for projects which all require one thing: copper.
There's no substitute for copper's conductivity and efficiency in conducting heat and electricity; the next best option would require around 20% more materials to achieve the same efficiency in motors, transformers, and cables. Copper is highly ductile, making it easy to shape and extrude it into sheets and wires for use in every situation, and its recyclability means that it can be reused almost indefinitely without losing its engineering properties.
But copper supply is limited
Over the next decade, global demand for copper and other commodities vital for green technologies is predicted to outpace supply. For example, Chile is currently one of the world's largest copper suppliers, but it's expected to produce 7% less copper this year, largely due to the inevitable degradation of copper ore over time.
The copper industry needs to drive substantial and unprecedented growth in new mine supply to meet zero-carbon targets, which in turn requires significant investment. But environmental concerns around the local impact of copper mining are holding many companies back from completing proposed projects.
The copper supply chain is under stress
Additionally, political unrest at various points in the copper supply chain could result in short term price spikes. In Peru, for example, mines were closed for a period in 2023, due to political protests.
China currently dominates the market for copper processing, controlling 40% of the trade. But it is seen as an unreliable partner, especially to democracies that criticize its authoritarian practices. Many Western countries are determined to limit their trade dependence on China. As a result, we can expect to see the West invest in the development of copper mining in countries outside of China's control, at the same time as onshoring or near-shoring copper processing.
[Source: United States Geological Survey, Wood Mackenzie]
For various reasons, the global shortfall in copper production is expected to lead to consistently higher prices with intermittent short-term spikes, making copper stocks an attractive investment opportunity.
Invest in copper with an ETF
Copper is vital for practically every green initiative. Long-term investment in green technologies, particularly in EVs and electricity from renewable sources, is expected to drive a significant and sustained surge in demand for this commodity. At the same time, limited supply will push up prices. These factors are coming together to make copper stocks an appealing and lucrative option in 2023.
However, it can be difficult to identify specific copper stocks for investment. The political climate is volatile in many parts of the copper supply chain, and mining companies are sometimes struggling to realize their plans to open new mines.
Instead of trying to navigate the murky waters of copper production, savvy investors can invest in a copper ETF. By buying into CHRG or other copper ETF, retail investors can spread their investment across a number of stocks involved in the production of copper and other vital commodities, helping balance their portfolio and mitigate exposure to risk. CHRG, the batteries commodities ETF from EMG Advisors, tracks copper, lithium, nickel, and other raw materials that are crucial for green energy success, drawing on over 70 years combined experience in investing in natural resources.