Will 2024 be a favorable year for mineral wealth?
I read an interesting article today and so I would like to discuss it here with you, how you see the future for commodities, especially copper, but we can include similar commodities here.
If everything goes as currently expected, several factors such as the growing demand to move towards greener energy, renewables, then the reduction in mining due to environmental protests and last but not least, the Fed cutting interest rates, this will weaken the dollar and in turn make dollar priced copper more attractive to foreign buyers. All of this could drive copper prices up by as much as 75% by 2025, according to analyst reports.
Copper prices will push higher to $15,000 a tonne in 2025, according to a report by BMI, the research unit of Fitch Solutions, much higher than the record high of $10,730 a tonne set last March.
In addition, at the recent COP28 climate change conference, more than 60 countries backed a plan to triple global renewable energy capacity by 2030 , a move that Citibank said "would be extremely bullish for copper". In a December report, the investment bank predicted that higher renewable energy targets would boost copper demand by an additional 4.2 million tonnes by 2030.
The base metal is an essential element in the energy transition ecosystem and is integral to the production of electric vehicles, power grids and wind turbines.
Other analysts see copper rising due to production disruptions, with Goldman Sachs expecting a deficit of over half a million tonnes in 2024. "Our confidence that copper will be substantially overvalued by 2025 [averaging $15,000 per tonne] is now much higher," Goldman said.
The winners of the copper rush will be mainly Chile and Peru, BMI estimates. Both countries have large reserves of green transition minerals such as lithium and copper that are poised to benefit from increased investment and higher export demand. Chile holds about 21% of the world's copper reserves.
I quite like this investment thesis and it makes sense to me, there is a general recognition that if the economy is sound and so is the hunger for raw materials that promote prosperity in the development sector. 😊 I have mining companies Rio Tinto and Vale in my sights. And what maybe lesser known picks do you have? I look forward to hearing your views. 😊