Insights

Copper Demand to See 26% Annual Growth This Decade

Long-term investors may want to seriously consider adding commodities to their portfolio, as these materials are continually being moved to the grid for electrification and demand is only expected to increase. In this Motley Fool Live segment from “Ask Us Anything,” recorded on April 11, Fool.com contributor Tyler Crowe discusses how investors should think about commodities over the next 10 years.  

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Tyler Crowe: Looking at long term at tailwinds, I guess you could say for commodities, like I said about oil, where, for the past seven years, dating back to about 2014, the investment in oil had been extremely low. So the development pipeline for future discoveries is extremely low, putting us in a position where we might be a little short on supply. A lot of that similar nature has happened in many of the commodities that we think of that we need. I want to focus specifically on the commodities required for the electrification of everything. We talk about electric vehicles, we talk about taking gasoline, fossil fuels and moving it to the grid for electrification. We’re talking about copper, we’re talking about tin, lithium for batteries, cobalt, nickel, these are all extremely important materials, and expected demand for these things is supposed to be huge. I always use this particular data point.
But Teck Resources is a copper miner and one of the projections in one of the recent investor presentations said that copper demand from electric the electrification of everything is going to grow by 26 percent annually through the rest of the decade, which may be for tech revenue growth doesn’t sound huge, but we’re talking about commodities, 26 percent annual demand is massive. There are these long-term tailwinds over the next couple of years, where we’re going to see major demand and commodities, I think, actually across the entire spectrum, some much in better position positions than others. But the supply pipelines similar to oil have been under-invested for a very long time. We had the Chinese commodity boom of the 2010s. That crashed really hard, and we had this very prolonged period of lack of investment.
If I’m looking at a 10-year window in commodities right now, I’m quite optimistic or at least I want exposure in my portfolio to it. How long that lasts, I’m not 100 percent certain. I’m still watching it. The thing that I’m going to be watching most intently is capital expenditures in these particular things, because the one thing that ruins any tailwind or bull market in any energy commodities is oversupply and over capital is capitalization spending. These industries are great at shooting themselves in the foot when times are good. Who knows how long that takes? But it’s certainly the thing that I’ll be watching as the long-term tailwind or headwind for sake of the commodity markets over the next 7, 10 years.
Tyler Crowe has no position in any of the stocks mentioned. The Motley Fool owns and recommends Teck Resources. The Motley Fool has a disclosure policy. –

Long-term investors may want to seriously consider adding commodities to their portfolio, as these materials are continually being moved to the grid for electrification and demand is only expected to increase. In this Motley Fool Live segment from “Ask Us Anything,” recorded on April 11, Fool.com contributor Tyler Crowe discusses how investors should think about commodities over the next 10 years.  

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Tyler Crowe: Looking at long term at tailwinds, I guess you could say for commodities, like I said about oil, where, for the past seven years, dating back to about 2014, the investment in oil had been extremely low. So the development pipeline for future discoveries is extremely low, putting us in a position where we might be a little short on supply. A lot of that similar nature has happened in many of the commodities that we think of that we need. I want to focus specifically on the commodities required for the electrification of everything. We talk about electric vehicles, we talk about taking gasoline, fossil fuels and moving it to the grid for electrification. We’re talking about copper, we’re talking about tin, lithium for batteries, cobalt, nickel, these are all extremely important materials, and expected demand for these things is supposed to be huge. I always use this particular data point.

But Teck Resources is a copper miner and one of the projections in one of the recent investor presentations said that copper demand from electric the electrification of everything is going to grow by 26 percent annually through the rest of the decade, which may be for tech revenue growth doesn’t sound huge, but we’re talking about commodities, 26 percent annual demand is massive. There are these long-term tailwinds over the next couple of years, where we’re going to see major demand and commodities, I think, actually across the entire spectrum, some much in better position positions than others. But the supply pipelines similar to oil have been under-invested for a very long time. We had the Chinese commodity boom of the 2010s. That crashed really hard, and we had this very prolonged period of lack of investment.

If I’m looking at a 10-year window in commodities right now, I’m quite optimistic or at least I want exposure in my portfolio to it. How long that lasts, I’m not 100 percent certain. I’m still watching it. The thing that I’m going to be watching most intently is capital expenditures in these particular things, because the one thing that ruins any tailwind or bull market in any energy commodities is oversupply and over capital is capitalization spending. These industries are great at shooting themselves in the foot when times are good. Who knows how long that takes? But it’s certainly the thing that I’ll be watching as the long-term tailwind or headwind for sake of the commodity markets over the next 7, 10 years.

Tyler Crowe has no position in any of the stocks mentioned. The Motley Fool owns and recommends Teck Resources. The Motley Fool has a disclosure policy.

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