Free Whelan: Need an anti-inflation pill? I know a doctor

A few years ago, James Whelan prescribed a dose of one commodity. Now it looms as the perfect cure for what ails us.

Copper looms as a key resource that is on the rise. Picture: Andrey Rudakov/Bloomberg

A few years back I was asked to provide my best commodities picks for the year.

Along with a whole article (on Stockhead) by seasoned veterans on their best picks in various spaces (with NPVs and ore grades) there was me; James Whelan, VFS Securities.

My comparatively simple take (at the time)? “Buy Copper”.

And if you look at copper now you can see that was an amazing call (if not for wanting on the detail).

However, if you’ve looked at the copper chart lately then it’s not looking amazing.

But if you think of all the things that have been the cause of our woes recently, you get something like this …

ESG funds drove underspending in energy production, while an overemphasis on making the switch to “climate friendly” alternatives made everyone believe we were ready for the switch to wind turbines and EVs waaaaay ahead of time.

Russia finally built a second gas pipe and needed it online through Germany to Europe ASAP.

With an overeager focus on ESG, Europe was understocked on its energy needs.

Russia then tried to force Europe’s hand with an undersupply of gas heading into the northern winter.

So, food prices continue to go up.

Gas is needed for fertiliser, which is needed because one key output of fertiliser production is carbon dioxide, which is used as the main method for slaughter.

No gas, no Christmas Turkey.

At the same time, Ukraine was seen as an easy target because Europe had no energy alternative and was ultra-dependent on Russia.

Supply chains have continued to be fractured and energy prices are blowing a hole in inflationary expectations.

The rest we are seeing play out now.

The hedge

You want something that will get more spend as food and energy – two of the main contributors for inflation – continue to rally?

You also want something that will be in high demand to stop the dependence on oil and gas and will form part of the EV revolution?

You guessed it — Dr Copper.

I’ve said a few times over the years that an EV needs three times as much copper as an internal combustion vehicle.

I was corrected on my podcast by Robert Rennie, Head of Commodities Strategy at Westpac, who said I wasn’t taking into account charging stations and everything connected.

“Probably more like five times, Jimmy.”

Everything that will be needed to try control food and energy inflation? Plus a key ingredient in just about every facet of modern life (including electric vehicles)?

It all requires copper.

SUBSCRIBE

Get the latest Stockhead news delivered free to your inbox. Click here