Tearaway Tesla helps to drive boom in copper

At today’s price of about $US8900 a tonne, copper has bounced to a nine-year high from a standing start only a few months ago. Picture: Bloomberg

If you missed the money made in the iron ore boom, hold on — you might have a second chance with copper.

The world’s most commonly used industrial metal is rising rapidly as investment markets prices in a global recovery from the COVID crisis.

Long known to industry analysts as “Dr Copper” for its ability to act a bellwether for the health of the wider economy, this time round things are different in copper thanks to Tesla: the spectacular trading and fourfold increase in Tesla share price over 12 months has put a rocket under virtually all investments linked to electric vehicles, which use four times more copper than traditional petrol vehicles.

With a “tight” supply of copper mines — and a timeline of seven years to get a mine up and running — any extra demand is going to push the copper price higher: As for electric vehicle demand, it is expected to reach 3 million tonnes a year by 2030. Just now, the total global market is 22 million tonnes.

Tesla, by itself, will need 1.8 million tonnes of copper to reach its target of 20 million cars a year.

In other words copper, along with riding a traditional commodity upswing, is wide open to getting the premium currently ­offered to so-called battery metals such as lithium, nickel and ­cobalt.

Indeed, copper has arguably wider usage in “green industry” than almost any other metal. For example, renewable power systems are also five times more copper-intensive than conventional power systems.

At today’s price of about $US8900 a tonne, copper has bounced to a nine-year high from a standing start only a few months ago — and unlike iron ore, this metal price story is not all about China.

In fact, the lift in copper prices in recent days follows the spectacular Texas snowstorms that have made analysts realise that US electricity grids are going to have to be upgraded in the months ahead.

The rise in Tesla’s share price over 12 months has put a rocket under virtually all investments linked to electric vehicles, which use four times more copper than traditional petrol vehicles.

Copper’s 7 per cent rise over the past week was the best of all metals including iron ore — over the past 12 months, the improvement is more than 90 per cent.

A new note on the metal from Daniel Hynes, the senior commodity strategist at ANZ, says that for copper: “Strong growth in investment in clean energy sectors such as renewable energy and electric vehicle infrastructure in 2020 could just be the tip of the iceberg.”

For investors, the stars aligning for copper offer a similar ­picture to iron ore stocks late last year — big miners such as Rio Tinto and BHP will be obvious winners from new enthusiasm for the metal, but there are also a ­selection of independent listed miners with exposure to production within Australian and overseas.

Indeed, while BHP and Rio are already well established players in the global copper industry, the local mining industry’s “third force” Fortescue is reportedly looking at diversifying into the copper industry.

Beyond the big miners, the two main stocks of the local copper market are OZ Minerals and Sandfire Resources — though OZ Minerals has a better ASX record in recent times.

OZ Minerals is the largest of the independent producers with a $7bn market capitalisation — it gained 7 per cent in the first session of the week and has doubled since this time last year.

Sandfire Resources also gained 7 per cent on Monday, but remains under the $1bn mark in terms of market capitalisation largely due to a failure to capitalise on the copper boom so far — the stock is up about 7 per cent since this time last year.

Among small-cap copper stocks, the picture is mixed: Stavely Minerals (market cap $195m) has barely changed in price over the past year, while Caravel Minerals (market cap $53m) has tripled in price.

Where does it all go from here? In common with analyst bulletins during the rise or iron ore prices a few months ago, the investment industry is struggling to keep up with bank analysts barely able to get their forecasts out before ­prices move too fast. Those prices can change in the blink of an eye but the underlying theme is clear.