Copper is already trading near record highs, but according to a new report from Pitt Street Research, there could be more good news to come for investors with an "extreme" copper crunch on the way.
Pitt Street has this week sent a research note to its clients, arguing that copper could be the best-performing metal in the 2020s, and has named two producers it says are well placed to benefit.
Let's have a look at what they're saying about copper supply first.
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Deficits to grow
Pitt Street Research argues that copper has the potential to mirror gold's stellar performance, as "the emerging supply/demand gap … is only going to continue to grow''.
They added:
Global copper consumption is ~26.5Mt today, and the deficit is a modest ~200,000tpa. But consumption is forecast to rise sharply as EVs (~80kg copper vs ~25kg for ICE cars), renewable energy, grid infrastructure and data centres scale simultaneously. Bloomberg has estimated that demand will reach ~35Mt by 2035 and ~50Mt by 2050.
Pitt Street said no major new world-class copper deposit had entered production at scale in more than a decade, and existing mines are ageing and ore grades are declining.
New discoveries also take 7-10 years to come into production, they said.
They added:
The crunch will mean significantly higher copper prices. We are already seeing an impact with LME copper prices up >50% in 18 months and believe more growth is to come. ASX will gain exposure to the upside in the copper price. However, not all copper companies are created equal. The companies that will do the best will be the companies that have high-quality projects in favourable jurisdictions with persistent operational performance.
Miners worth a look
In terms of ASX-listed copper producers, Pitt Street Research likes Evolution Mining Ltd (ASX: EVN) and Sandfire Resources Ltd (ASX: SFR).
While Evolution is mainly thought of as a gold producer, Pitt Street said it has strong copper exposure embedded in its high-quality assets.
Pitt Street said:
Ernest Henry is a large-scale iron oxide copper-gold (IOCG) deposit with a long mine life to at least 2040 and significant resource depth. The operation contains approximately 1.4Mt of copper and 2.8Moz of gold in resources, supporting long-term production of around 50kt copper per annum. Beyond Ernest Henry, Evolution also has exposure through Northparkes, creating a broader copper portfolio. Copper contributes approximately 25% of group revenue, with a strategic target of increasing this to 40% over time. This indicates a deliberate shift towards greater copper leverage.
And finally, to Sandfire, Pitt Street said it had diversified from a single asset producer into a diversified global copper company with producing assets in Europe and Africa.
Pitt Street said:
All things considered, we believe Sandfire represents a direct, scalable and relatively low-cost copper exposure, with both operational stability and growth. In the context of the copper price scenarios, it offers strong leverage in the base and bull cases, while remaining resilient in downside environments due to its cost position.
