Recently, the capital market has set off a “periodic table of elements” investment boom. In addition to gold and silver competing in the precious metals sector, copper, as an important industrial metal, is also receiving increasing attention from market participants.

The price of copper is regarded as one of the macroeconomic “barometers”, and the market calls it “Dr. Copper.” Since March of this year, the price of “Dr. Copper” has continued to strengthen. Luntong has risen by nearly 11%, reaching a new high since the end of January last year.

What is the reason behind the “boom” in copper prices?

As the global manufacturing industry shows signs of recovery, the industry's expectations for tighter supply and demand in the copper market are gradually increasing.

In the databases of many senior macro traders, you can often see a comparison chart between the copper/gold ratio and US bond yields. Over time, the two have often shown a positive correlation. Today, as US bond yields continue to rise, it seems to indicate that copper may have greater potential to rise compared to gold.

The logic behind this is: the copper-gold ratio is the result of dividing the price of copper by the price of gold. Gold is a typical safe-haven and anti-inflation asset, while copper, known as “Doctor Copper,” is a cyclical commodity, a risky asset, and is greatly affected by the macroeconomic cycle on the demand side. The ratio of the two is very sensitive to macroeconomic trends.

When market sentiment recovers or heats up, copper's price performance will surpass gold due to increased demand. However, when the economy is sluggish or is threatened with recession, copper's performance is often lower than that of gold.

But in fact, in addition to this historical pattern, the rise in copper prices has also been driven up as global copper ore supply tightens and news that China may reduce production. Furthermore, “Dr. Bronze” also holds an ace in his hands, which is AI.

As discussions about “the end of AI is electricity” began to rage, the market began to shift its gaze towards copper, because electricity itself also contains copper. In AI data centers, copper is mainly used for power distribution equipment and grounding and interconnection.

According to the International Energy Agency (IEA)'s basic forecast, global data center power demand will grow at a CAGR of 15% by 2026. J.P. Morgan estimates that by 2030, this growth rate will require a cumulative increase of about 2.6 million tons of copper demand. This will also translate into around 2% of the expected global copper demand in 2030, the bank said.

Commodity trader Toke also said that by 2030, demand for copper associated with artificial intelligence (AI) and data centers may reach 1 million tons, which will further exacerbate supply shortages.

Citi recently believes that the price of copper will reach 10,000 US dollars in the fourth quarter of this year. The triggers for this bull market include increased demand related to decarbonization (especially renewable energy, power grids, and electric vehicles) and increased demand for emerging AI/data centers.

In the context of the wave of AI infrastructure investment, Citi particularly emphasized that it is expected that by 2026, data center construction will provide additional impetus for copper demand. Citi raised its benchmark forecast for data center copper demand from 10,000 tons per gigawatt to 20,000 tons.

Morgan Stanley said that with the rapid development of AI technology, copper demand will increase significantly, and AI data centers will become a new growth point for copper demand. By the fourth quarter of 2024, the price of copper may rise to 10,500 US dollars/ton, which is 18% higher than the current level.

On March 28, Goldman Sachs said that the copper market is at an important seasonal inflection point. Since the end of December last year, the refined copper market has experienced an obvious seasonal surplus phase. Currently, this phase is coming to an end. In the second quarter, inventory levels will gradually decline. The bank said,

With strong demand in China and continued supply restrictions, the copper market will gradually shift to a pattern of supply shortages. Continued supply shortages will support copper prices. Copper is expected to rise to 10,000 US dollars per ton by the end of 2024.

Which concept stocks are expected to benefit?

Recently, copper has become one of the hottest topics in Chinese and foreign capital markets recently. Previous articles“AI chips are booming, and the big players are watching the copper price at a new high! How can the Hong Kong and US stock markets seize opportunities?》It also mentioned opportunities worth paying attention to in the Hong Kong and US stock markets.

In fact, since March, US copper stocks have all recorded good gains. Among them, Canadian copper and gold mining companies$Taseko Mines (TGB.US)$Increased by more than 63%; the world's fifth largest copper producer$Southern Copper (SCCO.US)$Up to 44% increase; US mining giant$Freeport-McMoRan (FCX.US)$, Canadian miners$Hudbay Minerals (HBM.US)$Cumulative increase of over 35%; Canadian mining company$Teck Resources (TECK.US)$, Canadian Copper Company$Ero Copper (ERO.US)$, global commodity trading giant$GLENCORE PLC (GLNCY.US)$Both increased by more than 25%.

However, the price of copper stocks is affected by various factors, including the global economic situation, market demand, supply conditions, and policy changes. These factors may cause the price of copper ore stocks to fluctuate greatly, and investors need to pay attention to investment risks.

Editor/Somer