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    The Market Huddle

    MH+ Ep.33 Copper, Dispersion & Commodities (guest: Will Thomson)

    Wed Apr 03 2024
    copper marketglobal manufacturingsupply challengescopper miningreal asset investinggeopolitical factorsundervalued metals

    Description

    This episode covers various aspects of the copper market, including global manufacturing trends, factors influencing copper prices, supply challenges, recommended copper mining companies, opportunities in real asset investing, and geopolitical factors affecting undervalued metals.

    Insights

    Global manufacturing PMIs have shown signs of bottoming

    This is a positive indicator for industrial metals like copper.

    CEOs holding back on CapEx due to recession fears has impacted the economy

    Despite concerns of recession, energy and material sectors have remained tight with prices holding up.

    Copper market shows potential for sustained growth

    Driven by both micro supply issues and favorable macroeconomic factors.

    Government investments in green sectors are driving significant copper demand

    Especially in China.

    Factors influencing copper prices include Chinese property market, green demand, and global economic conditions

    Supply challenges in the copper industry are arising from mine closures, production shortfalls, droughts, and logistical issues

    Lack of investment in new assets is impacting copper supply globally

    Two recommended copper mining companies with growth potential are Ivanhoe and Lundin Mining

    NGEX and Filo Mining have promising development assets in Argentina but require a higher risk appetite

    Investing in oil and natural gas provides many opportunities due to the wide range of winners and losers annually

    Chapters

    1. Global Manufacturing and Industrial Metals
    2. Factors Influencing Copper Prices and Supply Challenges
    3. Recommended Copper Mining Companies
    4. Opportunities in Real Asset Investing
    5. Geopolitical Factors and Undervalued Metals
    Summary
    Transcript

    Global Manufacturing and Industrial Metals

    00:02 - 07:38

    • Global manufacturing PMIs have shown signs of bottoming, which is a positive indicator for industrial metals like copper.
    • Despite concerns of recession, energy and material sectors have remained tight with prices holding up.
    • CEOs holding back on CapEx due to recession fears has impacted the economy.
    • Central bank easing cycle has changed the economic mood and encouraged business activity.
    • Copper market shows potential for sustained growth driven by both micro supply issues and favorable macroeconomic factors.
    • Government investments in green sectors, especially in China, are driving significant copper demand.
    • Positive secular story for copper includes turning industrial cycle, de-stocking from COVID, and robust demand despite weaknesses in key markets like Chinese real estate.

    Factors Influencing Copper Prices and Supply Challenges

    07:15 - 15:01

    • German and Korean manufacturing play a significant role in copper demand due to their production of durable goods and machinery.
    • Factors influencing copper prices include Chinese property market, green demand, and global economic conditions.
    • Supply challenges in the copper industry are arising from mine closures, production shortfalls, droughts, and logistical issues.
    • Lack of investment in new assets is impacting copper supply globally, leading to potential shortages in the future.
    • Issues with permitting for new mines like Resolute in the US highlight challenges in meeting copper demand.

    Recommended Copper Mining Companies

    14:37 - 22:13

    • The current copper price is not incentivizing the production of new copper mines.
    • Management teams are crucial in the mining industry for problem-solving and execution.
    • Two recommended copper mining companies with growth potential are Ivanhoe and Lundin Mining, known for strong production and management teams.
    • NGEX and Filo Mining, both Canadian companies, have promising development assets in Argentina but require a higher risk appetite.
    • A discussion on the dispersion of company results in the speaker's investment strategy.

    Opportunities in Real Asset Investing

    21:47 - 29:55

    • Assessing the breadth of opportunity in a stock universe is crucial for active management.
    • The dispersion of results within a real asset universe indicates significant opportunities for differentiated returns.
    • Investing in oil and natural gas provides many opportunities due to the wide range of winners and losers annually.
    • Small cap stocks show more extreme outcomes with big winners and losers, while large cap stocks tend to generate positive returns consistently.
    • Natural gas market shows promise for long-term growth due to factors like LNG exports, industrial production, and geopolitical issues.

    Geopolitical Factors and Undervalued Metals

    29:34 - 36:01

    • Europe's geopolitical situation with Ukraine and Russia may lead to higher natural gas prices
    • Lithium and other battery metals are currently undervalued
    • Iron ore prices are expected to rise due to growing demand, especially in batteries
    • Emerging markets' industrial firms are overlooked but poised for growth due to government spending on infrastructure and energy transition
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