China is no longer building fossil fuel power plants at the rate of two a week as the world opts for greener energy options.
However, the metals needed to achieve these goals are estimated to increase again Patrizia Mohrcommodity expert and former vice president at Scotiabank.
Mohr told Benzinga Melanie Schaffer that the green transition could lead to a surge in the prices of some raw materials.
Speaking at the recent Prospectors And Developers Association of Canada (PDAC) conference in Toronto, Mohr said he was particularly bullish on both copper and uranium.
“In the mining sector we think copper will do very well – it’s currently trading around $4 a pound, I think in a couple of years it will be above $5 a pound, which will be quite a profitable level,” he said. “We need to get to that level because we need to see investment in some new mines created around the world to meet the decarbonization goals that the world has now.”
Copper is widely used in electricity production, both in fossil fuel-intensive power plants and in wind and solar farms. Copper is used in turbines that convert rotational energy into electrical energy. In fact, more copper is used in wind and solar energy production than in traditional fossil fuel power plants.
It’s a bit like when China’s tiger economy grew at double-digit percentages every year throughout the 1990s. This required an expansion of energy and housing. Thus, the price of copper and many other industrial metals reached record highs during the commodity supercycle through the early 2010s.
“With copper there have been a lot of operational issues,” Mohr said
These have included the closure of Quantum Prime‘S FQVLF The Cobre mine in Panama, which was ordered by Panama’s government late last year after public protests over environmental concerns
There have also been production problems with other mining groups, such as Anglo-American Plc NGLOYresulting in lower copper production forecasts for the year.
“We don’t see much new investment: there is some capacity expansion, but not as much as the market expected six months ago. So the market will rebound in the next year and a half and it will prove to be a very good investment.”
THE US Copper Index Fund CPERan ETF that tracks the price of copper, has grown nearly 5% so far in 2024, while Global X Copper Miners ETF COPXwhich holds major copper mining stocks, is up 8.8%.
Read also: Copper Stocks Rally as Market Tightness Reaches Historic Levels: Analysts Predict Severe Shortage by 2025
Towards nuclear power with uranium
Global environmental goals are sparking renewed interest in the nuclear option.
After the Fukushima disaster in Japan in 2011, when an earthquake caused nuclear contaminants to be released from a power plant into the surrounding environment, some countries decided to reduce their dependence on nuclear energy.
Germany has decided to free itself from nuclear power, but many countries, given the current risks associated with the supply of other fuels such as oil and gas, have revised their nuclear policies.
“We are optimistic about uranium, an energy source that emits almost no greenhouse gases. It is a very clean source of energy. Governments around the world are starting to show interest in nuclear energy again, including in Canada,” Mohr said.
Mohr explained that uranium has seen quite a run. After hitting lows around $15 a pound in 2016, the price is currently at $85, after hitting more than $100 in January.
“I wouldn’t be surprised to see it reach its previous peak of $140 (it hit in May 2007) – I think it will prove to be a good investment.”
This week the Global X Uranium ETF URAan exchange-traded fund that tracks global uranium miners, is stable in 2024.
Lithium-driven drawdown
While lithium prices have collapsed over the past year as demand for electric vehicles appears to have reached a plateau, Mohr is now turning more bullish, given the lower entry price.
“I think electric vehicles are the future, but in the United States they are advancing more slowly. In the United States they are not worried about the global oil outlook because they are the largest oil producer,” she said.
He added: “Lithium took quite a tumble last year, so I think some investors will come back to take advantage of the low valuations and the price will slowly come back.”
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