Kazakhstan may be the place that breaks the recurring pattern in critical minerals investing. The pattern tends to be that the West wakes up to a dependency, commissions reports, convenes summits, and then watches China quietly sign another joint venture while the paperwork is still being drafted in Brussels.

The numbers are not subtle. China controls 60% of global rare-earth mining, 91% of refining, and 94% of magnet production. In April 2025, Beijing weaponised that position by imposing export restrictions on rare-earth elements and by May, shipments of rare-earth magnets to the US had fallen 93% year on year. Ford idled its electric-vehicle plant in Chicago and German carmakers warned of production halts.

China has since extended the same logic to tungsten, where it controls 79% of global supply and has imposed export curbs on a market already stretched by demand for defence fuelled by the Ukraine war and disruption in the Persian Gulf.

The benchmark price for ammonium paratungstate – the white crystalline powder that is the standard intermediate stage that virtually all mined tungsten passes through before being refined into metal, carbide cutting tools, or missile-grade alloys – has risen 716% in a year. The price chart looks almost vertical. Russia, meanwhile, controls 46% of global uranium-enrichment capacity, a choke point that Western utilities are only now starting to engineer around.

Why invest in Kazakhstan?

Into this landscape steps Kazakhstan. The ninth-largest country in the world, sitting on one of the most extraordinary resource endowments on Earth and still, somehow, trading at a discount anchored in Cold War geography. That discount is the opportunity.

Kazakhstan produces 40% of the world's uranium. It produces 18% of the titanium used in global aerospace. It is a top-ten global producer of copper, gold, chromium, beryllium, niobium, tantalum, and tungsten. It has recently begun developing what is reportedly the world's largest manganese deposit and will shortly become the second-largest global producer of gallium, which is essential for semiconductors. Last year, it announced a rare-earth discovery that could put it third globally in that category too. All of this is before you consider that only 16% of its territory available for exploration has been licensed.

The geopolitical story is at least as interesting as the resource one. President Kassym-Jomart Tokayev has executed a genuinely remarkable balancing act. Kazakhstan has observed Western sanctions against Russia without drawing Moscow's ire.

It has maintained strong ties with both Washington and Beijing at a moment when those two are economically decoupling. It has joined Donald Trump's Board of Peace, secured a G-20 invitation to Florida, hosted the expansion of the Central Asia Five to include Azerbaijan and let China lead the recent mining investment league table, all simultaneously.

Economists call this kind of diplomatic optionality a free good. It rarely lasts and wise investors should not assume it will. But for now, it represents genuine strategic value in a world of hardening blocs. The transport picture has also shifted materially. The Trans-Caspian International Trade Route, the so-called Middle Corridor, has reduced transit times between Kazakhstan and Europe from 50 days in 2023 to 18 today, with a target of ten by 2030. Critically, this route has become the primary channel for Kazakh uranium reaching Western utilities, bypassing Russia.

The risks of investing in Kazakhstan

There are real risks and investors should not pretend otherwise. The Kazakh government is moving to mandate state-owned enterprise participation of at least 50% in new oil, gas, and uranium projects, and similar rules are under discussion for the mining sector more broadly. A Canadian investor recently withdrew from a series of uranium licences, citing a regulatory change that would have handed Kazatomprom a 75% stake in any new venture.

The $100 billion arbitration Kazakhstan's government launched against the Kashagan and Karachaganak oil projects over claims of lost revenue is a reminder that Kazakhstan has, in the past, rewritten the rules after the investment was made. Constitutional changes passed in March 2026 appear to strengthen the role of domestic law relative to international treaties.

Investment opportunities in Kazakhstan

The counterpoint is that newer investors, coming in with eyes open, are structuring around this reality rather than fighting it. One foreign investor quoted in Ocean Wall's recent Kazakhstan research noted that participation by state-owned enterprises (SOEs) in joint ventures was an advantage in practice, with the state partner handling licensing and regulatory navigation while the investor focused on operations.

The Cove Kaz Capital tungsten joint venture with Tau-Ken Samruk, financed by the US Export-Import Bank and Development Finance Corporation, is the model: US government finance backing the deal, Kazakh state equity alongside it and a Western mining company operating it; 15% of global tungsten output, secured for the West, against a price backdrop that makes the economics extraordinary.

The West needs Kazakhstan more than it has yet been willing to admit. For investors who recognise that before the consensus does, the window is open.

One name worth watching is Kaspi.kz (Nasdaq: KSPI), the most accessible entry point for global investors and the one requiring the least tolerance for frontier markets' complexity. Kazakhstan's dominant fintech and e-commerce platform, it combines a payments super-app with a marketplace and a banking operation in a country where digital adoption is accelerating rapidly. It is the closest thing Kazakhstan has to a blue-chip offering long-term growth in consumption.

Halyk Bank (LSE: HSBK, a global depositary receipt, or GDR) is the country's leading retail bank and has delivered strong returns over the past three years as Kazakhstan's economy grew. It offers investors exposure to domestic credit growth and benefits from the same story of rising household income that underpins Kaspi.

Kazatomprom (LSE: KAP, GDR) is the anchor of the uranium thesis. Controlling 40% of global supply, it is the most important company in the nuclear-renaissance trade. The sulphuric acid constraint on in-situ recovery production is a genuine medium-term risk worth tracking in results, but the structural demand picture from reactor buildout globally is compelling.

KazMunaiGaz (Almaty: KMGZ) is the national oil company and the vehicle through which the Kazakh state participates in Tengiz, Kashagan, and Karachaganak, the country's three major oil and gas projects. It is not a growth story in the conventional sense, but at current valuations, it offers meaningful hydrocarbon exposure with a state backstop, and contract renegotiations with the major oil companies over the coming years could prove a catalyst.

East Star Resources (LSE: EST) is the early-stage exploration name for investors with a longer time horizon and a higher risk appetite. Its copper and gold assets in Kazakhstan are genuinely prospective, and the stock has already delivered strong returns over the past year. The Kazakh exploration story is at an early stage, and East Star is positioned to benefit as the government's new geological mapping programme begins to define the resource base more clearly.

Air Astana (LSE: AIRA) rounds out the picture as a play on Kazakhstan's growing connectivity and its ambitions as a regional hub. The airline has benefited from increased transit traffic along the Middle Corridor and from the general expansion of central Asian trade flows. It listed in London in 2024 and remains below the radar of most Western investors.

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Prices of commodities flatlined between January 2024 and the start of 2026 – now they are rocketing. The S&P GSCI index of 24 major raw materials has surged 29% since 1 January. That reflects a heavy weighting towards energy, which accounts for more than half of the index's composition. Higher oil and gas costs will also feed through into agriculture prices, the index's second-biggest component. US wheat futures have risen 15%.

The Middle East isn't just a source of hydrocarbons, says The Economist: 22% of the world's traded urea (a fertiliser), one third of its helium and 45% of its sulphur (used as a plant nutrient) comes from the region. The Gulf is also a major source of petrochemicals required for everything from basic pharmaceuticals to glycol (a paint ingredient). With spring planting “imminent” in the northern hemisphere, a squeeze on fertiliser supply that lasts another few weeks risks “catastrophic” consequences for global harvests later this year.

Commodities rise sees industrial metals miss out

The commodities uplift has not carried over into metals, with the S&P GSCI Industrial Metals index flat since the start of the year. Aluminium prices have risen 8% since 1 January; the Middle East accounts for 9% of global production. But nickel has gone nowhere, while copper (down 4% this year) has been behaving like gold, suffering a pullback after a multi-year boom. The prospect of global stagflation doesn't bode well for the industrial demand that underpins metals markets.

Copper entered the year with “a dose of the metals fever” amid dire warnings that soaring demand for electricity will cause shortages, says Andy Home on Reuters. Yet while traders bet on copper shortages later this decade, current supplies are ample. In the US, Chicago Mercantile Exchange warehouse stocks have rocketed from 85,000 tons at the start of 2025 to 536,000 tons today (US stockpiling has been turbocharged by attempts to beat import tariffs). “The gap between speculators' great expectations” and the “current reality” of well-supplied warehouses “yawns ever wider”.

The structural metals story could yet come true, says Alan Livsey in the Financial Times. Sluggish prices between 2015 and 2022 prompted major global miners to cut spending on new mines by “at least a third” and focus on paying dividends instead. While investment started rising again in 2023, mines have very long lead times. The consequences of historic underinvestment will soon loom large. Real assets enjoy other attractions. They provide a hedge, both against bouts of inflation and a prolonged fall in the dollar, which presently appears somewhat overvalued. And at a time of AI-driven concentration risk, investors are eager to diversify into other themes. “Commodities tend to go through cycles,” says Evy Hambro of BlackRock. “We appear to be in the foothills of the next cycle.”

Why gold has lost its shine

Investors looking to gold for relief from the energy shock have been left disappointed. Gold has fallen 16% in dollar terms (and 15% in sterling) since hostilities began on 28 February. You would expect gold to do well at a time of war and inflationary pressure.

So why the pullback? Firstly, gold had already been on a record-breaking rally that saw it reach an all-time high in late January. Having rocketed 174% over the previous two years, the yellow metal entered the conflict looking overextended. Secondly, gold is strongly influenced by real interest rates (interest rates adjusted for inflation). While inflation looks poised to rise, so are interest rates, reducing gold’s appeal relative to competitors such as government bonds.

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In 1874, the Scottish-American industrialist Andrew Carnegie completed the mile-long Eads Bridge, made of steel and crossing the River Mississippi into St. Louis. At the time, nobody believed that steel was strong enough to be suitable for such a project. Carnegie made an elephant walk along it to show that it was strong enough, as Vivek Koncherry, the CEO of Graphene Innovations Manchester, recounts. Carnegie thus ensured that mass-produced steel would become the backbone of the later industrial revolution, “leading to the rise of the skyscrapers”.

Graphene, a sheet of which is strong enough to bear an elephant standing on a pencil, is set to transform the world today in the same way that steel did then, says Koncherry. As well as being an example of groundbreaking British science, it may also prove to be lucrative for investors. Koncherry predicts that graphene and similar nanomaterials will enable the rise of “some of the biggest companies of the future”.

Where did graphene come from?

The story of graphene began more than two decades ago in 2004, with two scientists, Professors Andre Geim and Konstantin Novoselov of the University of Manchester, some graphite and some sticky tape, says James Baker, the CEO of Graphene@Manchester. They found that it was possible to use a modified version of the sticky tape to isolate a single two-dimensional atomic layer of carbon from the graphite. This material, a crystallised single layer of carbon atoms arranged in a flat honeycomb or hexagonal lattice pattern, occurs naturally, if very rarely, and is called graphene. It has some “unique properties”: it is stronger than steel, more conductive than copper, and can act as a membrane that allows some molecules through but blocks others.

The most interesting uses of the material occur when you “add it to things to complement them” and improve their functioning, says Baker. Scientists have already established that it can usefully complement materials used in batteries, energy storage, water filtration, the storing of hydrogen, in coatings for metals to prevent corrosion, for membranes and water desalination, and even inks used in wearable technologies. Baker notes that researchers at Manchester have already built graphene sensors that have been inserted into patients’ brains, opening up the possibility that the material could even be used to treat conditions such as Parkinson’s and strokes.

Graphene’s “exceptional qualities” are that it is “lightweight, while having high tensile strength and electrical conductivity” and “enhances the performance and durability of products”, says Asad Farid, portfolio manager of JSS Sustainable Equity – Strategic Materials at J. Safra Sarasin Sustainable Asset Management. Another factor which makes it different is its “simplicity” – graphene “is not a new compound and doesn’t use any exotic materials in its manufacturing” and can be extracted from graphite, an everyday substance.

The trouble with meeting expectations

Predictions that the discovery of graphene was about to change the world proved to be overly optimistic. But this was, argues Baker, the fault of unrealistic expectations, not with any thing to do with the material itself. Indeed, the gap between Geim and Novoselov’s discovery in 2004, their being awarded the Nobel Prize in 2010, and not finding commercial applications until around the present day, is not that unusual. After all, it was 25 years between discovery and the first carbon-fibre products hitting the marketplace, and that was for upscale, high-quality products such as Formula One cars, tennis rackets and golf clubs. In fact, it is usual for new materials to take ten years to get to market and even longer to reach a mass market. So graphene is still a “relatively young material”.

The biggest barriers standing in the way of mass adoption are a lack of standardisation, production costs and problems with scalability, says Aneeka Gupta, director of macroeconomic research at WisdomTree. Industry wants materials to be cheap, consistent and scalable, and that isn’t yet the case with graphene. Indeed, until very recently “there weren’t even any widely adopted standards” for the material. This matters to large industrial companies as they won’t want to redesign a process around a material unless they can be sure that other suppliers are going to be able to produce equivalent materials.

The good news is that, despite these “headwinds”, there has been progress in addressing all three issues, says Gupta, even if in a “very quiet incremental way”. Graphene hasn’t yet quite reached the point where it is being widely used across industry, but it is starting to gain a foothold in “niche, high-value components”. Terrance Barkan of the Advanced Carbons Council trade association is more bullish, noting that a lot of companies have been spending the last five years doing experiments with incorporating graphene into their product and are now ready to start rolling them out.

Setting global standards

The Advanced Carbons Council has been at the forefront of trying to get product quality standards in place, and has produced the graphene classification framework, which has now become an ISO standard – a universal benchmark for consistency across industries globally. The council also carries out work to help companies inspect and audit the supplies of graphene that they use. This is important, emphasises Barkan. “If a company uses a material that they’re told is graphene and it’s not, and it doesn’t work as they expect, then that damages the credibility of the entire market.”

There has also been progress on the key problem of manufacturing graphene cheaply at scale. Traditionally, the approach has been to make it by “exfoliating graphite”, essentially the same approach Geim and Novoselov used back in 2004, says Kjirstin Breure, CEO of HydroGraph. Her company has developed an alternative process, based on research carried out at Kansas State University, which involves exploding hydrocarbon gases.

This approach may not necessarily be the cheapest by weight, but because the result is of such high quality compared with other methods, “it works out as much cheaper for our customers as they have to use much less of it”. Costs are set to come down further as HydroGraph starts to move its operations to a large-scale production facility in Houston, Texas, which Breure predicts will be capable of producing hundreds of metric tonnes of graphene annually. She expects the amount produced to rise even further as demand explodes.

HydroGraph isn’t the only company leading a revolution in the way that graphene is produced. Mike Harrison, CEO of Concretene, points to the work of Levidian Nanosystems, a spinout from the University of Cambridge, which has devised its own process for manufacturing high-quality graphene from methane. Like Breure, Harrison thinks we have reached the point where reductions in cost and increases in quality will make more companies interested in using the material, which in turn is enabling those making graphene to benefit from economies of scale, further reducing the price.

Graphene in construction

One industry that is starting to enthusiastically embrace graphene is construction. By putting the material graphene into concrete (sometimes called “graphene doping”), for example, Concretene claims a 10% to 20% improvement in the material’s performance. This, in turn, means construction companies can reduce the amount of cement they need to put in the concrete, which reduces the environmental impact of their construction projects. Every 50g of graphene added can lead to a saving in terms of cement used of 7kg-9kg.

At the moment, most of Concretene’s customers – United Utilities, for example – are firms that are interested in the product for the boost it will give to their green credentials. There has also been interest from the Middle East. But Harrison reckons that, in a few years, graphene in concrete will be the best solution on economic as well as environmental grounds.

Graphene is set to play an important role in other parts of the building industry, too. Nathan Feddy and Liam Britnell of Vector Labs, for example, are already working with a range of partners, including large builders, to roll out a range of products that use graphene to improve home insulation. They are also particularly impressed with graphene’s potential for reducing the risk of fires, noting that graphene-enhanced materials “can reduce the spread of flames in the event of fire by up to 80%, without impacting on the performance of the original material, which is one of the weaknesses of existing materials”.

A growing market for graphene

Construction may be at the forefront of the graphene revolution, but other sectors are not far behind. There is currently no “single killer application”, but Barkan identifies no fewer than 45 separate vertical markets where graphene is set to play a major role. The paints and coatings industries, for example, are already using graphene to protect against corrosion. The textile industry is embracing the material, too – “more than a dozen companies now make graphene-enhanced clothes”. Koncherry highlights the fact that graphene is starting to be used “to make smaller and more efficient semiconductors, for use in a wide range of electronics and batteries”. Recent reports suggest that photonic chips produced with graphene by Cambridge Graphics can “deliver not only much higher data throughput, but also 80% lower energy use than equivalent silicon chips”, says Gupta. This could have big implications for AI data centres and telecoms firms, as “they are exactly the kind of niche, high-value market where graphene’s speed and optical properties matter more than its lack of scale”.

In short, we’re now seeing the emergence of hundreds of graphene-related companies worldwide. So although “the hype that we saw a few years ago has died down, a slightly slower, but more realistic, revolution has taken its place”, says Gupta, with graphene being used to improve concrete, plastics, coatings, filters and batteries. Research from IDTechEx suggests that the global market for graphene is “estimated to grow by around 27% a year over the next decade to 2036”, as Ivan Buckley, director of business development at Graphene@Manchester, points out.

An exciting times for materials

Perhaps the clearest sign of change in the world of materials is that, encouraged by the success of graphene, researchers and companies are also “developing a whole family of other 2D materials”, says Baker. One group of materials he thinks people will be hearing a lot more about in the future is the MXenes, a metal-based family of 2D materials. They have a “potentially huge” range of applications for energy storage and for aircraft, and are sometimes used in combination with graphene.

MXenes also outperform all other materials in certain properties that make them ideal for use in insulation and wearable electronics, says Yury Gogotsi of Drexel University. MXenes have tended to live “in the shadow of graphene”, but interest in them is taking off, especially in Asia. Companies such as Murata and Samsung hold “dozens of patents” in the area, and there are now “more than a dozen” Chinese companies that produce and sell MXenes, as well as in the US, Korea and Europe, too.

Another graphene-like material that has potential is Gii. Discovered in 2014, and coming out of research into graphene, Gii has a lot of similar properties to graphene. But while the former takes the form of a single 2D layer, Gii “can be grown in three dimensions, without losing performance”, says Marco Caffio, co-founder and chief scientific officer of iGii (formerly Integrated Graphene). It can also be manufactured at scale, at low cost and “anywhere where there’s electricity”, says iGii’s CEO Jean-Christophe Granier. Both Granier and Caffio emphasise that they have already received a huge amount of interest from industry, especially in terms of developing “faster, more accessible ways to detect disease or water contaminants, as well as the creation of flexible printed batteries the size of a fingernail”. Given such developments, it’s no surprise that Granier and Caffio consider it to be an “exciting” time for the materials industry.

How to invest in graphene

No safe way into graphene

There is no exchange-traded fund (ETF) or other collective investment that gives diversified exposure to the graphene theme. And the individual companies operating in the area must be considered high risk. Some of the very early public companies have struggled to get to commercial sales, and their stock prices have suffered because investors have lost patience with them, having gone through “year after year of fundraising”, says Terrance Barkan of the Advanced Carbons Council. Still, those companies able to achieve both profitability and critical mass could see investor interest return as “sales cure all ills”.

A catalyst for wider adoption

One company that is currently starting to see its revenue go up in leaps and bounds is HydroGraph Clean Power (Vancouver: HG). The company has developed a method of extracting graphene from gases. CEO Kjirstin Breure says the firm is now building a major production plant in Texas, which could cut costs and expand production so much that “we alone could serve as a sort of catalyst for wider adoption of graphene by industry”. Indeed, HydroGraph is so confident about the future that it is planning to move its share listing Stateside to the Nasdaq.

Better batteries and cement

Aneeka Gupta, director of macroeconomic research at WisdomTree, is optimistic about the prospects for the Graphene Manufacturing Group (Toronto: GMG), a Canadian company that makes graphene-based batteries. Two years ago, the company agreed a partnership with mining company Rio Tinto to develop a battery that uses graphene to improve the safety of batteries and reduce the need for cooling. This is useful in rugged environments where batteries may need to be charged and discharged quickly. Gupta is particularly positive about GMG’s graphene spray products, which can be applied to improve the conductivity of metals while maintaining performance.

Australian firm First Graphene (Sydney: FGR) is starting to bring products to market, and its graphene-enhanced cement has moved from the trial phase to mass production, says Gupta. The company is now beginning to receive contracts from major construction firms such as Breeden and Morgan Sindall. Indeed, earlier this month First Graphene announced the production of 600 tonnes of graphene-enhanced cement at Breedon Group’s works in Derbyshire for use in new projects that are expected to be rolled out in the UK.

Two alternative plays

A slightly different way to play the graphene revolution, as well as the development of similar materials, is through companies that supply equipment to manufacturers. CVD Equipment Corporation (Nasdaq: CVV), for example, makes systems used to grow graphene and other 2D materials. Its revenue is growing by roughly 7% a year, yet it still trades at a discount of around 18% to its net assets.

Those who are especially adventurous when it comes to risk might want to consider London-listed micro-cap Directa Plus (Aim: DCTA). The company is a producer and supplier of graphene nanoplatelet-based products. These are being used in textiles (including trainers) and filters. Like all of the above companies, it is not currently making any profit, but revenue is expected to rise by more than 50% this year from 2024 and then quadruple again in 2026.

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Following three consecutive years of above-average returns from the S&P 500 index, if there is to be a fourth the stock market will have to climb a steep mountain. From my recent market observations, I have come to the conclusion that two current booms will come to an end.

Firstly, capital spending on anything to do with AI will prove no different from previous bubbles fuelled by investors following the zeitgeist. Excessive capital spending caused by a supply shortage is almost always followed by a downturn once supply is satisfied. Die-hard AI enthusiasts can simply look to CoreWeave’s recent collapse or the market’s incredulous response to Open AI’s forecast for capital expenditure (capex) and revenue: the sums just don’t add up.

Secondly, the burgeoning demand for private credit or equity assets over their public equivalents is another trend whose days appear numbered. While light-touch regulatory oversight was fine when the asset class was outside the mainstream, such a hands-off approach to regulation just won’t wash for a pension fund and retail audience.

With greater scrutiny comes better price discovery and, at least for some operators, discrepancy and conflict on the value of assets. Against this backdrop of uncertainty for 2026, here are three stocks that could climb the proverbial stock-market mountain next year.

Three US stocks taking on Goliath

The skilled climber takes the riskiest direct route, straight up the north face. If he doesn’t fall, he will be in his deckchair at the summit swigging a beer long before his companions join him. MongoDB (Nasdaq: MDB) is a $30 billion-software provider of databases for unstructured data (such as emails, telephone-call recordings and social-media posts, which don’t fit neatly into traditional databases). Unstructured databases are a rich source of information for advanced AI programs.

From its $2 billion-revenue base camp, Mongo will attack Oracle, a giant of the sector that’s 50 times larger. A new CEO and a better product should help it chip large chunks off the old block of the competition.

The hiker, a well-prepared adventurer, takes a more cautious approach, avoiding the trickier parts of the climb. The US former Dow Jones constituent, aluminium producer Alcoa (NYSE: AA), is my choice in this regard.

The balance between demand and supply is becoming more favourable, with China curtailing supply. Expect asset sales to act as levers to pull, in addition to relying upon the demand cycle: what do you think goes in all those data centres?

Taking the easiest long route and avoiding tough obstacles is the pathfinder. Enter pharmaceuticals giant Pfizer (NYSE: PFE). The stock is cheap, having lacked growth since the company’s Covid vaccine was launched in 2021. At just 14 times earnings and a 7% dividend yield, investors have a margin of safety built in while we find out if Pfizer’s purchase of Metsera and its obesity drug pays off in the long term.

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This year’s best-performing emerging market (EM) shouldn’t really be classified as an emerging market at all. South Korea’s high-tech industrial base is a match for any of the world’s leading developed economies. Yet restrictive trading rules on the local bourse see it consigned to the same global investing basket as Egypt and Peru.

Nonetheless, the local Kospi index has rocketed 66% this year. That reflects two massive tailwinds: AI, and a closing Korea discount. For the first theme, memory-chip champions Samsung and SK Hynix are cashing in on Big Tech’s splurge on semiconductors. For the second, Seoul has begun to implement pro-shareholder reforms, a copy of similar changes in Japan that unleashed a multi-year stockmarket rally.

Emerging market winners

Korea’s gains have helped push the MSCI EM benchmark to a 26% gain for the year to date. After years of lagging the developed-markets index, that rise comfortably outstrips the 18% gain for MSCI’s equivalent index for developed markets.

Those gains partly reflect more benign financial conditions for the developing world. US interest-rate cuts and a weaker dollar tend to push capital out of Wall Street and into more exotic locales. Yet the upswing has not been universal. This year’s big winners have tended to offer exposure to one of 2025’s two winning trends – AI-focused tech and the global metals rally. Like Korea, Taiwan’s Taiex (+20.5%) is rallying on soaring demand for AI equipment, largely driven by the enormous success of local chipmaker TSMC.

The mainland Chinese CSI 300 is up a healthy 17.5%; Hong Kong’s tech-biased Hang Seng has done even better, with a 28.5% gain. The east Asian economies now jointly account for 60% of the MSCI EM index, making the index a more concentrated bet than many EM investors would ideally like.

India, the index’s third-largest component, provides some diversification. The country’s thrilling growth story resembles that of China in the early 2000s. Yet share prices have become stretched, and the BSE Sensex’s 8% gain for the year is lacklustre. While India is a global leader in IT outsourcing, local markets offer little exposure to AI.

Southeast Asia is a mixed bag. Vietnam’s VN index has rocketed a third in the same year that it won an upgrade to emerging-market status by index provider FTSE Russell. Indonesia’ IDX Composite has gained 21%.

Malaysia’s KLCI is flat, while the Philippines’ PSEi index has slipped 7% amid signs of a domestic slowdown. Thailand’s SET index has retreated 10% as investors flee political turmoil and signs of a decline in the country’s crucial tourism sector.

Metals rally helps emerging markets shine

Gold’s 60% rally this year has helped South Africa to shine. The JSE Top40 index has had a banner year, with local miners and an improved political outlook propelling it to a 40% gain. Copper champion Chile has done even better, with the IPSA index enjoying a massive 50% rally.

But not all commodities are created equal. The oil-heavy Saudi Tadawul all-share is off 13% amid weak energy prices. The US has picked fights with both the Mexican and Brazilian governments this year, but you couldn’t tell by looking at their stock exchanges, up 28% and 32% respectively.

The White House’s 50% tariffs on Brazilian imports have “backfired”, because “Brazil exports more than twice as much to China as to the US”, says Craig Mellow in Barron’s. Brazil’s strength in agriculture makes it a highly complementary trading partner. Investors also hope that next year’s presidential election could bring a pro-market candidate to power, echoing Javier Milei’s success in Argentina.

It has been another good year for emerging Europe. Poland, the region’s biggest market, is catching up fast with western Europe. A boom in defence spending has helped push the WIG20 to a 39% gain. Finally, difficult post-crisis reforms continue to pay dividends in Athens. The ASE index has rallied 41% this year and 119% over the past three years. The protracted Greek tragedy is finally over.

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The story of commodities in 2025 was “energy down, metals up hard”, says Ole Hansen of Saxo Bank. Silver and copper are continuing their record-breaking rallies, but the world’s oil men are feeling gloomy. Brent crude is down by a fifth since 1 January. The main European natural-gas benchmark is off 45% this year, to the relief of households. Overall, the Bloomberg Commodity Energy subindex has dropped 10% this year, even as the All Metals index has soared 43%.

Energy markets are dogged by talk of massive excess supply as Opec producers lift output caps, and new players such as Guyana enter the market. Meanwhile, China’s appetite for fuel is softening as its transition to greener supplies continues.

The International Energy Agency forecasts a near-four-million barrels a day surplus next year, equivalent to about 4% of global supply. Commodities firm Trafigura recently warned of a coming “super glut” as big new oil projects that were planned when prices were high enter production just as prices drop.

Why copper is the new oil

Aluminium has rallied 13% this year, with zinc up 8%. But it is copper, with its 33% gain, that has been the real star. Prices on the London Metals Exchange (LME) have topped $11,700/tonne this month. “Much as oil dictated the geopolitics of the last century, access to copper is becoming an economic imperative in this one,” says James Attwood on Bloomberg.

Just three countries (Chile, the Democratic Republic of the Congo and Peru) account for almost half of all copper mining. More than 40% of copper processing takes place in China, much to the alarm of Western politicians. And it takes an average of 15 years to turn a new copper find into a productive mine, and big new discoveries have slowed to a trickle over the past decade.

Meanwhile, on the demand side, copper sits at the heart of mega-trends from the building of AI data centres to electric vehicles (which require three times as much wiring as those with internal-combustion engines).

But not everyone is feeling bullish. Global manufacturing is in the doldrums, with US factory activity falling for nine months in a row, says Andy Home on Reuters. This year’s supply crunch doesn’t represent strong demand so much as a market “fracture” caused by fears that 2026 will bring new US tariffs on refined copper. Anxious dealers have been shipping copper to the US en masse in anticipation of new import charges, clearing out Chinese and European warehouses in the process.

Copper prices may be poised to “decline somewhat” next year as they pull back from recent record highs, says Goldman Sachs Research. Demand for Chinese refined copper appears to have fallen 8% year-on-year in the fourth quarter. For all the talk of shortages, the metal is actually in surplus globally this year and should be next year, too.

That said, the longer-term outlook is bullish as “rising structural demand from power infrastructure” runs into limited new mined supply, with the market expected to enter a deficit in 2029. Analysts forecast an LME price in 2035 of $15,000 per tonne.

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You can’t blame BHP for having another crack at buying Anglo American, but its decision to walk away again so quickly raises big questions. It is widely acknowledged that there is a looming supply shortfall for copper, the metal at the heart both of a putative BHP-Anglo deal and of the much better Anglo-Teck Resources merger that investors prefer. Yet BHP and its peers remain reluctant to put up serious money to solve that.

The copper bull case is simple. The world is using more electricity: it is replacing fossil fuels (eg, electric cars), it is meeting new demand (eg, emerging markets) and – at the margin – it is critical to new technologies (eg, data centres are a small but fast-growing share of consumption).

In total, electricity will grow from 21% of final energy demand now to more than 50% by 2050 in some scenarios, reckons the International Energy Agency. This implies a lot of copper for wires and other components – generators, transmission cables, vehicles, appliances, in buildings, in networks and so on.

Can copper supply keep up with rising demand?

Copper supply is not on track to keep up with this. Total demand will grow by roughly 24% to almost 43 million tonnes per annum (mtpa) by 2035, reckon analysts at Wood Mackenzie. Meeting it will require eight mtpa of new mined supply and 3.5 mtpa of additional scrap supply. There is no shortage of copper reserves around the world to mine, although ore grades have been dropping over the long term (this means more rock must be mined to produce the same amount of metal, pushing up costs). However, there has been a lack of investment in major new mines. Meeting demand will now take over $210 billion in investment, says Wood Mackenzie. This is a huge increase from the $76 billion invested in the past six years, and about half of that came from Chinese miners, which adds a further wrinkle. Securing copper supplies may become a geopolitical imperative.

There may already be hints of tightness in the market, with prices reaching record highs. Steady demand growth has combined with supply disruptions at mines in Chile, the Democratic Republic of Congo and Indonesia to create a probable mined supply deficit by next year. However, there are other factors at play as well. The threat of tariffs on refined copper imports pushed US prices to a premium, causing metal to be stockpiled there and shrinking stocks elsewhere in the world. If demand forecasts are correct, the fundamental crunch is yet to come.

Some substitution is possible. Aluminium has lower conductivity and is less durable, but works well for some power applications. Fibre-optic cable has replaced copper for data transmission. More speculatively, carbon nanotubes may eventually offer another alternative. Still, for the most part, copper will be crucial for the foreseeable future. A basket of some of the most pure-play copper miners – eg, Anglo-Teck, Freeport McMoRan, First Quantum Minerals, Antofagasta, Southern Cooper – is one of the most compelling ideas in natural resources.

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It was possibly the worst news the industry could have received. Last week, the EU set out plans to cut the amount of steel it allows to be imported into member countries by half and impose tariffs of 50% on top of anything above that. With US president Donald Trump imposing steep levies on imports into the US, the EU is worried that manufacturers will start dumping excess production in Europe instead. It may well have a point. After all, there are not many other places it can go, and production can’t be wound down very quickly. Almost 300,000 people still work in Europe’s steel industry, with an estimated 2.5 million jobs dependent on its supply chain, and it can hardly afford to give those up. Tariffs are an obvious response.

That will hit British manufacturers harder than anyone. The EU is the largest market for steel made in the UK, with exports worth £3 billion a year. And it was not as if the industry was in great shape to begin with. Even with the trade deal that was agreed with Trump over the summer, the industry is still likely to face tariffs in the US after the government failed to reach a deal to exempt it. And it has been struggling with the highest industrial electricity prices in the developed world. Power in the UK is now twice the price of that in France and four times the price in the US. Given that energy can account for up to 40% of the costs of a steel plant, that has made British producers hopelessly uncompetitive on global markets. Add in higher wage costs, land prices and taxes, and it is very hard for most plants to compete. An extra 50% tariff in the EU will surely make it impossible. Exports will inevitably dwindle away to nothing.

It’s net zero or British steel, not both

Over the next few weeks, we can expect ministers to scramble around looking for a solution. They may offer big concessions to the EU to avoid the tariffs, such as conceding a youth mobility scheme. But that will just create problems elsewhere. British university and school leavers are already facing a huge shortage of jobs and it is hard to see how more competition from the EU will help that; or it could offer yet another round of subsidies and state aid. Almost half of steel production is now effectively controlled by the state. But the government is already strapped for cash and hardly in a position to offer open-ended subsidies to the steel industry.

Right now, the government is stumbling towards a half-hearted nationalisation. It has already taken control of British Steel, with a plant in Scunthorpe, earlier this year, while Liberty Steel, with plants in Rotherham and Stocksbridge, collapsed into government control last month. The plan, apparently, is to keep them alive while the government looks for a buyer, but there don’t seem to be any takers, and the tariffs from the EU make it unlikely any will emerge now. Half the industry has already been effectively nationalised, and the other half may not be far behind.

It is time for the government to make a grown-up decision. The steel industry should be closed down. It has been getting less and less competitive for years. It will soon be locked out of both the US and European markets by tariffs. The domestic market is not big enough to support it by itself, and with the accelerating deindustrialisation of the economy, it is getting smaller all the time. The unions and Labour MPs will demand subsidies to keep the industry and jobs alive. That would be a huge mistake. It will prove to be a waste of money that could be better spent elsewhere. Perhaps more importantly, closing down the steel industry will force the country to face up to the fact that successive governments have destroyed the industrial base through green regulations and soaring energy costs.

That would make the UK the first major developed country without any form of capacity to manufacture steel. And that will be a huge strategic weakness. But there is no point pretending the UK can still be an industrial power while also leading the world on hitting net zero. The country will have to make a choice. The steel industry can’t stagger on in its current form and we can’t afford the subsidies. It would be better to let it fade away and focus instead on those industries that can still be saved.

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The price of copper hit a record high in the US yesterday (8 July) as president Donald Trump suggested that imports of the red metal into the country could be slapped with a 50% tariff.

Trump told reporters “today we’re doing copper… I believe the tariff on copper, we’re gonna make it 50%.”

Copper futures on The Commodity Exchange (COMEX) spiked to $5.69 per pound, 13% higher than they had been trading prior to Trump’s comments, as US traders rushed to lock in supply of the key industrial metal before the tariff takes effect.

“With tariffs looming, US buyers have rushed to bring in copper ahead of schedule,” said Tom Bailey, head of research at HANetf. “But much of this metal is not being consumed. Instead, it is sitting in warehouses or locked in financing agreements. Due to high US premiums, it is uneconomical to export.”

This so-called “trapped copper” could restrict supply to the rest of the world, pushing up prices, according to Bailey.

The strength of this market reaction is somewhat surprising given that tariffs on copper have been expected for some time.

“There’s been a Section 232 investigation underway since February, so markets have been aware [that copper tariffs could be implemented],” said Stephen Hare, lead economist at Oxford Economics.

The reason for yesterday’s volatility, according to Hare, is that the level of the tariff proposed caught markets off-guard.

“I think markets were expecting that to be a little bit lower, probably closer to between 10% and 25%,” he said.

Are LME copper prices rising?

Unlike COMEX copper, Trump’s comments appear to have depressed copper prices outside the US. Copper traded on the London Metals Exchange (LME) fell yesterday, pushing the premium for US-traded copper over London-traded copper to a record 25%.

This seems slightly counterintuitive, but it goes back to the fact that markets have long been anticipating a copper tariff to be implemented at some point.

“There’s been a massive arbitrage opportunity to try and ship as much copper to the US before the tariffs could come into effect,” said Hare. That has squeezed supply on other exchanges, causing LME copper prices to rise despite global copper supply currently outstripping demand.

Now that copper tariffs are becoming more of a known quantity, and could be implemented imminently, this arbitrage opportunity window is closing. That will likely see copper supply increase slightly outside the US, prompting ex-US prices to pull back.

When could copper tariffs take effect?

The timing of potential copper tariffs will also have a key bearing on pricing of copper outside the US market.

“If they come into effect in ~3 weeks, shipments already on route to the US will likely try to get there still, meaning the ex-US markets shouldn't face excess cargoes immediately,” said Amy Gower, commodities strategist at Morgan Stanley in a research note. “But it will be more challenging to ship any extra cargoes in a 3 week window, loosening ex-US markets going forward.”

The 50% copper tariff that Trump suggested hasn’t yet been officially confirmed, and as such there is no definitive timeline for its implementation. Initially, the White House did not respond to questions from CNN about its timing.

Secretary of state for trade, Howard Lutnick, later suggested that the copper tariff could come into effect in late July or on 1 August, giving US businesses that rely on copper supplies just weeks to secure supply at their current levels.

What is the long-term outlook for copper prices?

There is a deeper structural story at play with copper prices over the long term. Like silver, it is a key industrial metal with applications to a huge range of modern technologies.

“Copper sits at the centre of a looming supply-demand crunch,” said Bailey. “On one side is surging demand driven by grid upgrades, the rapid buildout of AI data centres, and the ongoing urbanisation of emerging markets. On the other is a supply base that is ageing, expensive, and increasingly unreliable.”

Bailey believes that these various demands for copper mean that it is “fast becoming a strategic resource.

“Its role in AI infrastructure and renewable energy has placed it in the crosshairs of trade policy and geopolitical risk,” Bailey added. “Like oil in the twentieth century, copper may increasingly be shaped by politics as much as by geology.”

What do rising copper prices mean for your money?

In theory, rising copper prices would increase inflation, given the centrality of copper to electronics and all manner of other daily spend. As an example of its ubiquity, most of the piping in your house is probably made of copper: any building or renovation work becomes more expensive if copper prices are higher.

The good news is that, as we’ve seen, it is only in the US that copper prices are spiking. Outside the country, they are coming down.

“At the minute, it’s very much going to be the US consumers that are going to pay more of that price,” said Hare. “The UK should be fairly insulated.”

“We are executing a downturn in US industrial production over the next couple of quarters, just because of the impact that the wider tariffs are having,” said Hare.

Since Trump first announced his ‘reciprocal’ tariff regime in early April there have been widespread fears that they could prompt a US recession.

But while copper supply outstrips demand for the moment, that could change in future.

“On current projections, copper supply is not going to keep pace with levels of demand over the long term,” said Hare, echoing Bailey’s views. “In the very short term we’re expecting that this is just a spike in volatility: prices should come back down once there’s a bit more clarity over the tariffs.

“But over the long run, we are quite bullish about copper prices.”

Copper is used in virtually every area of industry and modern life. The red metal is the third most-used metal globally, behind only steel and aluminium. It is even nicknamed Dr. Copper because demand is tied to the health of the broader economy. The idea is that if demand for copper is robust, the broader economy is healthy.

Since China’s rapid industrialisation in the last few decades, copper’s price has been closely tied to the Chinese economy, with 58% of total global refined copper consumed in China alone last year. The Trump administration’s policies have unsettled the market; 2025 has hitherto seen unprecedented volatility. But the long-term picture is clearer: most analysts expect a broad supply deficit.

The Donald Trump effect

Donald Trump’s return to the White House has unsettled the copper market. On 7 April, just after “Liberation Day”, copper traded in a range of $8,105 - $9,096.50 per tonne, an unprecedented one-day range. Recent US policy has not just suppressed global risk appetite, but also dented expectations about demand for copper over the next few years. Many goods shipped from China to the US are copper-intensive, such as washing machines, fridges and televisions.

Huge tariffs on these goods are likely to reduce these flows. Some market participants estimate that as much as 5% of Chinese demand for copper ends up in the US in products such as those mentioned above. Recent copper consumption, however, has not declined: the fear of tariffs has led to the “front-loading”, or expedited shipments, of goods. The front-loading of exports has actually increased apparent demand for copper over recent months, but this is unlikely to last.

Beyond the surprising immediate effects on the copper market, tariffs in general are considered bad for the global economy and, by extension, household spending and government investment in copper-intensive areas such as grid infrastructure. Copper declined sharply after Liberation Day owing to fears that the tariffs could affect demand. The London Metal Exchange’s (LME) cash copper price fell 11% in the week after the announcement.

The copper price is also closely related to the value of the US dollar. LME copper prices are priced in US dollars. If the US dollar strengthens, copper becomes relatively more expensive for participants operating in other currencies, so dollar strength tends to pull the LME copper price down.

Trump’s economic policy is having a significant impact on the US dollar. So far in 2025, the US dollar index has already traded in a range 44% wider than in 2024 – adding to the volatility of the copper price.

Recent US government policy has also threatened to affect copper directly. The US government has announced an investigation into the national security implications of the US’s reliance on copper imports. This has led to speculation that the US will implement a tariff on the red metal.

Most American market participants use copper prices from the Chicago Mercantile Exchange (CME), whereas most international traders and producers use the LME price. The LME price is a duty-free copper price, and the CME is a duty-paid price. The CME copper price would therefore be likely to rise to reflect any import duty. A historically broad arbitrage has opened between the two markets, with participants using the spread as a play on the expectations of tariffs. For example, it recently widened sharply after Trump threatened the EU with a 50% tariff.

The fear of tariffs and the broad spread between US and world copper prices has seen the US flooded with copper. The rest of the world, on the other hand, has seen markets virtually drained, pressing premiums for copper being delivered in Europe to record highs, and creating a shortage of material.

Premiums for copper being imported into China also hit multi-year highs in May, with those premiums as much as 85% higher when compared with the levels seen before Trump’s inauguration.

US participants want to ensure a good stockpile of material in case tariffs do come in, so they are rushing to secure extra material promptly. Participants, predominantly metal traders, are also moving copper from across the globe, including South America and Europe, into the US to take advantage of the arbitrage.

The upshot? Since January, the copper market has seen record-breaking price movements, spread movements, and arbitrage. Copper miners’ share prices have swung wildly too. One analyst told me recently that forecasting price movements is now so challenging, he wished he could forgo forecasting the price at all in 2025. Still, copper prices are up 10% this year, outperforming UK and US stocks.

Look far beyond this year

The long-term picture for copper is much clearer than the tariff-driven short-term. In the long run, most analysts and participants agree that the copper market will slide into a substantial deficit by the end of the decade.

This fear of a supply deficit and the expectation of higher prices has been highlighted by the significant number of mergers and acquisitions in the copper market in recent years. Miners are rushing to acquire assets to bolster their own supply. The most prominent examples are BHP’s and Glencore’s attempts to acquire Anglo American and Teck Resources, respectively, in multibillion-dollar deals.

New technologies such as electric vehicles (EVs) and increased investment in grid infrastructure are expected to massively increase demand for copper. Copper is an excellent conductor of electricity, which makes the metal critical as the world rushes to electrify. Renewable energy generation, such as wind power, along with the related grid infrastructure, is significantly more copper-intensive than traditional energy generation.

Electric cars drive demand

The increased use of EVs also looks likely to power the requirement for copper. EVs are more copper-intensive than traditional cars, and the same is true of the related energy needs and infrastructure. EVs and plug-in hybrids respectively use 250% and 144% more copper than traditional cars do.

There is also an expectation that the world will need more electricity in the coming years, with AI and the internet generally relying on energy-hungry data centres. Trafigura, a major copper trader, predicted last year that AI alone could generate demand for an extra one million tonnes of copper by 2030 (currently, there is an annual demand for around 28 million tonnes of copper). All these factors mean electrical infrastructure and transport will increase copper usage by 26% and 29% respectively between now and 2030, according to Benchmark Mineral Intelligence’s Copper Service.

Meanwhile, as nations develop, industrialise and bolster infrastructure, their demand for copper rises greatly. Indian copper usage is forecast to grow 76% between 2024 and 2030. In total, copper usage globally is forecast to increase by 16% overall by 2030. Yet supply is only set to grow by 11% over the same period, so that a significant deficit will open by the end of the decade. The International Energy Agency is predicting a 30% shortfall of supply by 2035, as mines have been affected by “declining ore grades, rising capital costs, limited resource discoveries and long lead times”. Problems range from deep, low-ore grade mines in South America and logistical challenges in Africa to delays securing permits in the US.

Nations in South America, such as Chile, the world’s largest copper producer, have been exploiting some of their best resources for some time now, with some of Chile’s largest mines many decades old. Major copper miner BHP estimates that global copper-ore grades have declined by 40% since 1991.

As ore grades decline, mining becomes less efficient and more expensive. “Declining grades… means that more ore needs to be mined, processed and transported to produce the same amount of copper. Without technological advancements, grade decline is likely further to increase production costs on a unit of output basis,” BHP said last year.

In several countries, obstacles to acquiring permits and local resistance to projects have caused supply problems: witness First Quantum’s Cobre Panama mine, which was closed in late 2023 after nationwide protests. Cobre Panama had only opened in 2019 following a $10 billion investment from First Quantum and its predecessors. The risks in investing in opening new mines are high, which militates against new production.

“Return on investment is long in the mining industry. From finding a resource to actually mining it can take 15-20 years,” a source at a large copper miner told me. With all this in mind, there is an expectation that copper prices will move up significantly in the coming years. Benchmark is forecasting a 32% increase in copper prices by 2030, while some traders believe that the upswing could prove even more dramatic.

Where to look now

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Two of the biggest trends in technology right now are the rise of “clean tech” – that is, technology designed to lower carbon emissions and other pollutants, especially from electric vehicles (EVs) – and AI. As well as disrupting a score of industries, these trends have also given a massive boost to the demand for key metals and minerals. Rising geopolitical tensions between the US and China, and the prospect of “resource nationalism”, have also affected the market. Both factors could combine to create a “supercycle” in the metals market – “a phase of long-term price increases far beyond normal fluctuations”, as Lale Akoner, a global market analyst at eToro, explains. Here’s what you need to know about the global scramble for metals and minerals and how to take advantage of it.

How to take advantage of the metal supercycle

The rise of “clean tech”, and of electric cars in particular, is going to lead to a “fairly unprecedented level of demand for all types of metals and minerals”, says Duncan Goodwin, manager of the Premier Miton Global Sustainable Growth Fund. Electric vehicles typically use around six times as many mineral inputs as conventional cars, according to the International Energy Agency (IEA). Large quantities of lithium, nickel, cobalt, manganese and graphite will all be needed. Copper will also be in huge demand, being used in the cars themselves and the kit needed to connect these and other similar technologies to the grid.

There will be a big impact on three metals in particular: lithium, nickel and copper, agrees Alexandra Symeonidi, a corporate credit analyst at William Blair. Lithium is used in electric-car batteries, which are already accounting for around 60% of current demand for the metal. The IEA expects that to rise to 90% by 2040, with the overall volume of lithium used rising eight times over that period. Electric vehicles currently account for a much more modest 16% of total demand for nickel, but this is up from only 6% a few years ago. The IEA projects it will rise further to around half of the total, and overall nickel consumption increase sevenfold within the next 15 years.

Whether these projections prove accurate will depend on which technologies win the day. Dominic Vergine of Monumo, a company aiming to shake up the motor industry with high-tech innovation in engineering, is sceptical about the medium-term need for lithium and for the rare-earth minerals also in demand. The “environmentally destructive nature of the mining process” required to extract such metals has “spurred a lot of research as to how their use could be minimised, or even eliminated”. Most of the big car companies are trying to develop a different type of electric motor that doesn’t need lithium. Vergine predicts that in the best-case scenario the proportion of electric-car batteries that use permanent magnets, which require a lot of rare-earth minerals, could fall from 80% to as little as 20% within the next decade.

Developing these more sustainable batteries will be “a very fine and complex challenge”, however, and the technology won’t work for all types of cars, especially those that require more torque, such as sports cars. Chinese manufacturers are also likely to keep using permanent magnets in order to take advantage of their large domestic supplies of rare earths, says Vergine. And any substitute batteries are likely to use larger amounts of other materials instead, especially copper, demand for which is already surging.

Indeed, copper looks to be the “linchpin of the green-energy revolution”, says Hakan Kaya, senior portfolio manager at Neuberger Berman. Green-energy technologies in general use “more copper than when producing energy through traditional technologies” – electric cars, for example, use two and a half times the amount of copper than vehicles with an internal combustion engine. In some cases, wind farms and solar plants can use up to seven times more copper than conventional gas plants. Investors playing a rise in demand for copper rather than for other metals are arguably making a safer bet as “it is hard to replace copper with anything else on the periodic table”, says Kaya.

How to take advantage of the AI boom

Just as copper once “ushered humanity into the Bronze Age”, so it is now set to “help us transition from the fossil-fuel age to the zero-carbon age”, says Kaya. Copper has superb conductive properties – only silver is better – which means it will be in demand as the numbers of data centres and the advanced computing infrastructure required to support AI technology rises. The shares in AI technology companies now look expensive, so playing the rise in the copper price could be a better way to benefit from the AI boom.

Indeed, the escalation of AI and the rapid building of data centres will be “a significant additional driver of demand for many of the same minerals used by battery EVs and clean technology”, says Martin Frandsen, portfolio manager for Principal Asset Management. Data centres are “essentially vast jungles of sophisticated semiconductors, electrical equipment, and cooling technology”, all of which consume large amounts of minerals and electrical power.

In particular, the production of semiconductors relies on materials such as silicon, gallium, indium, and germanium, says Géza Sebestyén, Head of Economic Policy at the Mathias Corvinus Collegium and associate professor at the Institute of Finance at Corvinus University of Budapest. AI hardware also requires rare-earth metals, such as neodymium, dysprosium, praseodymium, and terbium for magnets and displays. Battery production depends on lithium, nickel, cobalt, and vanadium. Copper and silver are essential for wiring, processors, and thermal management. Data centres also use aluminium for cooling systems and steel for construction. Overall, the largest relative increases in demand are likely to be for copper, gallium and indium – little surprise, then, that “all three have shown a bullish price trend over the past five years”, says Sebestyén.

The sheer pressure placed on the energy grid by data centres, which “can consume as much as 80,000 households”, is also starting to become an accelerator of renewable-energy deployment, says Frandsen. Most technology companies have pledged themselves to achieving net-zero emissions, which means that the AI boom will probably create a “feedback loop”, whereby increasing demand for artificial intelligence creates more demand for green infrastructure and electricity, and hence for the metals and minerals used in that.

The weaponisation of critical minerals

At the same time as clean-tech and AI have led to an increase in demand for metals and minerals, resource-rich countries have “become more assertive about maintaining control of their natural resources”, mindful that they have “an outsized influence on supply chains”, says Frédérique Carrier, head of investment strategy for the British Isles and Asia at RBC Wealth Management. In some cases, the interventions are minor – Chile, for example, mandated in 2016 that mining companies allocate part of their earnings to community development. But increasingly the controls are becoming more direct – Indonesia’s ban on exports of bauxite (raw aluminium), for example, came into effect last year.

Some have gone even further and are engaging in the outright “weaponisation of critical minerals”, says Carrier. China has been particularly aggressive, banning exports of certain vital minerals to Japan in 2010 due to a dispute in the East China Sea. In 2023, it went further, entirely prohibiting the exports of certain key rare-earth minerals. “It’s hard to imagine anyone more nationalistic than Chinese leader Xi Jinping”, the “high priest of resource nationalism”, says Christopher Ecclestone, principal mining strategist at Hallgarten & Company. The latest restrictions go so far that China “risks cutting off its nose to spite its face”, distorting the country’s internal economy by effectively penalising its mining and metals industry to support its more marginal manufacturers. These restrictions are also “inconsistent with China’s stated desire to keep global prices low, in order to discourage other countries from developing their own rare-earth mineral resources”.

The “growing wave of protectionism” in resource-producing countries is in turn prompting governments around the world, including in the West, to “scramble to secure access to critical minerals essential for strategic industries”, says Tal Lomnitzer, senior investment manager on the global sustainable equity team at Janus Henderson Investors. Research by global risk-intelligence firm Verisk Maplecroft reveals that there has already been “a surge in state intervention” in the resources market, says Lomnitzer, as “various economic blocs seek to build duplicative supply chains” and stockpile scarce resources. This should lead to higher global prices.

Trying to predict geopolitical developments can be dangerous as the “policy momentum” in producing and consuming countries can suddenly shift, warns Peter Myers, principal consultant at SRK. At the moment, however, miners in Western countries are “definitely rubbing their hands together with glee at the prospect of reduced supply from China”, which will boost prices. Western miners should also benefit from tax breaks and a more sympathetic regulatory environment in their home countries, prompted by the desire to reduce dependence on external imports. Alessandro Valentino, product manager at VanEck, points to the EU Critical Raw Materials Act and US Inflation Reduction Act as examples of such incentives.

The best ways to play key metals

The price of key metals and minerals may be rising, but finding the best way to take advantage of it is another thing entirely. One way to buy into the boom directly is to invest in exchange-traded funds (ETFs) that track the price of the metals, or in the companies that mine them. The problem is that sorting out profitable mining companies from those that are speculative ventures is not easy, notes Valentino. When it comes to mines, for example, you need to “check the quality of proven reserves, including grade, tonnage and feasibility of extraction”.

Investors should also “evaluate the financial health of mining firms by analysing profitability metrics, such as Ebitda, all-in sustaining costs (AISC), and debt-to-equity ratios”, says Valentino. They also need to consider management expertise and the firm’s operational record – “a well-managed mining company will have a history of delivering projects on time and within budget, while maintaining strong relationships with local communities and governments”. On the other hand, companies with “red flags” – such as “frequent equity dilution, overly optimistic projections, and lack of proven reserves” – should be avoided.

Valentino expects the scramble for minerals to lead mining companies to expand their operations and make investments in new projects over the medium term, and hence create additional demand for mining equipment. This will be good news for the industrial mining-equipment companies that delivering drill rigs, trucks and excavators. The average age of mining equipment globally is relatively old, which is good news for the equipment companies, especially “those that are providing the most efficient solutions”.

Other secondary industries that should benefit from a mining boom include those producing mining vehicles, as well as other inputs into the materials extraction process, such as explosives, says Evy Hambro, global head of thematic and sector-based investing at BlackRock. Hambro recommends the companies seeking to develop more advanced technologies for identifying and extracting materials from ore, as well as those aiming to help the materials producers themselves to decarbonise. That is important, otherwise the move to clean technologies will simply shift emissions creation from the point of consumption to the point of production.

Finally, Alexandra Symeonidi of corporate credit analyst William Blair is bullish on recycling and scrap metals. New copper mines typically take between ten and 20 years before production begins, so “there’s a clear opportunity for both more established networks of scrap collection and more metal processing and refining of scrap”. A significant amount of copper and nickel supply will come from these sources in the future, she says. Indeed, there are already a large number of legacy industries that technology companies can take scrap copper from, although that won’t be nearly enough to compensate for the extra demand.

Add it all up and it’s no surprise that metals have become the “hottest topic” in investment, says Akoner. Below we look at some of the most promising plays on the themes discussed.

The best investments to buy now

The easiest way to play the rise in price of a commodity is through an exchange-traded commodity (ETC), which is essentially an exchange-traded fund (ETF) that directly follows a commodity index. WisdomTree Copper (LSE: COPA) aims to follow the Bloomberg Commodity Copper Subindex 4-Week Total Return index. It comes with an annual charge of 0.49% a year. Alternatively, you could consider an ETF that invests in copper-mining companies, such as Hanetf ICAV Sprott Copper Miners ESG Screened UCITS ETF (LSE: COPP). This invests in a basket of 30 copper-mining companies, including such names as Ivanhoe Mines, Evolution Mining and Southern Copper Corporation, which have been screened for minimum ethical standards. In this case the total expense ratio (TER) is 0.59%.

One of the largest holdings in the above fund is the FTSE-100 company Antofagasta (LSE: ANTO). It operates several copper mines in Chile as well as a transportation company that specialises in transporting materials from mines. Revenues can be volatile, but the firm grew by around 35% between 2018 and 2023 and is expected to keep growing over the next few years. The company has a decent return on capital employed (Roce) of 9%, suggesting it is run efficiently. Antofagasta currently trades at 23 times 2025 earnings, with a dividend yield of 1.85%.

Lithium miner Atlas Lithium (Nasdaq: ATLX) looks interesting as it operates several mining projects in Brazil. It isn’t currently making any money, which makes it a bit riskier than more established companies, but its Neves project received official approval to begin operations at the end of last year, and production is expected to start very shortly. It also received a major stamp of approval a few months earlier when it agreed a strategic partnership with the industrial conglomerate Mitsui, which is looking to start developing lithium batteries. The deal involved the Japanese company taking a 10% stake in Atlas.

Increased mining activity around the world will be good for Caterpillar (NYSE: CAT), the world’s leading manufacturer of mining equipment. Caterpillar makes a wide range of equipment, including cutting-edge autonomous vehicles. Revenue growth has been solid at around 4% a year, and earnings per share have more than doubled between 2018 and 2013. The Roce ratio is 24%, which will allow dividends to grow strongly as well. Caterpillar trades on 16.3 times 2025 earnings, with a dividend yield of 1.6%.

With demand for copper and other metals on the rise, there will be a greater push to recycle and repurpose scrap metal. This is good news for Sims (Sydney: SGM), one of the global leaders in metals and electronics recycling. Sims has facilities in 13 countries, with its largest operations in the fast-growing markets of the United States, Turkey, China and India. The volatility of scrap-metals prices can have a big short-term impact on profitability – Sims lost money in 2024 – but the company has a good record of medium-term revenue growth and is expected to return to profitability this year. It trades at 23 times 2025 earnings.

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I have been writing a book about gold, including a chapter on the ancient art of alchemy. Alchemy is a paradox. On the one hand, it is bogus science. You cannot turn base metals into gold. A universal elixir that could cure all diseases and grant eternal life does not exist.

And yet far brighter folk than me – from Isaac Newton, who at one stage thought he had cracked it, to Johannes Kepler – have kept on trying. Alchemy has captivated human beings for millennia. It is almost as old as civilisation itself. The space it occupies in modern fiction (witness Harry Potter or The Alchemist) shows the extent to which alchemy still fascinates and fixates humans the world over.

Alchemy has played a huge role in the development of science, chemistry especially. Many of its theories, techniques and instruments laid the groundwork for modern science. Alchemists developed methods for distillation, sublimation, precipitation and crystallisation: methods still used in chemical synthesis and analysis. They contributed to the discovery of new substances, including phosphorus, sal ammoniac and aqua regia. They developed the scientific method, emphasising observation, experimentation and empirical verification.

In the 18th century, Augustus the Strong, King of Saxony, who had a spending problem, heard of a chap who could make gold, called Johann Friedrich Böttger. He kidnapped and imprisoned him, ordering him to come up with the Goldmachertinktur (gold-making tincture). Böttger couldn’t, of course, and became something of a laughing stock.

But he did stumble across a way of making a hard paste porcelain that was comparable to prized Chinese ceramics. This was a huge business breakthrough. Augustus the Strong founded the Royal Meissen Porcelain Factory in Meissen and the factory still produces high-quality porcelain to this day. How often does the pursuit of one thing lead to the discovery of something else?

How alchemy conned the Nazis

But alchemy has also led to fraud after fraud. Frauds are not funny when you get caught up in them. They can break you. They can humiliate you. But comedy equals tragedy plus time. Consider the story of a German named Heinz Kurschildgen who managed to con Heinrich Himmler.

In 1914, Kurschildgen started his first job as an apprentice in a dye factory in his hometown of Hilden, near Dusseldorf. He became fascinated by the chemicals he was working with and built a small laboratory at home to conduct experiments.

Before long, he thought he had found a way to make gold, and even persuaded several investors to give him money. However, it soon became clear that he couldn’t make gold, and he found himself prosecuted for fraud. The courts let him off on the grounds that mentally he was not all there – but only on condition that he solicited no further investments with schemes to make gold. He was soon claiming he could produce other transmutations, and became a joke in his hometown, where a bust was even erected in his honour, albeit ironically, inscribed with the words: “For the genius gold-maker, from his grateful hometown”.

But in 1929, he returned to his first calling: kidding people he could make gold. He approached German president Paul von Hindenburg and Hjalmar Schacht, the head of the Reichsbank (the central bank), with a proposal to make the gold they needed to pay off Germany’s World War I reparations.

These had been set at 132 billion gold marks, which translates to 47,300 tonnes. To give you an idea of how unrealistic a figure this was: it was an amount not far off all the gold that had ever been mined in history by that time. That would take considerable alchemy.

But Kurschildgen was not to be deterred. He raised a load more money, defrauded his clients and ended up with another 18 months in jail. After his release, he was soon at it again. This time, he approached the newly elected Nazi government with a plan to make petrol from water.

Chief scientific advisor, Wilhelm Keppler, paid him a visit and Kurschildgen agreed to reveal his methods and surrender the rights to the government. Meanwhile, his claims about being able to make gold piqued the interest of SS leader Heinrich Himmler, who had a notoriously superstitious streak and a fascination with alchemy. Himmler started funding Kurschildgen generously to conduct his experiments.

But Reichsanstalt physicists soon declared his contraptions useless, and Kurschildgen ended up in a concentration camp. “Himmler has fallen for a gold and petrol maker,” said Joseph Goebbels in his diary. “He wanted to defraud me, too. I knew what he was about straight away”. After two years Kurschildgen was released for good behaviour. Himmler had him put straight back in the camp. On no account did he want this embarrassing story becoming public.

After the war, Kurschildgen insisted he had been a victim of Nazi persecution, so he could claim compensation. “The Gestapo would stop at nothing to get my invention,” he told the courts. As with most of his ventures, his petition was unsuccessful. Even so, you can’t fault the man’s ambition.

Dominic Frisby writes the newsletter The Flying Frisby (theflyingfrisby.com)

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The rise in the gold price ought to be very good news for gold miners. In theory, every dollar on the gold price goes straight to profits as mining costs are fixed. Gold-mining shares used to be regarded as a leveraged play on the gold price, amplifying the rise in the metal. In practice, it hasn’t worked out like that. The gold price has risen over 20% this year and 32% over one year to around $2,500 an ounce. The price is 40% higher than the peak reached 12 years ago. Yet the FTSE Gold Mining index stands nearly 30% below the level reached in late 2011.

Is the BlackRock World Mining Trust a good buy?

This doesn’t necessarily mean that gold-mining shares are a bargain. Miners are beset by rising costs, falling ore grades and government taxation and regulation, which means that their break-even gold prices rise steadily. For example, in the early 1990s South Africa was the world’s leading gold producer, accounting for 30% of global output. But today it is not even in the top ten. Output increased 12% in 2023, but that was 40% below the volume in 2010 and 90% below the level seen in 1970. 

Still, investors in global mining are at last making money. The £1bn BlackRock Gold and General Fund, managed by Evy Hambro and Tom Holl, has made investors no money since it launched in 2011, but it is up 17.5% in 2024. About 55% of the fund is invested in Canada, 31% in the US and 10% in Australia, showing a strong preference for safe and stable countries. Half of the fund is invested in large-caps with a market value above $10bn and 43% in mid-caps with values of $1bn-$10bn. Almost 90% is invested in gold miners and 10% in silver. The top ten holdings account for 59% of the portfolio and the top three, Newmont, Agnico Eagle Mines and Barrick Gold Corp, for almost a quarter. 

The fund is almost a mirror image of the $4bn BlackRock World Gold Fund, launched in 1994, but has considerably lower costs – 1.15% per annum versus 2.06%. That the World Gold Fund has returned an annualised 7.7% since its inception shows how abruptly the fortunes of gold miners changed in 2011; until then, the fund had multiplied sevenfold on a quadrupling of the gold price. If the gold price keeps climbing and the upward trajectory is deemed sustainable rather than the prelude to a nasty bear market, gold-mining shares should continue to perform, and even outperform the gold price. 

A safer option might be the £1.2bn BlackRock World Mining Trust (LSE: BRWM), also managed by Evy Hambro, but with Olivia Markham as co-manager. Almost 25% of its assets are invested in gold miners although there will also be gold production in the 35% invested in “diversified” miners. The proportion invested in gold varies depending on the managers’ view of the outlook, so the trust, which trades at around net asset value (NAV), should provide a smoother ride than a pure gold fund. At present, 24% of the fund is invested in copper, whose price rose strongly earlier this year, but has since fallen back. The trust is down 8% over one year and has returned just 4% over three, but 68% over five. So it is hardly riding the crest of a wave. The shares yield 6% to pay for the wait until the next boom. 

Hambro says that “constrained mined commodity supply, an evolving demand picture, strong balance sheets and valuations below historic averages make us optimistic about the outlook for the sector on a long-term view”. Cynics would point out that he is always optimistic. But his observation that “mining companies have focused on capital discipline in recent years, meaning they have opted to pay down debt, reduce costs and return capital to shareholders, rather than investing in production growth” is inarguable. The massive boom in demand driven by China between 2002 and 2011 is over, but other drivers of demand, such as infrastructure spending and renewable energy, are replacing it. Gold bulls will prefer BlackRock’s Gold & General fund, but World Mining is a compelling alternative.

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Copper mining has been a standout sector in 2024, bolstered by the copper spot price nearing all-time highs. We believe copper’s growing use as a critical material for surging global energy demand has triggered the next copper supercycle. The proliferation of data centres needed to support artificial intelligence (AI) applications, and the recent increase in their substantive power requirements (and, therefore, their copper requirements) have created a demand shock for the red metal. The growing energy needs of electricity grids, emerging economies and the copper-intensive energy transition have also given miners a major fillip. 

Yet the supply of copper has fallen below expanding demand, which may result in escalating copper deficits in years to come. Copper miners are therefore poised to play a pivotal role in providing a critical material necessary for electrifying the global economy. Here are three copper mining stocks within the Sprott Copper Miners ESG-Screened UCITS ETF exemplifying the industry’s efforts to bolster future supply.

Top copper mining stocks to play the boom

Freeport-McMoRan (NYSE: FCX) is the largest pure-play copper producer in the world, with 1.3 million tonnes of copper output in 2023. FCX is renowned for its geographical diversification (it has mines in North America, South America and Indonesia); strong margins and cash flows; large and liquid stock; and its advancing project pipeline, which provides additional growth opportunities owing to 111 billion pounds of copper reserves. Of the copper producers above one million tonnes, FCX is the only publicly listed pure-play (above 50% exposure to copper). 

Lundin Mining Corporation (Toronto: LUN) is a prominent Canadian copper producer, with projects in Argentina, Brazil, Chile, Portugal, Sweden and the US. The company hit a record high in copper production in 2023 and its production guidance for 2024 projects a further increase. Moreover, Lundin and BHP Group agreed to acquire Filo for $3billion, giving them each 50% ownership. 

The deal is expected to close in the first quarter of next year, and gives Lundin exposure to the advanced-stage copper exploration project Filo del Sol. It has 4.5 billion pounds of indicated and inferred copper resources, additional gold and silver resources and is located near an existing project owned by Lundin, along the border of Chile and Argentina. More broadly, this acquisition marks a continued strategic interest in pure-play copper miners and provides another tailwind to the industry.

A junior copper stock set to mature rapidly

ERO Copper (Toronto: ERO) is a junior copper producer and developer with operations in Brazil and headquarters in Canada. ERO’s assets are all in Brazil. They include the Caraíba Operations, which contain multiple high-grade copper-producing mines and the Tucumã Project, an imminently producing copper project that is expected to double the company’s total copper production by 2025. 

ERO also owns the Xavantina Operations, an operating gold and silver mine. It boasts a leading sustainability position as a lower carbon-intensity copper producer. Operations located in Brazil benefit in this regard as Brazil is a leader in clean energy, generating 91% of its electricity from it in 2023.

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It has been an exciting year for investors in base metals. In May, copper hit record highs, while nickel, zinc and tin prices have all seen double-digit gains this year. One thing all these base metals have in common is that we need them for the energy transition. Another is that they have all recently suffered from serious supply disruption. Lithium, meanwhile, also crucial to the energy transition, has seen its price plummet as supply has ramped up. Latin America is the key global store of most of the energy transition metals. As countries and investors compete to secure supplies of critical minerals, the region’s mining sector will see an inflow of capital.

Uptick in prices of base metals

One of the reasons for the recent uptick in base-metals prices that is less understood is the influx of energy traders and funds. Energy trading houses (such as Gunvor, Vitol and Mercuria) that made huge profits buying and selling oil have moved, or moved back, into metals. At present, the value of the metals market is far smaller than that of oil and gas, but as one of the traders told me: “We are diversifying today [for] what might happen tomorrow. If the energy transition takes off, we want to be there”. 

Some investment firms, meanwhile, aren’t content with simply getting exposure to metals prices via stocks, bonds or derivatives. They want to enter the physical market too. As one explained to me, “having access to physical flows of metal gives us forward-looking data about demand that we use to guide our financial positions”. These funds’ financial bets on metals prices are often much larger than their physical holdings. 

Even miners are caught up in the excitement. In April, Australia-headquartered BHP made an unsolicited bid for London-listed Anglo American. Copper was at the heart of the $38.8 billion deal. If it had gone through, the deal would have created the world’s largest copper miner, with 10% of global output. The bid failed in May, but now Anglo American is under pressure to divest some of its non-copper assets. 

The reason for the upsurge in prices is the energy transition. We need to switch from fossil fuels to renewable energy, which means new power generation, transmission lines and electric vehicles – all of which require the metals listed above. 

Another chapter in the demand story for these metals is our growing dependence on technology. We now put computer chips in everything from bicycles to washing machines and expect our devices to be connected to the internet or each other. This “internet of things” increases the need for energy hungry data centres, as does the growth of artificial intelligence (AI). More data centres mean increased electricity generation and storage, boosting demand for copper, tin, nickel and zinc. 

But the story is years old, so why are the investors piling in now? It’s becoming more apparent we won’t actually be able to build the mines needed to produce enough of these metals. And in a tightly supplied market, it doesn’t take much to make prices swing. Those dramatic price movements entice more investors and traders into the market because they make money in volatile environments – which further propels prices.

Challenges facing the metal industry

In May, a host of base-metal prices hit highs on the London Metal Exchange (LME). The three-month futures contract for copper hit $11,104.50 per tonne on 20 May – a new all-time high. Nickel hit an eight-month peak on that day, with the three-month contract reaching $21,615 per tonne. Tin hit $36,050 per tonne last month, up by 47% since the start of 2024. The three-month zinc price closed at $3,062.50 on 22 May, a 24% gain in a month before and a 25-month high. 

All of these metals have different markets, uses and dynamics, but they share some traits. Demand for all of them is expanding due to the energy transition and they have all suffered from disruptions to supply. 

In copper the most dramatic hit to production came when the Panamanian government ordered the closure of Cobre Panama in late 2023. The mine, owned by Canada-listed First Quantum Minerals, comprised 1% of the annual global copper supply, so its closure had a big impact. But more significant than this type of “black-swan” event are the structural factors that make it more difficult to produce copper. During 2023 and 2024, several large copper miners revised their annual production forecasts downwards. 

Growing environmental and community activism has made it harder to build new mines. The average time to take a copper discovery into a producing mine has gone from seven years to almost 20, so miners focus on extending existing mines. But these “brownfield” projects invariably have lower ore grades or other technical challenges. The difficulty of producing more copper by the drill bit explains why BHP tried to do it via the chequebook. 

In the UK tin is associated with food cans or abandoned mines in Cornwall. Yet nowadays more than 50% of demand for tin is for soldering electrical components and computer processors. It is a key metal for the energy transition. It is part of the “solar ribbon” that connects the individual cells in a solar panel, while electric vehicles (EVs) use three times more tin than conventional cars. The “soldering metal” is also in the new computer chips that enable AI. So tin is a future-facing metal essential for both the energy transition and the fast-growing technology sector, yet it just takes a quick glance at the world’s main tin-producing countries to see why supply might be precarious.

Uncertain future ahead for nickel

Peru, the world’s second-largest tin producer, is subject to frequent bouts of civil unrest and political turmoil, which often affect mining operations and infrastructure. Bolivia is the world’s fifth-largest producer and, like Peru, has a former president in jail, while the latter struggles with widespread discontent. Indonesia, the third-largest producer, has repeatedly threatened to ban tin exports, which makes future supply difficult to estimate. 

In Myanmar, which is responsible for around 10% of global tin supply, the majority of tin output comes from an autonomous region ruled by an armed separatist group. At present, 66% of nickel goes into stainless steel. But 15% of annual global nickel production is used for batteries. That percentage is rising rapidly as EV production increases and raises demand for batteries. 

The supply picture for nickel is unclear. Over the last few years the market has been disrupted by an influx of MHP, a nickel intermediate product that’s a halfway step between nickel ore and the fully refined nickel metal. MHP is mostly produced by Chinese-backed operations in Indonesia. 

Because MHP is cheaper than refined nickel, and can be used to make batteries, it took market share from the traditional metal and caused the nickel price to fall by 40% in 2023. That, in turn, caused a slew of Western nickel mines to close in 2024. Those closures, and unrest in New Caledonia (a French-controlled island in the Pacific and the world’s third-largest nickel producer) reminded investors that nickel supply is precarious. 

“Accounting for all disruptions so far this year, we have recently revised our world primary nickel supply-demand balance to just a 47,000-tonne surplus this year, down from the 194,000-tonne surplus we previously forecast and a 223,000-tonne surplus recorded in 2023,” said Andrew Cole, an analyst at Fastmarkets. There’s one place the world can get its essential energy transition metals: Latin America. The region is responsible for more than 50% of global copper production and holds over half of the planet’s lithium reserves. Chile is the world’s top copper producer; Peru is the second-biggest. But the most exciting countries don’t appear in the official rankings. 

Today, Argentina exports almost no copper, but it has the potential to be a top global producer by 2030. Five huge copper deposits in Argentina have been discovered. Ecuador is another high-potential country, where scores of impressive discoveries have been made, but it has only one large-scale copper mine operating. 

Brazil is the world’s eighth-biggest nickel producer, which doesn’t sound that impressive, but it has the third-largest reserves, so the growth potential is huge. When it comes to tin, Peru is the fourth-largest producer, while Brazil and Bolivia are the joint sixth-largest. In zinc, Peru, which is clearly a polymetallic country, is the second-biggest global producer, while Mexico is sixth and Bolivia is seventh. Finally, in cobalt, Cuba has the world’s fourth-largest reserves. 

The “Lithium Triangle” of Bolivia, Argentina and Chile is thought to hold 56% of global reserves. Chile is the second-largest lithium producer in the world with Argentina the third-largest and Brazil fourth. Australia is the world’s number-one producer, yet it produces lithium from hard-rock. It is a conventional mining process, with all of the costs associated with mining and processing ore. 

In the Lithium Triangle, the lithium is found in brine pools located on salt flats. Lithium can be extracted from this brine by a process of evaporation where the sun does most of the hard work. It means Lithium Triangle production can be much cheaper than for its Australian competitors and is a process more akin to manufacturing or petrochemicals than to mining. 

Latin America’s potential to be a low-cost lithium producer is very relevant given the recent price fall. Fastmarkets assessed battery grade lithium carbonate prices at $13,500 per tonne in June, down from an average price of $40,000 per tonne in 2023. Latin America’s abundant supply of low-cost energy transition materials will be in increasing demand over the coming decade. Below, we look at some of the best ways for UK investors to get access.

How to invest in base-metals

A simple way to play the base metals, without taking the risk involved with particular projects or companies, is through an exchange-traded fund (ETF). One option is the WisdomTree Copper ETF (LSE: COPA). In theory, you get more potential upside in a mining boom by investing in the miners, rather than in the underlying metal, as they are typically leveraged bets on the trend. In that case you can look at the Global X Copper Miners UCITS ETF (LSE: COPG). Another option is the Sprott Copper Miners ESG-Screened UCITS ETF (LSE: CPPR). At least 60% of its top-10 holdings have significant Latin America exposure. 

In lithium, there are also several ETFs. Global X Lithium and Battery Tech UCITS ETF (LSE: LITU) gives exposure to both Latin American lithium producers and their customers, such as Tesla, further downstream. Another choice is the iShares Lithium and Battery Producers ETF (LSE: LITM). 

The best way for UK investors to play tin or nickel is through an exchange-traded commodity (ETC). In tin, one option is the Wisdom Tree Tin ETC (LSE: TINM). In nickel there is the Wisdom Tree Nickel ETC (LSE: NICK). They trade like equities on the stock exchange, tracking the movement in the futures market of the underlying metal.

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With all the emphasis on investing in gold given the yellow metal’s surge in recent months, it can be tempting to overlook its more industrial cousins.

Gold investing is all the rage, with the yellow metal surging as investors look to hedge themselves against disruption in the equity markets or inflation that could result from Trump’s tariff regime.

But ignoring copper could be a mistake. Prices of the conductive metal hit an all-time high on 6 January, rising to above $6 per pound amid expectations that supply would fall in 2026.

While prices have since fallen to around $5.8 on 8 January, investors taking a longer-term perspective might want to consider investing in copper, alongside gold or other commodities. Between 2 January 2025 and 8 January 2026, the price of a pound of copper rose around 43%.

Copper’s main industrial usage is in the energy sector as it is a good electrical and thermal conductor, and with demand for energy projected to keep getting higher, the demand for good conductive materials is also expected to increase.

Its range of industrial use cases also means that the copper market is often viewed as a bellwether for the global economy.

So is it worth investing in copper? And how can you gain exposure if so?

Why are copper prices rising?

Copper prices reached an all time high of $6.13 per pound on 6 January after traders expected supply disruptions to push up prices in 2026.

Global copper supply is still recovering from several disruptions at major copper mines last year, including one tragic accident in September 2025 at the Grasberg copper mine in Papua, Indonesia, the world’s second-largest copper mine, which led to decreased output.

Workers at Capstone Copper’s Mantoverde copper mine in Chile have also gone on strike, leading to a further constriction in supply.

The tariff threat also looms large over the copper market. Worries that Trump will impose tariffs on the metal have led traders to ship large quantities into the USA to pre-empt any potential new taxes.

The supply disruptions come at a time when demand remains high for copper, and is expected to grow.

Tom Bailey, Head of Research at HANetf, said: “Copper’s rally to record highs is being driven by a combination of supply tightness and policy-driven market distortion, rather than any single geopolitical flashpoint.

“A series of disruptions at major mines, including Grasberg in Indonesia and Kamoa-Kakula in the DRC, alongside labour action in Chile, has pushed the market into deficit at a time when ageing assets, declining ore grades, and long development timelines are already constraining supply.”

As the metal is the go-to common electrical and thermal conductor for industrial usages, lots of it is typically needed when building electrical infrastructure. This includes infrastructure that generates electricity, but also infrastructure that uses electricity – especially power-hungry buildings like artificial intelligence data centres.

As demand for electricity is expected to increase in the long-term, more copper will be needed to build infrastructure for the green energy transition.

Copper is also a key commodity for modern defence technology. “Copper is embedded across modern military supply chains, from ammunition and artillery to advanced electronics and communications systems,” Bailey added. “As geopolitical uncertainty rises and the US places greater strategic emphasis on the Western Hemisphere, European policymakers are being forced to confront a future in which defence spending is structurally higher and industrial capacity must be rebuilt domestically.”

Which factors impact copper prices?

Duncan Hobbs, research director at Concord Resources, told MoneyWeek there are three main influences on copper prices.

The first is the “fundamental status”: the balance between physical copper supply and demand. Naturally, if demand outstrips supply, this acts to increase copper prices, and vice versa.

The second factor is influenced by this and pertains to broader macroeconomic environments – major disruptions to trade, like those coming from Trump’s mercurial tariff policy.

Hobbs said: “You can sometimes get a situation where the fundamental assessment of the supply and demand balance would lead you to expect prices to trade in one direction, but broader macroeconomic and political considerations push prices in another direction.”

For that reason, he says, the fundamental balance has to be layered with the macroeconomic outlook.

The third factor influences short-term copper prices, over weeks and months rather than years and decades. That is financial positioning: effectively, a consideration of how copper market participants have deployed money.

If investors generally expect copper prices to rise in future, they will build long positions, often in futures markets. If the hypothesis is correct and copper prices rise, they will naturally want to take some profit. That can lead to short-term periods where the price of copper falls, even against a longer-term trend of rising prices.

Similar dynamics to this third effect also play out in equities markets.

How to invest in copper

There are several ways to invest in copper. Many professional copper traders will buy and sell futures contracts; however, that’s not generally recommended for retail investors as it is risky and involves a degree of speculation.

You can easily gain exposure to copper spot price movements with an exchange-traded commodity (ETC), though. An ETC is like an ETF, but rather than an index it tracks the price of one particular commodity.

“These are ideal for investors seeking pure-play exposure to the metal itself, without the added exposure of mining company performance,” says Lale Akoner, Global Market Analyst at eToro.

One example is WisdomTree Copper (LON:COPA). This London-listed ETC tracks the dollar price of copper.

You can also invest in copper mining ETFs. Like most ETFs these are bundles of stocks: the stocks will be those of copper mining companies.

The Sprott Copper Miners UCITS ETF (LON:COPP), for example, provides exposure to small-, mid- and large-cap copper miners.

“These funds tend to amplify movements in copper prices through equity exposure, potentially delivering higher returns (and risks) than the metal alone,” says Akoner.

Investors could also buy the shares of copper miners directly. Some major FTSE 100 companies like Antofagasta, Glencore (LON:GLEN) or Rio Tinto (LON:RIO) have large exposure to copper mining. Like copper mining ETFs buying these shares could amplify risks and returns compared to investing in copper ETCs (with less diversification to mitigate this risk and reward compared to buying a copper mining ETF).

“Finally, diversified commodity funds and investment trusts, such as BlackRock World Mining Trust (LON:BRWM) or JPM Natural Resources Fund can provide broader exposure,” says Akoner. “These vehicles typically hold positions across multiple metals and mining companies, including those focused on copper, making them a useful option for investors seeking a more balanced approach.”

We are entering the “copper age”, says Étienne Goetz in Les Echos. The price of copper has jumped by 18% this year to trade close to two-year highs of roughly $9,910 per tonne on the London Metal Exchange. 

Business intelligence company CRU Group estimates that $150bn in investment in new supply will be required between 2025 and 2032 to meet growing global copper demand. Yet higher interest rates and environmental opposition to mining projects are making investors reluctant to stump up the cash. 

Copper “exploration budgets have fallen since the early 2010s”, says the Financial Times. Going from discovery to production can take more than ten years, increasing the risk that projects are derailed by politics or changing market conditions. Prices might need to rise by 20% to incentivise interest in new mines.

Could the price of copper could rise further?

Miner BHP’s recent bid for London miner Anglo American reflects growing interest in copper. Yet it is telling that commodity giants would rather bid for existing operations than open brand new mines. 

“Shifting assets from one owner to another” does nothing to address the looming copper crunch. Copper is vital for everything from electrical switches to solar panels and electric vehicle components. 

The looming copper crunch investors eye up EM bonds says Sohrab Darabshaw in Metal Miner. In 2022, global copper production was about 22,000 kilotonnes, compared with demand of 26,000 kilotonnes (recycling bridges the gap). In the long term, demand may hit 33,000 kilotonnes, leading to a yearly deficit of roughly 6,000 kilotonnes by 2030. 

By one estimate, that could eventually push prices as high as $15,000 per tonne. Analysts at Citi forecast a 1,000 kilotonne supply deficit over the next three years, says Megha Mandavia in The Wall Street Journal. 

China buys about half the world’s copper supply. Booming electric vehicle and solar panel production has seen the country’s copper demand rise by 18% year on year over the past five months. It remains to be seen whether this frenetic rate of production can be maintained, while demand from the domestic property market remains “flat on its back”. 

The copper outlook is auspicious, but the metal “still isn’t a one-way bet”. It takes “three times as much copper to generate the same amount of electricity on a solar farm as in a gas-fired power station”, says Tom Stevenson in The Telegraph. For offshore wind, it is “nearly eight times”. 

Tomorrow’s growth sectors have “an insatiable appetite” for the metal. A long period of weak prices saw capital expenditure on new copper mines drop by more than 40% between 2012 and 2020. These are classic preconditions for a commodity price supercycle – prices “do nothing for years”, companies fail to invest, then a “credible demand-growth story” emerges and prices rocket.

This article was first published in MoneyWeek magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription. 

MoneyWeek's writers give us their top investment tips for 2024, which include a biotech investment trust, a gold miner and a copper ETF.

Dominic Frisby - Bitcoin

Next year is going to be a good one for Bitcoin. You absolutely must own some. 

In January, the likelihood is that America’s Securities and Exchange Commission (SEC), the key financial regulator, will approve Bitcoin exchange-traded funds (ETFs). Then in February, the ETFs will begin trading and, with the SEC’s legitimisation of the asset, billions of dollars of capital will be invested in them, much as happened with gold and silver ETFs. 

Come the spring we will see the next halving event. This is a process whereby the reward bitcoin miners receive for validating transactions falls by 50%, slowing the rate at which new bitcoins enter the market and reducing new mining supply. Every bitcoin bull market has occurred around the time of a halving event. Then we get interest-rate cuts and easy money in the run-up to the US election. Towards the end of the year, we see perhaps the biggest catalyst of the lot. 

Bitcoin has, hitherto, largely been driven by retail investors. When large corporations start holding their Treasuries in Bitcoin to avoid 10% annual currency debasement, the game changes. A few, such as Nasdaq-listed MicroStrategy (Nasdaq: MSTR) have already blazed this trail. But in December, the Financial Accounting Standards Board (FASB), the US entity that details how companies should report assets on their balance sheets, will begin to allow this, and many more will follow. Lots of catalysts, then. 

But the main reason to own bitcoin is that this is a technologically superior form of money to fiat currency. Its scalability, from micropayments amounting to 1/35th of a penny to huge billion-dollar transactions across borders, at the click of a mouse, backed by the world’s most powerful supercomputer network, is such that the risk is, surely, not owning bitcoin, but not owning it.

Frédéric Guirinec – Emerging markets

Last year I recommended the food sector, notably Premier Foods, as the industry was underpinned by the inflation of commodities and food. Going into 2024, the Olympic Games in Paris will cheer us up. However, despite recent easing, the lagged effects of tighter financial conditions will continue to weigh on economic activity. 

The economic outlook for Europe remains poor, with mild recessions forecast. Poland still offers very good value for investors and will profit from an improved relationship with the European Union under Donald Tusk’s premiership. Polish miner KGHM (Warsaw: KGH) offers an attractive valuation. In fact, on the subject of relative value, commodities are at secular lows relative to stocks. Low metal prices in general, and higher mining costs, such as oil, have led to strong capital discipline in the sector. KGHM carries little debt. The downside risk seems limited, and the group will be able to profit from any potential rebound in the prices of minerals. 

Looking further east, a now increasingly likely victory of Russia in Ukraine will be another symbol of a structural shift in geopolitics, with power pivoting further to emerging markets. These look cheap compared with Europe and the US, but they are a mixed bag: elections in Indonesia may trigger volatility, while valuations in India are high. Buy an ETF such as the iShares MSCI Emerging Markets ETF (LSE: SEMA). 

I threw a dart at a map of the Far East just for fun, and it fell on Astra International (Jakarta: ASII), a conglomerate in Indonesia. Let’s put a chip on that one too. Faites vos jeux.

Cris Sholto Heaton – Doric Nimrod Air

The Doric Nimrod Air funds (DNA [delisted], LSE: DNA2 and LSE: DNA3) are/were three London-listed trusts set up to own Airbus A380s leased to Emirates. 

The leases run for 12 years, after which Emirates could renew the lease, buy the aircraft or return them to the fund. The lease on DNA’s only aircraft expired early this year and Emirates bought it for parts for $30m. The fund was wound up and cash was returned to investors. Two of DNA2’s seven planes went off lease recently and Emirates also bought them, for $35m each (also probably for parts as they are in storage). Leases on DNA2’s other five planes expire in late 2024 and DNA3’s four planes in 2025, so the pay-off depends on what happens after that (unlike the more complicated Amedeo Air Four Plus trust). 

If Emirates buys all the planes for $35m each, investors should get a double-digit rate of return until wind-up. If it extends the leases, it will be at a new (lower) rate based on its current value. 

Return is the worst scenario: Emirates is the only obvious buyer for these A380s, so they would probably be sold for scrap. Emirates plans to keep flying A380s until the 2040s, but it has 119 in service, and how long it needs all nine of these leased planes is uncertain. They don’t appear to be among the 67 A380s that Emirates is now upgrading, but that doesn’t stop it from needing them for a few more years of service and then for parts: its short-term need for planes seems high. 

DNA3 is trading at 55p per share: residual lease income plus “half-life” payments, if Emirates returns the planes, amounts to 65% of that, plus scrap value. That helps cap the downside, so I think the bet that Emirates buys or extends is worth taking.

Max King - RTW Biotech

It’s been a decent year for stockmarkets, with the FTSE 100 flat but the S&P 500 up by 18%. Within that, there are wide variations – the information technology sector is up by 50% but the healthcare sector is down 6%. Biotechnology has been even worse. 

In the words of Woody Stileman, business development director of the RTW Biotech Opportunities (LSE: RTW) trust, the Russell 2000 Biotech index is “three months short of the longest-ever bear market and down 75% from its peak”. The share price of RTW Biotech Opportunities is back at its October 2019 issue price and the fund is on a discount to its net asset value (NAV) of more than 30%. With assets of £280m, it is a small but growing part of the $6bn managed by RTW, whose main fund has returned a compound 24% a year since 2009. RTW is a “full-cycle investor” – it is involved from an early stage in private companies until sale or profitability. 

Its most conspicuous success has been the sale to Merck earlier this year of Prometheus, then accounting for 15% of the trust’s portfolio, for 12 times the capital invested in 2020. 

Despite very difficult markets, four portfolio companies have listed this year, two have been taken over (including Prometheus) and distributions are already being received on two royalty investments. In November the trust made an all-share offer for biotech group Arix Bioscience. Arix has net assets of £232m, including £106m of cash, £56m in 15 listed but immature biotech investments, and £68m in seven unlisted ones. RTW believes it is better positioned than Arix to realise the upside. With “a unique opportunity to buy into a depressed market while innovation is booming”, the enlarged trust will be well placed to multiply investors’ money.

Rupert Hargreaves - REITs

Investors have been giving real estate assets the cold shoulder over the past two years as higher interest rates have introduced uncertainty about asset values. 

While sentiment has recovered over recent months, many real-estate investment trusts (REITs) continue to trade at a discount to underlying net asset value (NAV), reflecting the market’s view that companies are being too optimistic about property prices. This seems unwarranted. Those companies that have sold assets recently have not seen a big decline in the price buyers are willing to pay, suggesting NAV values are reliable. 

Indeed, the index-linked cash flows property provides remains highly attractive. There have been some distressed sales, but these are mainly limited to over-leveraged owners struggling with high borrowing costs. A good way to play this theme is PRS REIT (LSE: PRSR), owner of 5,100 rental homes across the country. 

There is a structural shortage of rental housing in the UK – bad news for tenants, but good news for companies like PRS. The company has constructed a portfolio of high-quality dwellings: purpose-built, energy-efficient estates of rental properties, owned and maintained by the company. This helps PRS maintain quality and keep costs low, something tenants appreciate. 

The company’s properties are virtually all full, and it pushed through an inflation-busting rent increase of 9.8% in the year to 30 September. There’s no reason why it cannot repeat this sort of growth in future. 

Despite this, the stock is trading at a 30% discount to NAV, suggesting the market believes the properties are not worth their balance sheet value. Considering the shortage of rental homes in the country, the portfolio’s occupancy rate and rent increases, that is unlikely. The stock also yields 4.9%.

James McKeigue - First Quantum copper

This year the most-read story – by far – on LatAm-Investor.com was an interview with Tristan Pascall, CEO of First Quantum Minerals, the world’s sixth-largest copper miner. The good readership numbers will be scant consolation for Tristan, who was using his interview to counter protests against First Quantum’s vast copper mine in Panama. The country’s president recently vowed to shut down the mine following a Supreme Court ruling that it is unconstitutional. Given the mine produces 1% of annual copper output, its closure would have a tangible impact on the global market. 

But First Quantum’s travails reveal something even more important: it is becoming very difficult to build large-scale copper mines in Latin America. There are more than $100bn-worth of copper mining projects across the region that are being held up by environmental permits or processes. 

Latin American states, most of which have weak legal mechanisms for building strategic projects, are struggling to balance the need for new mines with increased environmental activism and the historical legacy of disaffected communities. 

Latin America is normally on the peripheries of the world economy, but now the intricacies of its internal politics have global significance. Peru and Chile account for more than 40% of world copper production, while Ecuador and Argentina could become top-ten producers by 2030. The region’s inability to build new mines is bad news for the copper-intensive energy transition, but good news for the copper price. 

The easiest way to play it is through the WisdomTree Copper ETF (LSE: COPA). Or if you think miners will outperform the price in the coming bull market, then you can pick the Global X Copper Miners UCITS ETF (LSE: COPG).

David C. Stevenson - Literacy Capital private equity

I think there is a decent chance that the old private-equity (PE) model is now not fit for purpose in the new world of higher interest rates. That glorious era of cheap money is over, and the market is being saturated with new players. 

But there is still opportunity in the right niche, and I think small to medium-sized deals (in the £1m to £50m range) involving private UK companies is one such niche. These deals involve established, mostly profitable smaller businesses looking to scale up, but the scale of these deals means they are too small for the large PE shops, while venture capital (VC) companies tend to look at sexier, tech-influenced names. 

This is where a small UK-listed private equity fund called Literacy Capital (LSE: BOOK) fits in. Its classic deal involves entrepreneurs looking to scale up their business but also cash in on their business success. The fund also has a symbiotic relationship with a charity funding school reading initiatives. The fund’s record to date is excellent, there are lots of opportunities in its sector and unlike its bigger peers, the fund doesn’t rely on lashings of debt or selling on portfolio businesses to other PE firms. The only slight catch is that its shares don’t trade at a big discount to net asset value (NAV), unlike outfits such as Hg Capital and Oakley Capital Investments (both of which I rate highly as well).

David J. Stevenson - Mandalay gold

A year ago I selected Canada-based gold miner Mandalay Resources (Toronto: MND) as my 2023 stock pick. Yet, despite the price dropping by 35% so far this year, I’m doubling down on MND as my tip for 2024. Here’s why. 

Mandalay has metal-producing assets in Australia (the Costerfield gold-antimony mine) and Sweden (the Björkdal gold mine). And this year’s bullion price rebound was expected to revive Mandalay’s shares. Indeed, gold’s US dollar value has risen by 10% in 2023. However, gold miners haven’t really got the message. 

The HUI Arca Gold BUGS index (basket of unhedged gold stocks), a gauge of big names in the industry, is down by 3% this year. 

Factors such as a lack of confidence in the durability of gold’s rally, rising mining costs, dilution of shareholders (through equity issuance to fund capital expenditure), and increased political risk in some developing countries (making gold assets more vulnerable to seizure) have hurt bullion miners, in particular the industry’s smaller players. 

While only the first two factors have affected Mandalay, higher metal extraction costs have damaged its 2023 earnings and share price. Indeed, the stock’s been dire over the last decade, plunging more than 85%. Yet it’s now very cheap on a 2024 prospective price/earnings (p/e) ratio of just 3.2. The market value is $130m, which compares with net assets worth $182m. What’s more, the latter aren’t intangibles resulting from, say, an overpriced acquisition, but physical assets such as property, plant and equipment. Even including lease liabilities, there’s almost no net debt. 

As a global recession looms, the Fed may soon be forced to start cutting rates again. And with the world’s debt mire getting ever deeper, central bankers are – ultimately – likely to print even more money. That would be excellent news for gold and miners such as Mandalay, which I still believe will make investors multi-fold profits.

Mike Tubbs - Elixirr consultancy

Last year I tipped Begbies Traynor, the insolvency specialist, as rising interest rates and a struggling economy would cause a sharp rise in insolvencies. That duly occurred, with insolvencies reaching their highest level since 2009 in the second quarter. Yet Begbies Traynor’s shares are still down over 2023 by more than the FTSE All-Share index. 

This year I am recommending a riskier small company with experienced top management, excellent growth prospects and a number of blue-chip clients. The company is Elixirr International (Aim: ELIX), a consultancy with a market value of £220m and a 2022 turnover of £70.7m, up by 40% on 2021. 

Elixirr was founded in 2009 by the current CEO, Stephen Newton, who had been a managing partner at Accenture. Newton says Elixxir’s ambition is to become the best digital, data, artificial intelligence (AI) and strategy consultancy in the world, with a globally recognised client base. It already numbers Diageo, HSBC, LVMH and Tesla among its clients. 

Elixirr features in several categories of the Financial Times’ 2023 list of the leading UK management consultancies. Its emphasis on digital, data and AI should shield it from the recent turndown in general consultancy. Elixirr grows organically and through bolt-on acquisitions such as US generative AI firm Responsum, which has enhanced the group’s AI capabilities. 

Revenue rose by 23% to £41.1m in the six months to 30 June, with pre-tax profits up 17% to £9.9m and net cash at £19.5m. Newton, who holds 28.7% of the shares (aligning his interests with other shareholders’), expects this strong performance to continue for the rest of the year, with full-year sales of £85m-£90m. 

The trailing 12-month p/e is 17.5 and the forward dividend yield is 2.23% at the recent share price of 472p – well below analysts’ one-year price target of 868p.

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Lithium prices have plunged by 75% this year and the rout seems “far from over”, say Yvonne Yue Li and Annie Lee at Bloomberg. The white-coloured metal is a key ingredient in lithium-ion batteries. Excitement about demand for these batteries from electric vehicles (EVs) drove a huge rally during COVID-19. The price of Chinese lithium carbonate leapt by 1,400% between late 2020 and November 2022. But over the past year prices have receded amid signs of a glut.

Shares in US-listed Albemarle, the world’s biggest lithium miner, have plunged by more than 50% in a year. It mines lithium in Chile, Australia and the US. After mining, most of the metal is processed in China, making Chinese lithium prices the industry benchmark.

The sell-off has been driven by “brewing demand problems”, says Al Root in Barron’s. For one thing, car companies stockpiled the metal during the price frenzy, but that has left them with big inventories that don’t need immediate replenishment. EV uptake is still growing strongly, with sales up 50% or so in both the US and Europe so far this year, and a 20% rise in China. But that has fallen short of even more bullish predictions made at the height of the price boom.

UBS analysts expect the global EV rollout to be slower than previously expected, says Étienne Goetz in Les Echos. EVs now look likely to represent just 18% of vehicle sales worldwide in 2024, down from forecasts of 20% previously. Come 2030, that share will be 47%, less than the 54% previously expected.

The analysts cite uncertainty among consumers as interest rates spike, falling government subsidies to buy EVs, and still insufficient charging infrastructure as factors constraining uptake. Lithium supply looks set to outstrip global demand until 2028. The white metal will be under pressure for some time.

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The price of gold has fallen below $4,000 for the first time since 6 November 2025 as the prospect of higher US interest rates rises.

Gold prices fell 11.7% during June, dipping below $4,000 in the process.

Gold has sold off this year as inflation has risen, exacerbated by the conflict in the Middle East, prompting some to question whether gold still acts as an inflation hedge.

While gold is typically viewed as a safe haven during times of crisis, its gains during 2025 made gold holdings an obvious asset for liquidity-hit investors to sell once the conflict in Iran broke out at the end of February.

“Gold is often considered to be a haven in troubled times, but what many people don’t realise is that its price can still drop in a falling market,” said Dan Coatsworth, head of markets at AJ Bell. “Investors often sell what they can in the face of trouble, and gold is a liquid asset.”

But the selloff didn’t start or end with the conflict in Iran. Its price has continued to fall even as the war appears to be drawing to a conclusion.

“Recently, gold has become increasingly sensitive to the same oil-price and inflation dynamics affecting broader markets, meaning its behaviour may be more correlated with other assets than investors have come to expect,” Matt Bance, solutions strategist and portfolio manager at investment manager T. Rowe Price, told MoneyWeek.

What is currently weighing on the gold price, and where might it go from here?

Why is the gold price falling?

Several factors led to the price of gold falling after the US/Israeli war with Iran broke out, besides the aforementioned liquidity rush that set in at the start of the conflict.

Gold is priced in dollars, and had therefore been benefitting from a weaker dollar prior to the outbreak of the war.

Greater inflationary expectations also reduced the chances of central banks cutting interest rates. Hawkish central bank policy, particularly in the US, is typically negative for gold prices because higher rates increase the appeal of bonds compared to gold, which pays no income.

Either side of the war there has been much focus on the policy outlook of the Federal Reserve’s (Fed) new chair, Kevin Warsh.

Warsh is regarded as more hawkish (favouring relatively higher interest rates) than other contenders for the position. Gold prices fell immediately following his announcement as Trump’s pick for the post in January, and with US CPI inflation rising to 4.2% in May markets are expecting the Federal Open Market Committee (FOMC) (the Fed’s committee that sets interest rates – equivalent to the Bank of England’s Monetary Policy Committee) to slow or even reverse its prior cadence of rate cuts.

Rate-setters balance the need to hike interest rates in order to curb inflation against the risk that doing so will balance economic growth. But US economic data paints a picture of a strong economy: on 30 June, the US Bureau of Labor Statistics revealed that US job openings increased by 9,000 in May, strengthening the hawkish argument for relatively higher interest rates.

“A run of resilient US economic data has cemented expectations that the Federal Reserve still has scope to raise interest rates,” said Susannah Streeter, chief investment analyst at wealth manager Wealth Club. “Stronger jobs data and stubborn inflation have reinforced the view that rates are likely to stay higher for longer, pushing up Treasury yields and the dollar, while taking some of the shine off gold.”

Should you buy gold?

A more hawkish Fed means that the short term outlook for gold isn’t particularly positive, and there are other reasons to believe that gold prices could fall further before they start to rise again.

“A significant portion of the structural bull case is now reflected in prices,” said T. Rowe Price’s Bance. “Central bank demand moderated in the first quarter of 2026, while exchange-traded fund (ETF) demand has also softened.”

As its declines this year have shown, gold has a lot of risk attached to it considering many consider it a defensive asset.

“Gold may glitter as a safe haven during periods of heightened uncertainty, but it's far from immune to volatility,” said Wealth Club’s Streeter. “The precious metal tends to bask in demand when nerves are on edge, but its fortunes can quickly tarnish when expectations for interest rates change, which they have recently.”

Despite this many experts, Bance included, think there is still an argument for holding gold given its long-term diversification potential.

“While market dynamics reduce some of gold’s diversification appeal in the near term, we continue to believe gold deserves a place in diversified portfolios,” he said. “Gold provides diversification against inflation surprises, fiscal deterioration, reserve currency uncertainty, and broader confidence shocks. Those risks remain relevant, which is why we continue to favour maintaining a strategic allocation.”

How to gain exposure to gold prices

If you are considering where to invest and want to add some gold exposure, there are three main approaches.

The first one is investing in the metal itself through a financial contract, such as an ETF or exchange-traded commodity (ETC).

See our article on the best gold ETFs for more information.

You can also get indirect exposure by investing in the miners that dig gold out of the ground. This can be done by investing directly in their shares, or by buying a gold fund or investment trust.

Lastly, you can buy physical gold bars or gold coins.

In terms of how much gold to hold in a portfolio, Tom Stevenson, investment director at Fidelity International, suggests around 5-10% – which is about the same as you might hold in cash.

“The two offer insurance and dry powder to complement the growth and stability of the shares and bonds that make up the bulk of a balanced portfolio,” he said.

With a history stretching back to the dawn of civilisation, investing in gold is perhaps one of the most tried-and-tested economic transactions you can make.

It’s been a prosperous period for gold investors recently. Strong demand from various sources drove global gold prices to new all-time highs early in 2026.

The price of gold hit an all-time high of $5,595 on 29 January, having been driven upwards during the month by Trump’s intervention in Venezuela and rumours that the president was about to nominate a dovish chair of the Federal Reserve (Fed) to replace Jerome Powell.

In the end, Trump went with a more hawkish Fed chair pick. Gold prices were starting to decline, before falling rapidly from the beginning of March as the conflict in the Middle East prompted a rush for liquidity.

Gold outperformed the S&P 500 in 2025 for the second calendar year in a row, and despite recent falls, it is still up 11.8% so far in 2026 – compared to 1.6% for the S&P 500. If you are considering where to invest for 2026 then an allocation to gold may well be tempting.

“The case for gold as a core portfolio allocation continues to strengthen, particularly in the current environment of persistent inflation, elevated geopolitical tension and uncertain monetary policy,” said Cosmo Sturge, director, market strategy at precious metals fund manager Baker Steel.

There are various ways that you can add gold to your portfolio. These range from buying gold bullion to investing in a gold ETF.

“Physical gold, in the form of coins and bars, offers direct ownership with no counterparty risk, appealing to investors seeking tangible wealth preservation, albeit with storage and insurance costs,” said Sturge. “Physically backed gold ETFs provide a convenient and cost-efficient alternative, delivering exposure to the gold price without the practical challenges of holding bullion.”

We take a look at the pros and cons of each approach.

Gold investing for beginners

If you’re just getting started in investing, it’s worth considering the role that gold could play in your portfolio. It’s tempting to buy gold during a bull run like the one it enjoyed last year, but even when gold prices aren’t climbing there are good reasons to include an allocation in your portfolio.

“Gold can be a highly effective hedge against governments’ monetary and fiscal profligacy (monetary debasements and currency devaluations) and tends to become the ultimate safe haven when global geopolitical shocks start to occur,” says James Luke, manager of the Schroder ISF Global Gold Fund.

Traditionally, bonds are used to diversify a portfolio away from equities, the theory being that when bonds underperform, stocks overperform, and vice versa.

However, as Luke explains, bonds have shown a greater degree of correlation with equities in the current market. As such, gold currently offers a greater level of protection against a downturn in equities markets, given its lower degree of correlation.

Despite this, most investors are relatively underweight gold. “We absolutely believe gold deserves a place in investors’ portfolios,” says Luke. “In our view a traditional 60:40 portfolio would benefit from diversifying 10% into a gold allocation.”

How to invest in physical gold

One way to add gold to your portfolio is by buying physical gold in the form of gold bars and gold coins. And though it isn’t usually purchased for investment purposes, bear in mind that any gold jewellery you buy will store value in the same way that other gold investments will.

Physical gold can be purchased from government mints such as the UK’s Royal Mint, precious metal dealers such as Sharps Pixley or GoldCore, and jewellers.

It is an unregulated market so you should be careful to avoid scams. One way to protect yourself is to always check whether a dealer is part of the London Bullion Market Association (LBMA), which sets standards across the industry.

As with any investment, it is important to do your own research on prices. Gold dealers make their money by selling for more than the spot price and buying for less. The difference – or spread – will vary depending on the gold content and weight of the bullion, who you buy from, and current supply and demand.

Gold coins can have more value than bars as they may be rarer and are often viewed as collectables, known as numismatic coins. Some forms of gold coin are tax-exempt, as they are legal tender. That means you won’t incur capital gains tax (CGT) if you sell them for a profit.

As attractive as buying a gold bar or coin may be, you should also consider the cost of delivery, insurance and secure storage. One solution may be using an online investment service such as BullionVault, which lets you invest in gold bars or coins which are stored in its vaults.

The Royal Mint also has a digital option that lets you invest in physical gold, silver or platinum based on monetary value instead of weight. It can then be stored in the Royal Mint’s vault.

Investing in gold with ETFs and ETCs

A simpler and cheaper way to invest directly in gold is through exchange-traded funds (ETFs) – or to be precise, exchange-traded commodity (ETC) products.

Analysts typically favour physical-backed ETCs, such as iShares Physical Gold (LON:SGLN), over leverage-style products that rely on derivatives, adding extra complexity.

“An ETC owns physical gold and tracks the price,” says Ben Yearsley, investment director at Shore Financial Planning. “It’s as close as most people get as it’s simple and can be held in your SIPP and ISA.”

The main benefit of using ETCs to invest in gold, according to Paul Syms, head of EMEA ETF fixed income and commodity product management at Invesco, is their simplicity and cost-effectiveness.

“It’s low cost, and [an ETC] trades throughout the day,” he says.

You won’t actually own any gold directly – although The Royal Mint Responsibly Sourced Physical Gold ETC (LON:RMAP) allows investors to exchange shares for physical gold coins or bars.

Owning a gold ETF or ETC will allow you to benefit from any growth in prices. Of course, you will also lose money if the gold price drops.

Take a look at our article on the best gold ETFs for more information.

Investing in gold miners

Rather than buying actual gold, you could consider backing the companies involved in gold exploration or mining. This would mean buying shares in gold miners. This requires significantly more research than tracking the gold price, as a company’s success will be linked to its exploration activities, business strategy and management.

“While gold miners carry additional volatility versus physical gold, they can offer operational leverage to rising gold prices, as well as shareholder returns and exploration and development upside,” said Baker Steel’s Sturge. “Gold miners are currently benefitting from strong margins and are maintaining capital discipline, creating a potentially strong environment for performance.”

While investing in gold miners can come with greater reward, there is also the risk of incurring greater losses.

Investors should also pay attention to the size of the company, says Evangelos Assimakos, investment director at Rathbones Investment Management.

“Smaller companies will usually have a greater proportion of their operations in mines that have yet to start production and thus carry more execution risk should their plans get pushed further into the future or see a reduction in expected output,” he explains.

Rather than picking individual gold mining stocks – which can be more volatile compared to physical gold or gold price trackers, and therefore carry greater risk – you could select a fund consisting of gold miners. For example, the L&G Gold Mining UCITS ETF (LON:AUCP) tracks the Global Gold Miners Index, and as such holds companies like Agnico-Eagle Mines (LON:0R2J) and Newmont (LON:0R28).

The pros and cons of investing in gold

One drawback of investing in gold is the lack of income available from physical gold or through gold ETFs which don’t pay dividends.

What’s more, the price of gold can be volatile over the short or medium term, making it hard to know if you are buying at the top or bottom of the market.

However, advocates see the metal as a useful diversifier, as its value and performance don’t correlate with those of other assets. It also has a reputation for retaining its value well in periods of inflation.

“Gold’s role as a store of value and hedge against currency debasement has been reinforced in recent years, while its low correlation with general equities provides valuable diversification benefits,” said Sturge.

Given the increase in wholesale gas prices you’d expect that investment vehicles and companies involved in the energy transition would have shot up in value. However Tesla’s share price is down by almost a third (-31%) in the year to date, while Umicore, a major player in recycling strategic metals, is down 13%. As for funds, L&G Battery Value-Chain ETF (LSE: BATT) has fallen 18% in the year to date while WisdomTree Battery Solutions ETF (LSE: VOLT) is down 21% over the same period.

The share prices of nuclear energy-related firms have also not moved that much given the renewed focus on nuclear. Yellow Cake (LSE: YCA), a London-listed uranium oxide physical holding company, has seen its share price advance by 20% in the year to date. However, Geiger Counter (LSE: GCL), which invests in uranium-exploration companies, has seen its share price fall by 3%.

There’s also a handful of newly listed uranium ETF trackers. HANetf partnered with Canadian commodities giant Sprott to launch the HANetf Sprott Uranium Miners ETF (LSE: URNP), while Global X launched Uranium ETF (LSE: URNG). Over the last three months these funds have increased by between 24% and 16% respectively. Those numbers are certainly an improvement on the S&P 500’s decline of 4% but they’re hardly off to the races.

Buoyant battery market will be good for strategic metals

Part of the reason for these mediocre returns is that investors in the battery complex and nuclear-power spectrum have grown jittery about over-capacity and some short-term price weakness in key metals. Chinese nickel-sulphate prices peaked at RMB56,000 per metric tonne on 10 March, but have come down around 34% to RMB36,900/mt as of 12 July, according to Scott Yarham at S&P Global Commodity Insights. One contributory factor has been the weakness of the steel sector in China – which accounts for more nickel demand than batteries, resulting in lower overall demand.

However, this analysis also points to a much more buoyant overall battery market. Lithium carbonate hit all-time highs of $78,000/mt in April and at S&P’s recent assessment was at $71,000/mt, up nearly 450% year on year due to increased demand for electric vehicle batteries and tight supply.

Cobalt hydroxide prices have also increased nearly 32% year on year, while battery-pack costs have increased and battery makers have made public announcements that prices will increase, says Yarham. “This is very unusual for battery costs, which have been consistently moving down for over a decade.” Some lithium producers are said to be fully booked for 2022.

Electric-vehicle growth will strain mining capacity

Short-term pricing pressures aside, it seems to me markets haven’t priced in long-term structural drivers. There will be a huge increase in electric vehicle deliveries over the next decade. This will strain mining capacity, especially in lithium. Prices must rise to stimulate investment in new capacity.

That’s also true for the uranium sector but with an added twist. Most deals avoid the spot market for uranium and opt for longer-term contracts. However capacity constraints will arise as demand from the developing world increases, forcing public sector buyers into the spot markets, which are thinly traded.

Finally, both the battery complex and nuclear sector lack the capacity to refine raw materials. Too much lithium-processing capacity is in China and uranium processing in Kazakhstan and Russia. If these countries were to use this capacity for geostrategic ends, prices would jump.

In short, if you think we are embarking on a structural transformation to wean us off increasingly expensive hydrocarbons, then recent price weakness in these alternative energy niches might represent a real opportunity.

The US recession is bad news for investors. But at least it lets them retell an old joke. Dr Copper’s diagnosis was accurate once again: the price of “the only metal with a PhD in Economics” dropped before the current economic downturn.

Yet while copper is an excellent predictor of GDP movements owing to its widespread use, it is rubbish at spotting energy transitions. Over the next 30 years governments, investors and companies will spend trillions electrifying the global economy. The goal is to fight climate change by replacing carbon-emitting fossil fuels with renewable energy. The “great electrification” will require huge amounts of copper for the generation, transmission and consumption of this clean power.

A severe supply squeeze

There is just one problem. The world can’t produce enough copper quickly or cheaply enough to fulfil these ambitions. The largest copper mine in the world is La Escondida in Chile. Mining analysts Wood Mackenzie estimate that five more Escondidas would need to come online over the next eight years to prevent a copper shortfall. Those huge deposits haven’t been found yet, never mind built.

Meanwhile, analysts at financial-data provider S&P Global estimate that annual demand for copper will double between now and 2035 to reach 50 million tonnes per year. In the 15 years from 2035 to 2050 we will need more copper than we have used in the last 4,000 years. The demand is being driven by the energy transition. Renewable-energy generation is far more copper-intensive than traditional power plants. S&P estimates that solar and wind use between two and five times more copper for each megawatt of electricity produced than coal or gas-fired plants.

As the world uses more electricity, it needs more electric infrastructure – from substations to car-charging points – which means more copper. Finally, the consumption of all this green electricity requires yet more copper. For example, electric vehicles (EVs) contain around three times more copper than a traditional internal combustion engine.

Yet nobody seems to have got the memo. Politicians talk about climate change, but are less keen to allow the miners to dig up the metals needed to combat it. It “is harder than ever to build a copper mine”, says Tristan Pascall, CEO of First Quantum Minerals, the world’s sixth-largest copper producer. It “takes 16 years from discovering a deposit to building a mine... two decades ago it took between six and ten years”.

Ironically the same environmental consciousness that is pushing electrification also turns public opinion against mining. It’s easy to bash politicians, but most investors also misunderstand the biggest investment story of the 21st century. The market focuses on technological solutions, such as batteries and electric vehicles, but the real bottleneck is metals supply.

“Mining companies trade on a 15.4% free cash-flow [FCF] yield,” says Michael Scherb, CEO and founder of Appian Capital Advisory, a mining private-equity firm. “Compare that with a prominent EV manufacturer that trades on a 0.5% FCF yield or renewable energy companies that also have a 0.5% FCF yield... The mining sector is making the most money from the energy transition, but mining still isn’t attracting sufficient capital.”

The lack of capital and political support means the world won’t produce enough copper. But other factors are also at play. Falling copper grades at older operations mean miners have to dig more ore to get the same amount of copper. That also means more energy has to be used, pushing up carbon emissions at mines, undermining the rationale for producing the metals in the first place. Solutions are being developed, such as electric mining vehicles, but they will add to costs.

The top producers

So, the world needs more copper, ideally new high-grade deposits with a low environmental footprint. Step forward, Latin America. Chile and Peru are already the world’s number-one and-two copper producers. Controlling almost 40% of world supply, these two nations have a similar market share to 13-nation oil-cartel Opec when it comes to oil. Their massive reserves, first and third in the world, means they will play a central role in the energy transition. Mexico, with the world’s fifth-largest copper reserves, also deserves a mention. When it comes to new discoveries, underexplored Ecuador and Argentina stand out. Mining accounts for less than 2% of GDP in these countries, compared with 15% in Chile, yet they are likely to contain similar copper reserves.

The region isn’t just rich in copper. The lithium triangle of Chile, Bolivia and Peru contains more than 50% of the world’s reserves of lithium, which is vital for the batteries needed to store all of this new electric power. Brazil has the world’s third-largest supply of nickel, another key battery metal. But the shift to an electric-powered economy will benefit more than just the specific “green-tech” metals.

Other metals will be used to build the new infrastructure to support the electric economy. One is iron ore, of which Brazil has the world’s second-largest reserves and Peru the seventh. Another is zinc, which prevents corrosion of steel and iron. Peru and Mexico jointly have the fourth-biggest reserves of zinc, while Bolivia has the ninth. Tin is another important metal in an electrified world as it is used in every circuit board in existence. Again, Latin America dominates the rankings, with Brazil boasting the fourth-largest reserves, Bolivia the fifth and Peru the seventh.

It also bodes well for Latin America that its vast hydroelectric power plants give it the world’s greenest electricity grid. More than 60% of the region’s electricity comes from renewable energy. That means miners can connect to a green grid, reduce their emissions profile and produce low-carbon metals. That bolsters their environmental and social governance (ESG) credentials, allowing them to attract cheaper financing. It also gives the end product a market advantage, as many environmentally conscious industrial customers don’t want to use “dirty” copper. This will become even more significant when carbon taxes are introduced.

The challenge in Latin America is not the geology – it’s politics. I am not referring to the left-wing governments that have assumed power in recent years, although many want to increase taxes on miners. The bigger problem is local politics. Independence from Spain created massive, sparsely populated weak states: 45 million Argentines inhabit a territory just 15% smaller than India, which contains 1.4 billion people.

All politics is local

What’s more, the cash-strapped governments lacked the wherewithal to build the infrastructure needed to connect remote areas with the urban centres. Many of these states were also home to dozens of indigenous cultures that were either ignored or oppressed by the creole elites who seized power from the Spanish. Over the last 30 years governments have tried to rectify these historical injustices with transport infrastructure, decentralised constitutions and indigenous rights.

The upshot is that local communities in the remote areas where mining projects are developed often oppose new mines. In Peru projects worth a total of $60bn have been stalled by community protests. Sometimes the protests are genuine. Often, they are manipulated by local politicians or crime bosses who don’t want the scrutiny, or competition for manpower, that a mine would bring. Being anti-mining is a vote-winner.

Bizarre as it seems, the key to humanity’s battle against climate change lies in local politics in the Andes. It’s also the key factor in determining if projects succeed or fail. Some zones are no-go areas. For example, Guatemala shut down the world’s third-largest silver mine. Sometimes the problem is the miner. Firms are under financial pressure to start mines operating as fast as possible, but those that don’t invest enough time and money in getting locals on board will face protests later.

Building community consensus in Latin America is a headache, but recent geopolitical tensions in Ukraine and Taiwan demonstrate the region’s strengths. Latin America is more peaceful than Eastern Europe and more democratic than Africa or Asia. Moreover, it should benefit as the US reacts to China’s dominance in critical minerals and secures its own supply chains.

One interesting way to play the coming metals boom is through Anglo Pacific Group (LSE: APF). It invests in royalties (which provide a share of a mine’s revenue) and streams (the right to buy some or all of the metals produced in a mine). Over the last eight years the company has switched from financing coal mines to finding funds for “future-facing” metals. So it has a big presence in Latin America, including a deal with a copper operation in Chile.

Southern Copper (NYSE: SCCO) is the fourth-biggest copper miner in the world and has the largest copper reserves, with mines in Mexico and Peru that also produce zinc. Antofagasta (LSE: ANTO) is a Chile-based, London-listed copper miner. According to the influential annual rankings published by the Fraser Institute, Chile is the best mining jurisdiction in Latin America. Moreover, the centre and north of the country, where Antofagasta owns its five mines, are generally free from community protests.

If you are inclined to take on more risk, consider SolGold (LSE: SOLG). It is developing Cascabel, one of the most exciting discoveries in Ecuador. When built it will be the world’s top underground silver mine, third-largest underground gold mine and sixth-largest underground copper mine. Argentina has also made some mammoth recent discoveries. Filo Mining (Toronto: FIL) is developing a copper, gold and silver deposit that would churn out 67,000 tonnes of copper per year for 14 years.

Mining developments are highly risky, although Filo is backed by the Lundin family, a Swedish-Canadian mining dynasty that has a good record of building mines in Latin America. In Brazil, Horizonte Minerals (Aim: HZM) has secured $630m to build a nickel mine. The shares will get a boost if Horizonte builds it on time and within budget, while it also has another promising project planned after that

“Copper is flashing a recession warning,” says Myra Saefong in Barron’s. Prices have slumped to their lowest level since November 2020. They slumped by 22% in the second quarter, the metal’s worst quarterly performance since 2011. Considered an “economic bellwether” because of its role in everything from electronics to construction, copper’s tumble suggests a “sour outlook” for the world economy.

It’s not just copper, says Albert Edwards in a Société Générale note. Other “industrial commodity prices are in virtual freefall”, with aluminium and nickel down 19.6% and 28.5% respectively since their May peaks. “This is not so much a canary in the coal mine as… the recessionary gorilla charging towards us out of the mist.”

Metals markets have been rescued in the past by Chinese stimulus, but don’t count on it this time, says Bloomberg News. While Beijing is supporting local government spending on infrastructure, the help is not on the scale of the 2008 or 2020 stimulus. The debt-ridden property sector – a key source of demand for metals – remains fragile, while new infrastructure projects in “cloud computing, 5G networks and data centres are less materials-intensive than the... bridges and high-speed railways” that characterised previous stimulus cycles.

Optimists see metals’ slide as an early victory over inflation, but the win might not last. The selloff may reflect financial speculators reining in their bets, rather than a rebalancing of the underlying physical market. JPMorgan Chase reports that “in the week to 1 July about $16bn flowed out of commodity futures markets, bringing the total for the year so far to a record $145bn”. But in the physical market, “commodity stocks remain 19% below historical average at a time of tight production”.

Worldwide spending on the shift to low-carbon energy rose by 27% to $755bn in 2021, according to a new report from research group BloombergNEF. This illustrates just how strong investor appetite was becoming for cleaner and greener technologies, even before Russia’s invasion of Ukraine turned global energy markets upside down and pushed some of the world’s largest consumers of fossil fuels to think seriously about renewable energy options.

Despite the shift in sentiment, even the most upbeat forecasts do not expect a big move away from oil, gas and coal any time soon. Oil cartel Opec believes that oil and gas demand will rise steadily to around 106 million barrels a day in 2030, before starting to decline in 2035. This partly reflects the fact that demand for electricity is growing faster than renewable capacity can keep up. According to the International Energy Agency, global electricity needs rose 5% last year, with fossil fuels generating 45% of the extra demand. New renewables capacity is expected to cover only about half the extra demand this year.

As Tesla boss Elon Musk noted on the group’s first-quarter 2021 earnings call, “if all transport goes electric” the world will need to double its current electricity output. Based on today’s trends, there’s no way we will be able to build enough renewable capacity fast enough to meet this demand (barring a giant leap forward in technology). These figures illustrate the challenges policymakers face in trying to drive the green agenda forward – but they also show just how big the opportunity is for businesses with exposure to the sector. One commodity will benefit, no matter how the energy mix changes in the next 15 years: copper.

Global copper demand is soaring

In April last year, the commodities team at Goldman Sachs published a report on the state of the global copper market titled Green Metals: Copper is the New Oil. The title says it all. Not only is copper a key component in all clean energy technologies, but it’s also an essential part of today’s digital economy. From skyscraper-sized wind turbines to the circuits in wireless headphones, every piece of equipment that uses or produces power requires copper.

As Goldman notes, green technologies might be better for the environment in some respects, but they are far more copper-hungry than older technology. Electric vehicles require four times more copper than internal combustion engines. A three megawatt (MW) wind turbine can contain up to four tonnes of copper (and the most powerful turbines can produce up to 14MW of power). The bank’s analysts predict that copper demand from electric vehicles alone could hit as much as 3.2 million tonnes (mt) by 2030. Overall, it’s forecasting an extra 5mt of demand by 2029, equivalent to 16% of global production today.

Goldman isn’t alone in this view. Last year, Gary Nagle, the head of Glencore, one of the world’s largest commodity companies, told the Financial Times that the copper supply would need to rise by an extra million tonnes a year by 2050 to meet green energy targets. As most of the world’s easy-to-access copper deposits have already been mined, Glencore reckons the price of the metal will have to hit $15,000 a tonne to justify further investment. That’s around 67% above current levels.

The challenge for producers (and indeed the world) is that it’s not terribly easy to set up a new copper mine. It takes about three years to expand a mine and eight years to start a new one. Nor are there many alternatives to copper. Aluminium is one, but it has only 61% of the conductivity and is less durable (the aluminium market also has its own supply issues). Freeport-McMoRan’s CEO summed up the state of the industry in 2021 when he said, “the price of copper could double overnight… and we couldn’t add new production of significance for a number of years”.

Legacy of the boom-bust cycle

To understand how the copper market has reached this stage, we need to go back to 2011. The price of copper surged by nearly 500% from mid-1993 to February 2011, and miners rushed headlong into the market. They capitalised on crisis-era central bank policies to borrow huge sums to invest in ramping up copper output. Unfortunately, just as these projects started to come online, copper’s value slumped. By 2015, the copper price had crashed more than 50% from its peak.

In 2015, analysts at Morgan Stanley estimated that between 2005 and 2014 the sector’s three largest operators, Rio Tinto, BHP and Anglo American, had spent $246bn on capital projects, overloading global commodity markets with supply. They lost nearly $50bn between 2011 and 2014 in the resulting crash.

After these losses, miners revisited their spending plans. Rather than chasing extravagant “growth-at-any-price” projects, managers began focusing on cutting costs and improving efficiency. Output growth suddenly became very “uncool”. As a result of this new operating model, the number of new copper projects under development and in the design stages has plunged by 60%. Although some new projects are slated to come on stream over the next few years, they’re not going to be sufficient to meet exploding demand.

World’s largest producer

The most important region in the world for the copper industry is Chile. More copper is mined in the South American country than in any other nation on earth. Six of the top ten largest copper mines in the world are located in Chile and its state miner, Codelco, is the world’s largest producer of the commodity. Codelco produced 1.7 million tonnes of fine copper from its own operations and joint ventures in 2021.

However, output growth is being hampered by another issue: water scarcity. In April, Chile announced an unprecedented plan to ration water as the country’s drought entered its 13th year. It now has some of the worst levels of water scarcity in the world. As you might imagine, producing copper requires a huge amount of water. In 2019, it was estimated that Chile’s mining industry consumes around 500 million litres of water a year.

With access to water limited, the supply picture for copper becomes a lot more uncertain. Codelco has plans to build desalination plants to solve its water issues, but this will take time and money. The company is looking for funding partners on 34 new projects across the country, its first such move into joint exploration. Still, even if Chile can find the water, money and partners it needs, it’s going to take years to bring new copper to the market.

Biggest “green metal” producers

Besides Codelco, the largest producers of copper are Freeport, BHP and Glencore. BHP and Glencore have an advantage over the Chilean and American miners as they’re well diversified. Copper is only part of BHP’s portfolio, alongside iron ore, nickel and coal. Glencore also produces copper and coal, but its mines also draw zinc, lead, cobalt, nickel, gold and silver. According to Rystad Energy, global nickel demand is expected to outstrip supply by 2024 as it is a key component in both steel production and batteries for electric vehicles. Battery demand also accounts for around two-thirds of global demand for cobalt.

In some respects then, Glencore and BHP are some of the best ways to invest in the green energy boom. Not only do they provide exposure to the metal itself but also other key components of the battery supply chain. Still, there are some drawbacks to investing in these businesses. As well as producing commodities, Glencore trades commodities around the world through its marketing arm. This business can be highly profitable and it’s also pretty difficult to get into, which gives the group a competitive advantage. No other company in the world has as much insight into global commodity markets as the trading giant.

This year the trading house has been capitalising on what it is calling “pricing differentials” in disrupted energy markets. As a result of these “differentials” the company expects half-year adjusted earnings before interest and tax (EBIT) of $3.2bn for its marketing and trading arm this year. That’s at the top end of management’s long-term EBIT guidance band.

However, Glencore does not provide granular information on how this side of the business operates. In fact, it’s a bit of a black box. Trading commodities requires access to huge amounts of short-term capital to fund purchases. This money is paid back when the commodity is delivered to a client, and to make sure it doesn’t lose out on the deal, Glencore also relies on derivative contracts to guarantee a fixed price on delivery. On a day-to-day basis the corporation may have tens of billions of dollars of short-term loans outstanding with billions more in derivative contracts. So in some regards Glencore is an investment bank as well as a mining group.

BHP does not have the same financial exposure. Unlike Glencore its primary business model is and has always been producing commodities. Over the past five years, BHP has undergone a significant transformation. It has cut costs and dramatically improved efficiency, putting it in the perfect place to capitalise on the current commodity price boom. Last year the group generated operating cash flow of $11.5bn and free cash flow of $8.5bn. BHP is a lot easier to understand than Glencore primarily because it does not have a trading business. Strong cash flows have allowed the group to reduce net debt to $6.1bn (from $11.8bn in 2020) and distribute record amounts of cash to investors. Over the 18 months to the end of December, BHP returned $22bn (£18.3bn) to shareholders. To put that into perspective, there are only 26 companies in the FTSE 100 with a market capitalisation greater than £18.3bn.

BHP was kicked out of the FTSE 100 earlier this year when the company consolidated its dual UK-Australia listing, but UK investors can still buy the shares on the London Stock Exchange.

Investors cannot ignore the environment

Copper has an important role to play in the 21st century economy but the environmental issues facing the industry need to be considered. As the world becomes increasingly aware of the environmental cost of global development, governments are bringing in new rules that increase the cost for producers. Consumers are also becoming more aware of where goods and services come from. In this environment, corporations need to be thinking about their environmental impact.

In most regions around the world, policymakers are developing instruments to encourage businesses to think about their impact on the environment. These range from measures as simple as banning plastic bags to those as complex as carbon emission trading schemes.

Taxes are another tool policymakers use to force companies to change their ways. Chile is working towards introducing a mining royalty bill, which will dramatically increase royalty taxes on mining groups extracting copper and lithium. Support for the bill has grown as corporations such as BHP are seen to be raking in billions of dollars in profits while the country rations its most essential resource: water. Meanwhile, 70% of the world’s cobalt comes from the Democratic Republic of Congo, where Glencore has a large operation. The region’s questionable labour laws have resulted in some difficult questions for the miner.

New environmental rules and regulations could increase the cost of doing business for these companies. While rising copper prices might offset some of the extra cost, it is something to bear in mind, especially as the world becomes more aware of its impact on the environment. Miners could also be hit with large fines if they breach environmental standards, which would almost certainly have an effect on shareholder returns, and their reputation in the mining community.

Still, there’s no denying that these businesses have a vital role to play in helping the world clean up its act. If policymakers are serious about getting emissions under control, they will have to work with miners to find a solution to these issues. A balance will need to be struck between all stakeholders. Meanwhile, we look below at how you can get exposure.

How to invest in the long-term copper boom

A good place to start looking for the best opportunities in the copper business is with a look at the copper production cost curve. For the bulk of the industry, the average production cost for one pound of copper is in the region of $1.20, although for some producers the cost can be as high as $3 per pound.

Australian mining company OZ Minerals (ASX: OZL) is one of the lowest-cost producers of copper in the world. Its cash cost per pound of copper last year was just $0.64, well below the sector average. While the firm is much smaller than some of the sector’s larger players (last year it produced 125,000 tonnes of copper compared with BHP’s 1.5mt) its low-cost model is incredibly appealing.

Canadian miner Lundin (Toronto: LUN) is another low-cost producer, with an average cash cost of below $1 per pound. The group is roughly twice the size of OZ and recently paid $483m to acquire Josemaria Resources, owner of the Josemaria project in Argentina. While still at an early stage, projections suggest it could increase Lundin’s copper output by a third for a cost of $4bn. That’s a big bill, but with $700m of net cash at the end of March and copper prices rising, the business should be able to afford it.

Three other options are London-listed Antofagasta (LSE: ANTO), Freeport-McMoRan (NYSE: FCX) and Teck Resources (NYSE: TECK). Both Antofagasta and Freeport sit at the higher end of the copper cost curve, with an average cash cost of production of $1.87/lb and $1.29/lb respectively, even though they are some of the largest pure-play copper producers on the market.

Teck’s cash cost sits in the middle of this range, but it’s the company’s growth prospects over the next couple of years that are really exciting.

The group is undertaking a major expansion of its Quebrada Blanca project, which will roughly double copper production when it comes online in the second half of the year, at an average cash cost of $1.24/lb.

On top of this project, Teck has five other mines in development. Management pegged the value of these projects at $3bn in 2017, when the price of copper was significantly below current levels.

The group has the cash to fund these projects, mainly as a result of surging coal prices. Coking coal for steel-making currently accounts for approximately two-thirds of Teck’s output, and thanks to rising prices, gross profit from this division hit $1.8bn in the first quarter, up from $196m in the same period last year.

For broad exposure to the sector the Global X Copper Miners ETF (LSE: COPX) holds Teck and Glencore as two of its top three positions. The BlackRock World Mining Trust (LSE: BRWM) is my favourite investment trust pick in the sector. The largest single stock holding is Glencore and 20% of the portfolio is allocated to copper stocks, with 41% in diversified miners (including firms with exposure to copper production). The trust also comes with a dividend yield of 6%, an attractive level of income in today’s interest-rate environment. The trust is trading roughly in line with its net asset value, reflecting the sector’s popularity.

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“There really is no pretence now that the Fed [hasn’t], in an act of penance for allowing inflation to get out of control, donned a horsehair shirt and is fully prepared to drive the US economy into recession,” says Albert Edwards of Société Générale. The more important question is whether bringing about a recession will dispel fears about inflation. “The outlook for commodities is key, especially with the backdrop of the war in Ukraine. But I still see commodity prices plunging just like in Q4 2008.” Back then, headline inflation dropped from 5% to -2% in just 12 months.

Certainly, recent trends in commodities have been more bearish. The S&P GSCI index of 24 major raw materials is up 31% in 2022, but has fallen back 9% since mid-June on growing fears of a recession. Copper, a key gauge of the global economy’s health, has hit a 16-month low after losing 22% since a peak in early March. “In a downturn, construction slows – copper is used in wiring and plumbing – and other industries make fewer things like electrical equipment, which also uses the metal,” says Lawrence Strauss in Barron’s.

Meanwhile, Chinese benchmark iron-ore prices are down 43% over the past year. China’s “voracious economy usually consumes about half of global industrial metal supply and more than 70% of the world’s iron ore”, says Lex in the Financial Times. About 40% of domestic steel (which is produced from iron ore) goes into the property sector, but Beijing’s crackdown on excessive leverage means that “floor space both sold and newly started is dropping at double-digit rates year on year, [a situation] not seen since the global financial crisis”.

Aluminium is also trading close to a one-year low, “with zinc and nickel not too far behind”, says Ehsan Khoman of bank MUFG. As well as faltering demand from China, “higher than expected Russian supply is leading to more stocks being deposited on to European exchanges”.

EV metals run out of charge

Not everyone is gloomy. Commodities have yet to peak, say analysts at Goldman Sachs. “Economic growth and end-user demand [are] simply slowing, not falling outright.” Yet some key electric vehicle (EV) metals – cobalt, lithium and nickel – may still be heading for a rough patch. There has been “a surge in investors’ capital into supply investment tied to... long-term EV demand... essentially trading a spot-driven commodity as a forward-looking equity”, say Goldman’s analysts. The result of short-term oversupply is that lithium prices, up more than 400% over the past year, are heading for a “sharp correction” over the next two years, and cobalt and nickel will also weaken. However, long-term structural demand from more electric vehicles should bring a rally after 2024.

“Commodities bulls may soon regret their enthusiasm,” says Gary Shilling on Bloomberg. The very long-term trend is for commodity prices to fall as people find cleverer ways of using resources. “Except for brief rises during wars and the 1970s oil embargoes, inflation-adjusted prices have fallen steadily since the mid-1800s, by a total of 83%... Bet on human ingenuity, not shortage-driven chronic price rises.”

Yesterday we talked about acquiring the right investment psychology and, in particular, about how if you want to ride out a bull market, you need to keep dosing up on knowledge that reinforces the bullish thesis.

On that note, I enjoyed listening to Bloomberg’s Odd Lots podcast this week with Goldman Sachs metals strategist, Nicholas Snowdon.

The recent price action in metals has cast doubts in my mind as to the secular bull market. I needed gee-ing up with some bull food.

I came away from the conversation wanting to buy as many metals producers as I possibly can.

The outlook for copper is very bullish

“By the middle of this decade, we’re forecasting the largest ever deficit in the copper market,” says Nicholas Snowden of Goldman Sachs, talking to Bloomberg’s Odd Lots podcast. “So just two years away from now. And by the end of the decade, the largest ever long-term deficit. It’s just an impossibly tight future.”

When I hear stuff like that from randos on the internet I tend to call “BS” – it’s usually sensationalising or clickbait, so my instinct is to filter out. But when it’s coming from respectable employees of respectable institutions, the implications are rather different.

Let’s start with the recent correction in copper prices. That was caused, says Snowden, by weak Chinese demand (due to their Covid lockdowns). There were also higher than expected exports from Russia (!). But both of these are transitory factors.

The longer-term bull market is underpinned by two factors. First there is increased demand due to decarbonisation, net zero, etc. That will require a lot of copper and there is no obvious substitute.

Second, there has been a chronic lack of investment in the sector. This is a drum we have been beating on these pages, but it is nice to hear that view endorsed by a Goldman Sachs analyst.

Demand for copper this year will come in at around 24 million tonnes. Of that, about 22.5 million tonnes is “normal” – copper in construction, wiring and so on. Only 1.5 million tonnes of demand is “green”, decarbonisation-related demand. That is to say for electric vehicles (EVs), EV infrastructure and so on.

By 2025 this “green” demand will double. By 2030, that number is projected to be six to seven million tonnes. In other words, green copper demand will rise from being about 5% to 20% of annual global demand.

Where is that extra supply going to come from? Production is set to increase slightly this year, but then it flatlines after that when it needs to rise to meet demand.

In the bull market of the 2000s, Snowden observes, projects were quickly approved, investment flowed, and supply reasonably quickly caught up with the increased demand (from China mostly). It’s different now.

“Over the last two years,” he says, “even though copper demand has doubled, there hasn’t been a single new copper mine approved.” I can’t believe that not a single copper mine has been approved – but perhaps not a significantly-sized one.

“The number one constraint on the copper mining industry is the experience of the last cycle. Because the mining industry faced a near-death experience in 2013 and 2014, as a result of the overbuild in response to high prices in the mid-to-late 2000s. Now you have a much more conservative mentality amongst management teams in the mining sector, reflecting that experience.”

I’ll say. The memory of 2013-2014 still lingers, and not just in my mind. We won’t forget it in a hurry. “Internalised trauma,” Snowden calls it, and it slows down investment.

Meanwhile, the permitting process, largely for environmental reasons, has got a lot slower. What would take six to 12 months now takes two to three years. Chile is the world’s largest producer, but it is also one of the hardest places to get a copper project going.

That slows investment, as does the ESG influence on investor allocation. Less capital goes to mining because it does not tend to score well through the ESG filter.

Another observation we have made on these pages, particularly as regards oil and gas, is the talent factor. Mining is hard. Who wants to work in mining when you can earn more, while risking less in tech? The gains are quicker and the aggro is lower.

“You’ve got a real bottleneck now on skilled labour in the industry,” says Snowden. “There aren’t enough engineers to a project.” That puts upwards pressure on wages and from there on capex and ultimately on prices.

In short, painful memories of previous over-expansion are holding back investment; opening mines is harder because of increased regulation; and there’s a shortage of people.

There are no obvious substitutes for copper

Substitution – using something other than copper – might look like a solution. After all, other metals conduct electricity too. But there are practical issues with all of these too – not least supply. The decade of underinvestment has led to a shortage of supply of base metals across the board.

Higher prices will solve a great deal of this. Mining will be incentivised; investment in alternatives will increase; technological advances will reduce the amount of raw material required; recycling and scrap supply increases; tailings get reprocessed.

But there doesn’t seem to be any “shale gas moment” for copper on the horizon – ie, a breakthrough technology that rapidly improves production.

Perhaps more importantly, the incentive to substitute is low. As Snowden notes, the cost of the copper content of an EV is a small part of the overall cost of the EV, so the copper price would have to go really high to motivate change. Similar observations might be made about tin and silver – they are in everything electronic, but in relatively small doses.

Copper needs to go to a price that incentivizes all the above change. It’s currently $9,700 per tonne. Snowden targets $15,000, but “doesn’t rule out that it could go to $50,000 or $100,000.”

I remember at the peak of the last bull market, people were melting down coins, theft was everywhere – a bronze statue got stolen and melted down. We are not at that point yet. In fact, Snowden thinks, using a baseball analogy, we are still in the first innings.

I hope he’s right, because I’m long copper and copper producers.

So how do you invest in this bull market?

How to invest in copper

There is no shortage of methods, depending on your risk appetite – from futures to exchange-traded funds (ETFs) to spread bets to stocks and shares. If you want to simply play the copper price, without taking in individual company or mining risk, there is the Copper ETF (LSE: COPA).

Then there are the miners. If you don’t want individual company risk, there is even an option for you there: the Global X copper miners ETF, the most liquid version of which is listed in New York (NYSE: COPX) but there are also “subsidiaries” in London, denominated in dollars (LSE: COPX) and sterling (LSE: COPG). The last one is probably the best way to avoid broker forex charges, though you’ll end up paying them by the back door.

London has no shortage of options when it comes to mining companies. There are the giants: BHP Group (LSE: BLT), plus Glencore (LSE: GLEN), Anglo American (LSE: AAL), Rio Tinto (LSE: RIO), and Antofagasta (LSE: ANTO).

US-listed Freeport-McMoran (NYSE: FCX), the world’s second-largest producer (after Chilean state-owned Codelco), should also probably get a plug, as it’s a purer play than most of the mining giants, Antofagasta aside.

There are plenty of smallcaps and midcaps. I’ll leave those to you to unearth – Canada and Australia probably have the most listed, although there are also plenty on London’s Aim. It’s a mining junior so caveat emptor.

Dominic’s film, Adam Smith: Father of the Fringe, about the unlikely influence of the father of economics on the greatest arts festival in the world is now available to watch on YouTube.

There’s a lot of excitement in the industrial metals market at the moment. Prices have gone up due to supply chain issues, which have been made worse by the war in Ukraine. However, there’s also a longer-term story playing out as we transition towards renewable energy.

The most commonly understood version of this is that we will all be buying lots more batteries to stick in our cars, hook up to at home, or place in containers which are then connected to the grid to provide stability because of intermittent renewable energy supplies.

But the energy transition will have a much wider impact than just batteries. The key driver is the electrification of lots of things, ranging from steel production through to aircraft, all of which will require more metals.

Soaring demand

This will drive immense demand for the usual candidates of lithium, nickel and zinc. So it’s entirely plausible that we will run out of key supplies of strategic energy transition metals in the next few decades. And if we don’t, then it’s likely we’ll run into a surge in prices.

Westbeck Capital, one of the few active fund managers in the battery space, notes that a number of metals have jumped in price recently, such as the 75% leap in lithium carbonate in China this year. Electric vehicle (EV) manufacturers such as Lucid, Tesla, and Rivian have either cut production or announced delays. Chinese EV maker NIO says it will raise prices in May and Mercedes-Benz has become the first major manufacturer to acknowledge supply chain issues.

There are two ways of investing in the expected surge in demand and rising prices. The first is to buy into individual mining stocks exposed to this space, or into a diversified fund such as BlackRock World Mining (LSE: BRWM).

The managers of this trust are betting heavily on this strategic metals super cycle: for example, more than 20% of the portfolio is invested in copper miners. It may be a surprise to see that only just over 1% is in nickel, but this is slightly misleading because the big diversified miners – which make up 40% of the portfolio – are also the major nickel producers.

A direct play on prices

I’ve highlighted nickel here because while everybody seems to focus on other metals such as lithium, we seem to have ignored the crucial role of nickel. For a sense of how important it really is, look at two new exchange-traded commodity (ETC) funds from WisdomTree that invest in the metals that are likely to play a key role in the energy transition.

WisdomTree Energy Transition Metals (LSE: WENT) is the broader of the two: it has 25% in nickel, 20% in copper, 15% in aluminium, 13% in silver and 12% in zinc, plus smaller amounts in tin, platinum and gold. WisdomTree Battery Metals (LSE: WATT) is more focused and has 48% in nickel, 26% in aluminium, 16% in copper and 10% in zinc.

One could argue that a mining fund such as BlackRock World Mining is the safer way to invest into this long-term theme. Its focus on diversified miners with strong balance sheets and generous dividends should help dampen down some of the inevitable commodity volatility. However, these big companies are subject to lots of risks. Rio Tinto just announced a decline in earnings due to various operational issues, for instance. Investing in a basket of commodities is a direct way to play the cycle, stripping away corporate risk.

What’s more, if prices shoot up it’s not unreasonable to expect many governments to demand bigger royalties and taxes or even to threaten to nationalise key strategic metal assets. That might be bad news for equity investors but good news for investors in pure commodity markets. So a smarter course of action might be to invest in direct equities or a diversified fund, while also playing the direct commodity markets for these increasingly strategic metals through ETCs.

SEE ALSO:

The case for nickel – a crucial metal in the Green Energy Revolution

Three stocks that will profit from electric-vehicle growth

Why investors should consider adding Glencore to their portfolios

Commodities are selling off a little as peace talks between Russia and Ukraine progress. The speculative mania seems to be unwinding.

Grains are down, oil is down – though daily swings of $10 a barrel now seem to be the norm – precious metals (palladium especially) are down.

War or not, most commodities will rise again – there was an ongoing shortage before Vladimir Putin went all Napoleon, but excess must be purged.

However, of note is that one industrial metal is hardly down at all, which suggests that that particular bull market has a lot further to go.

And that is why today we consider copper.

Copper is needed for everything, and supplies are low

Russia is the world’s seventh-largest producer of copper. It produces about 4% of annual supply (about one million tonnes a year), and sells most of that copper to China (with some into Europe).

Iron, steel and manganese make up Ukraine’s main metallic production – it is not a big player on the copper stage.

The overall consensus was that the war and sanctions on Russia would not have as big an effect on the copper price as on other commodities – and that has so far proved the case. The main protagonists in the copper story lie far away – in China, Africa and the Americas.

I don’t know how many times I’ve written this sentence, or at least a variation of it, but here I find myself writing it again: China is the world’s largest consumer of copper. That’s despite it also being the world’s third-largest producer. It is a net importer, accounting for 54% of world copper demand.

Europe is the next biggest user, at around 15% of demand, followed by the Americas, the US especially, which account for another 11% of demand. Total annual demand is somewhere between 25 and 28 million tonnes (depending on whose research you follow).

Copper costs around $10,000 per tonne, so this is a $250bn-plus market. Correct me if I’ve got my maths wrong (I’m sure you won’t hesitate).

The country with the biggest reserves and by far and away the biggest producer is Chile. Fears of resource nationalisation there with its new-ish left-leaning government have so far proved unfounded. It produces almost six million tonnes, or 28% of annual global supply.

Next is its neighbour Peru (2,200 tonnes, 12% of global supply); China (1,700 tonnes, 8%); the Democratic Republic of Congo (1,300 tonnes, 7%); and the US (1,200 tonnes, 5%).

Copper is used just about everywhere: homebuilding, construction, manufacturing, power generation, electronics and transportation. Which is why demand is often seen as a barometer of economic health. Overall demand is split roughly 65% electrical, 25% industrial and 10% transportation.

China’s inventories are at their lowest levels in four years (since before the pandemic), as are London Metal Exchange (LME) inventories, as is global visible inventory generally, suggesting strong support for current prices.

What does the copper chart tell us?

So to the copper price. It had a huge run up in the bull market of the 2000s. It collapsed in 2008, rallied again to a peak in 2011 (around $4.60/lb), and then went through nine years of bear market, during which it lost more than 50%.

It successfully retested its lows around $2/lb in 2016 and 2020. It then went ballistic in the post coronavirus-rebound, reaching new highs in 2021, since when it has been consolidating around the new highs.

Here is 20 years of copper:

And zooming in, here is three years of copper, so you can see the consolidation of the last year, steadily creeping higher.

The Dominic Frisby house call remains: “own copper”. It wants to go higher.

Never mind China, if we are to have our Green Revolution, we are going to require a lot more of it.

So how to invest?

There is no shortage of methods, depending on your risk appetite – from futures to exchange-traded funds (ETFs) to spread bets to stocks and shares.

You can even go down the scrapyard and buy the metal itself. That is what one of my brothers-in-law used to do. But he is odd.

If you want to simply play the copper price, without taking in individual company or mining risk, there is the Copper ETF (LSE: COPA).

Then there are the miners. If you don’t want individual company risk, there is even an option for you there: the Global X copper miners ETF, the most liquid version of which is listed in New York (NYSE: COPX) but there are also “subsidiaries” in London, denominated in dollars (LSE: COPX) and sterling (LSE: COPG). The latter is probably the best way to avoid broker forex charges, though you’ll end up paying them by the back door.

London has no shortage of options when it comes to mining companies. There are the giants: BHP Group (LSE: BLT), plus Glencore (LSE: GLEN), Anglo American (LSE: AAL), Rio Tinto (LSE: RIO), and Antofagasta (LSE: ANTO).

US-listed Freeport-McMoran (NYSE: FCX), the world’s second-largest producer (after Chilean state-owned Codelco), should also probably get a plug, as it’s a purer play than most of the mining giants, Antofagasta aside.

There are plenty of small-caps and mid-caps to spice up your dinner, or give you indigestion, depending on how much you consume. I’ll leave those to you to unearth – Canada and Australia probably have the most listed, although there are also plenty on Aim, London’s junior market.

Just remember what Mark Twain said: “a mine is a hole in the ground with a liar standing next to it”. Or words to that effect.

Dominic’s film, Adam Smith: Father of the Fringe, about the unlikely influence of the father of economics on the greatest arts festival in the world is now available to watch on YouTube.

SEE ALSO:

Why investors should consider adding Glencore to their portfolios

Nickel trading on the London Metal Exchange (LME) was suspended for more than a week after the metal briefly soared to $100,000 a tonne. Nickel, which is used to make stainless steel and electric-vehicle batteries, has recently traded for between $10,000 and $20,000 a tonne, but on 7-8 March, the price rose by 250%, prompting the LME to halt trading until 16 March.

Miners and manufacturers use the LME market to hedge their exposure to price volatility, says Bloomberg. Some – notably Chinese tycoon Xiang Guangda – had made big bets that nickel would fall because of rising production in Indonesia. Yet sanctions on Russia, the world’s third-largest producer, instead gave the price a boost. That forced bears to buy back futures to cover their positions, driving the price even higher.

When prices leapt by $30,000 in a matter of minutes early on 8 March, the LME halted trading. Controversially, it also cancelled the near-$4bn of nickel trades that were made in the hours preceding the surge, effectively resetting the market to the previous day’s $48,078 closing level. That drew fury from some traders, says the Financial Times. By “scrubbing the day from the record books”, they say the exchange has taken the side of squeezed short-sellers and brokers over those who bet the right way.

Yet for all the drama, nickel looks likely to come back down to earth soon, says David Fickling on Bloomberg. High prices will give smelters in China an incentive to convert lower-quality nickel into the more premium variety traded on the LME. And new plants in Indonesia that tap abundant, but low-grade, laterite ores suggest that we may be on the verge of unlocking “a significant new source” of global supply. “Prices driven by a short squeeze of this sort tend to calm down rapidly.”

The London Metal Exchange (LME) has just seen its biggest ever price move: the price of nickel has jumped by as much as 250% from the start of this week.

The LME has now suspended trading as it tries to restore a bit of order to the market.

What’s going on? And does it matter for you?

Nickel’s dizzying ride

The nickel price shot above $100,000 a ton this morning. For perspective, on Friday it was trading at $30,000 a ton, and that was the highest level since 2008.

That’s getting on for being cryptocurrency levels of volatility. So what happened? It’s all connected to Russian sanctions, which have triggered what’s known as a “short squeeze”.

In the stockmarket, investors short sell a stock if they think it is going to fall in value. To do this, they borrow the stock from someone else, sell it in the market, then hope to buy it back later at a lower price. They then return it to the lender, and pocket the profit.

This is risky even at the best of times. A stock can only fall to zero, but there is no limit to how high it can go. But it’s incredibly risky if lots of people have the same view as you. If lots of people have borrowed stock to sell, and thus need to buy it back at some point, that creates conditions for a buying panic.

If the stock does something unexpected – a big buyer comes along, or it reports results or even forecasts that beat expectations – the price might move sharply higher. As those with short positions rush to cover their positions (in other words, buying stock in the open market to return to the lenders), they push the price even higher.

That kicks people out of existing positions as their brokers demand more margin. That pushes the price even higher, and so on.

Hence the term “short squeeze”. Very painful to be on the end of one.

In the commodities market, though, things work a bit differently. Most of those who are “short” nickel aren’t doing it to bet on the nickel price falling. They’re doing it to hedge their production of the metal.

In the stockmarket, if you’ve got a big portfolio but you’re worried about prices falling, you might take out a short position to hedge against that fear. It’s an insurance policy rather than a bet; it’ll pay out if prices fall, but you don’t want them too.

It’s sort-of similar with commodities production. If you produce nickel, you’re going to have a lot of physical metal. You are “long” nickel. The tricky thing is that prices move around a lot. To give yourself some protection from falling prices, you might go short in the market. You’d calculate this in such a way that moves in one offset moves in the other.

But if something surprising happens then prices might move a lot more aggressively than you expect. As a result, you end up getting margin calls (you get asked to put up more money to cover your position) and if you can’t do it, well, the position gets shut down, which pushes the price higher.

Russia has pulled the rug out from under the commodities sector

Of course, something surprising just happened. It’s important not to forget that metals prices were already rising, partly because of pandemic disruption and partly because we were coming out of a big bear market in resources. Nickel supplies in particular were tight already, as it’s a key ingredient in the hoped-for electric vehicle revolution.

But we’ve now thrown in the problem that Russia is a major supplier of nickel – it produces 17% of the global supply of the top-grade nickel, not to mention lots of other commodities. That’s really pulled the rug under from lots of markets.

In this case, Tsingshan Holding Group, which is the world’s largest nickel and stainless steel producer, apparently held a big hedging short position. Via Bloomberg we hear that “a unit of China construction Bank Corp, which is one of Tsinghan’s brokers, was given additional time by the LME to pay hundreds of millions of dollars of margin calls it missed Monday.”

So what happens now? In terms of actual supply of the metal, the classic story with commodities is that high prices cure high prices, as more supply is brought online. As David Fickling of Bloomberg points out, nickel is not scarce, so you’d expect to see supply rise if these sorts of prices last for long.

What’s perhaps a little more concerning is the possibility of financial market disruption. There are a lot of bits of financing involved in the commodities trade. Requirements for credit at all of these points in the chain are exploding higher. What effect does all of this have on the financial plumbing?

I’m sure we’ll find out soon enough. Unless you’re a leveraged day trader (bad idea) you probably don’t need to worry too much. But even long-term investors should keep an eye on the companies in their portfolios and watch out for nasty surprises related to hitherto-unexpected derivatives exposure.

Electric vehicles (EVs) “are careering towards a giant pothole”, says Jon Yeomans in The Sunday Times. “There isn’t nearly enough metal around to put in all the batteries we need.” Prices are soaring as carmakers engage in a worldwide race to secure supplies of lithium, nickel, cobalt and graphite. “One noted mining investor predicts the coming boom will dwarf the supercycle in commodities unleashed by China’s rapid growth 20 years ago.”

Commodities sit “at the crossroads” of some of today’s key investment themes, says Reshma Kapadia in Barron’s. Digital and green trends will require masses of copper wiring, lithium is needed for batteries and aluminium is required “to build solar panels and wind turbines”. Most commodities spent the 2010s in a bear market, but last year the Bloomberg Commodity index soared 27%, “its best year in decades”.

Battery prices start to rise

The shift to electric vehicles has been powered by a long-term decline in the cost of batteries, says Rurika Imahashi for Nikkei Asia. In 2010, lithium-ion battery packs cost more than $1,200 per kilowatt-hour (kWh), but that had fallen to just $132 per kWh by last year. However, with Chinese prices of lithium carbonate rising 400% last year, that trend is reversing.

BloombergNEF calculates that average battery prices will rise by $3 per kWh in the first half of 2022, says Madeleine Cuff for iNews. That’s the first increase since at least 2010. Once predicted to reach “price parity” with internal combustion vehicles in the US by 2024, pricier batteries risk delaying that landmark. China, which accounts for 65% of global battery production, is poised to become the centre of the new industry. The country’s firms have spent $6bn over the past decade securing lithium supplies from “across the globe”, including Argentina, Australia, Canada, Chile, the Democratic Republic of Congo (DRC), Mali and Mexico.

The cobalt headache

Electric cars need much more metal than their internal-combustion equivalents. One electric Renault Zoe contains “7kg of lithium, 11kg of cobalt, 11kg of manganese and 34kg of nickel”, says Laurence Girard in Le Monde. Cobalt prices have almost doubled over the past year, but the “blue metal” is casting an ethical “shadow over the green car”. Roughly two-thirds of the global cobalt supply comes from the DRC, a country associated with corruption and child labour in mines. Investors are looking elsewhere – Greenland is one possibility – while engineers are trying to eliminate cobalt from batteries. Nickel is one popular replacement, but its price rose 15% last year.

Still, the nickel market may not remain in deficit for long, says Annie Lee on Bloomberg. “Aggressive supply expansion from Indonesia could swing the market into a surplus in 2022,” says S&P Global Market Intelligence. Lithium’s rally looks more durable because supply is struggling to catch up with rocketing global demand. “A balanced market is not projected until 2025 or 2026 at which point prices may start to subside,” says Cameron Perks of Benchmark Mineral Intelligence.

As the transition to electric vehicles (EVs) begins in earnest, a battery “arms race” is underway, and China is in pole position. A range of factors – including tightening emissions rules, earlier bans on internal-combustion models, and consumer incentives – are driving EV sales faster than expected, especially in China and Europe. Morgan Stanley’s auto team now projects 40% of new car sales globally will be EVs by 2030 – meaning annual production of 36 million electric cars within eight years, up from around four million in 2021.

China is already easily the world’s biggest market for EVs with total sales of 1.3 million vehicles in 2020, more than 40% of global sales that year. But it is also becoming the dominant player in battery production. And the EV market’s rapid expansion is increasingly focusing attention on the raw materials – lithium, nickel and cobalt, as well as rare earth metals – needed to make EV batteries.

What’s the issue?

In the words of the International Energy Agency, there is a “looming mismatch between the world’s strengthened climate ambitions and the availability of critical minerals that are essential to realising those ambitions”. Compared with current engines, the sheer amount of expensive metal that needs to be mined for EV batteries is astonishing, says Davide Castelvecchi in Nature.

These amounts vary greatly depending on the battery type and vehicle – and advances in battery manufacturing and recycling technology could change the picture – but currently a single car lithium-ion battery pack (of a type known as NMC532) typically contains around 8kg of lithium, 35kg of nickel, 20kg of manganese and 14kg of cobalt. That’s according to figures from Argonne National Laboratory, part of the US Department of Energy.

So as EV production ramps up, so will competition for resources and control of supply chains. The current acquisition of UK-listed Bacanora Lithium (focused on Mexican mining concessions) by China’s Ganfeng Lithium is a tiny part of that bigger picture.

How much metal will be needed?

Meeting the EV targets set in the recent Glasgow Food and Climate Declaration by 2040 will require over seven million tonnes of lithium annually, according to research from Benchmark Mineral Intelligence, the sector’s leading analysis firm. That’s 17 times more than was produced in 2021. Similarly, the IEA estimates that the growth in EVs could see lithium demand increase by over 40 times by 2030.

The cost of lithium-ion batteries has plummeted by 97% since they first entered the market as small, portable batteries in the early 1990s, and they are likely to remain the dominant technology for the foreseeable future, even as scientists develop ways of eliminating cobalt and nickel from the mix. It is hoped that further reductions in price (of a projected 20%) mean that electric cars should reach price-parity with combustion-engine models by the mid-2020s.

But there are also signs that prices (of lithium, for example) are already rising in anticipation of a supply crunch. And there are growing worries that China’s dominance in batteries and metals has left the West vulnerable and playing catch-up.

What is China doing?

China’s strategy is to establish dominance by controlling the global supply chain “from the metals in the ground to the batteries themselves, no matter where the vehicles are made”, says The New York Times.

Chinese battery giants led by CATL (which alone has 30% of the global EV market) and BYD have established such dominance that China now accounts for 85% of the global market in anodes, cathodes, separators and electrolytes, reckons UBS.

Those four components account for around 60% of a battery cell’s cost. “That grip on the global battery supply chain – so early in the game – has set China apart and will also allow manufacturers operating there to bring down their costs,” says Anjani Trivedi on Bloomberg. At the same time, China has worked to establish dominance over critical raw materials.

Such as?

Take cobalt, the most expensive material in EV batteries. At the luxury end of the EV market, for example, a longer-range Tesla needs almost 5kg of cobalt, more than 400 times the amount in a typical smartphone. Chinese processing plants supply 85% of the world’s battery-ready cobalt, according to Darton Commodities, a specialist supplier of cobalt, and US carmakers including Tesla, Ford and General Motors buy their battery components from suppliers that depend on Chinese-owned cobalt mines in Congo.

An investigation by Mike Forsythe in The New York Times found that Chinese firms now own or finance 15 of the 19 cobalt-producing mines in the Democratic Republic of the Congo (DRC) – the result of years of state-backed investment. The five biggest Chinese mining firms operating in DRC have been given lines of credit from state-backed Chinese banks totalling at least $124bn, says Forsythe, while the US (under both Obama and Trump) turned away from Congo and US miners sold assets to Chinese rivals.

What about nickel?

To circumvent the legal and reputational risks associated with cobalt from the Congo, some car and battery makers want to cut cobalt levels in their batteries. Nickel-rich batteries are one option, says Pete Pattisson in The Guardian – but “the same Chinese companies that dominate cobalt mining in DRC (Huayou Cobalt and CMOC) are also increasing investment in nickel extraction and processing in Indonesia”, home to the world’s largest nickel reserves.

This means that China is now the largest global market producer of nickel. It is also by far the dominant producer and refiner of rare-earth elements like neodymium and dysprosium, which are components in most electric vehicles. Unless the West wakes up, it will soon replace its old dependence on Middle Eastern oil with a new dependence on China for its clean energy transition, says Robert Bryce in The Wall Street Journal. “What a lousy trade.”

“Tesla will give you a giant contract for a long period of time if you mine nickel efficiently and in an environmentally sensitive way,” said Tesla CEO Elon Musk in July 2020.

In September he reiterated his position: “In order to scale, we really need to make sure that we’re not constrained by total nickel availability. I spoke with the CEO of the biggest mining company in the world and said, ‘Please make more nickel, it’s very important.’”

One year on from those big statements, we consider the investment case for nickel.

Nickel wants to go higher

Nickel, like all metals, has had quite a time of it over the last few years. Today it trades around US$19,500/tonne – a seven-year high.

The lows came in 2015-2016 – and, short of some kind of deflationary bust – I doubt we’ll ever see them again. We didn’t even touch them during the March 2020 Covid panic. Those lows were around $8,000/tonne.

However, the all-time high for nickel came in May 2007. It perhaps marked peak mania towards the end of the last great commodity supercycle. $54,300 was the price, so we are still some way off that.

If I look at a short-term chart of nickel I have to say I am not greatly encouraged by the price action. We hit a high in February, re-tested it last week and failed, and since then the price has been sliding.

However, if I look at a longer-term chart, I see a huge base that has formed over many years, with consistently higher lows since 2016, and that now looks like it wants to go higher, a lot higher. We are a long way from the speculative manias you find at the end of large bull markets.

Here’s a screenshot from the London Metals Exchange (LME) – what do you make of it?

Perhaps we just need to digest and consolidate the gains of the past year for a little longer before the bull market can get going again. Summer doldrums and all that.

Nickel’s role in the Green Energy Revolution

Nickel is the fifth most common element on earth. Humans have been using it since the bronze age, but it wasn’t officially recognised until 1751. Ancient Chinese manuscripts refer to “white copper”, while northern European miners in the Middle Ages called it Kupfernickel, which translates as “Old Nick’s copper” or “devil’s copper”, because the reddish ore looked like copper, but they couldn’t get any copper out of it.

Nickel has a high melting point, resists corrosion and oxidation, is ductile, magnetic at room temperature and alloys readily. It can be deposited by electroplating, has catalytic properties and recycles well – it can be re-used again and again. With these properties, its biggest use by far – almost 80% of annual demand – is in stainless steel. The rest comes from alloys (10%), plating (4%), electric vehicle batteries (3%) and, of course, “other”. Nickel use has been growing at a rate of about 4% per annum since 2010.

The excitement around the metal lies in its use in electric vehicle (EV) batteries. Nickel is a key component for EV cathodes. “Green energy will play a key role in nickel’s future,” says the LME. “The rapid rise of electric vehicles and growing importance of battery technology are likely to increase demand for higher purity nickel. Whilst EV’s only represent a small share of the current nickel story, government policy and the strategic plans of well-known automotive players are driving the renewable automotive manufacturing, and in turn a small part of the energy industry forward, which will impact the nickel futures market.”

It’s that Green Energy Revolution again, and the huge demands it places on natural resources.

Demand from electric vehicles is small – but that will change

Eddy Haegel, president of BHP Nickel West, said this week: “We believe that over 2020 to 2030, overall nickel demand will grow at 5% compound annual growth rate, and that nickel-in-battery demand will grow at a rate of 21% CAGR.” He sees EVs accounting for 25% of all vehicles sold by 2030.

Meanwhile, we have Elon Musk saying, “Please make more nickel, it’s very important.” Musk likes the greater energy density of nickel-rich, cobalt-free cathodes. That’s why he wants nickel. Robyn Denholm, chair of Tesla, says it will purchase around $1bn per year in battery minerals from Australia alone.

Nickel demand in the EV and energy storage sectors remains relatively small, but the outlook is that this will change. The International Energy Agency estimates a rise of 4,000% over the next 20 years — “from 81 metric tons in 2020 to 3,352 metric tons by 2040”. How they can be quite so precise, I’ve no idea, but one presumes there is a methodology.

80% of all nickel historically mined, says the Nickel Institute, was extracted over the past three decades. Worldwide, around 2.5 million tonnes of nickel are mined per year, according to this year’s US geological survey. Indonesia (760,000 tonnes) is the world’s biggest producer, followed by the Philippines (320,000 tonnes), Russia (280,000 tonnes), New Caledonia (200,000 tonnes), Australia (170,000 tonnes) and Canada (150,000 tonnes).

The world’s nickel resources are currently estimated at 300 million tonnes, and there are thought to be significant deposits in the deep sea, which no doubt humans will eventually start mining (if they don’t get to outer space first).

The world’s biggest producers are Vale, Norilsk Nickel, Jinchuan Group International Resources, Glencore and BHP Group – the latter two being the simplest option for UK investors. But they are far from pure plays: BHP’s nickel division accounts for less than 1% of its earnings.

The small and mid-cap pure plays are where the big nickel bucks will be made – and lost.

The commodities bull market that began in spring 2020 may be over – or just consolidating, depending on your point of view.

But there is one metal for which the only way is up, as the song goes. And that is tin.

Energy, metals and soft commodities could all go into bear markets and lose 30% or even 50%. The US dollar index could go back above 100. Interest rates could rise. I still think tin goes higher. The shortage of supply is that pronounced.

So today we consider the metal of Jupiter that gave rise to the Bronze Age.

Why the tin story looks so good

Tin is in the sweet spot. Demand is rising but supply is not, thanks in part to decades of underinvestment. The result is that, as Macquarie puts it in a recent report, “tin prices have been lifting month by month since April 2020”.

Annual tin demand stands at around 350,000 tonnes. The biggest producer is China (85,000 tonnes in 2019), followed by Indonesia (80,000) and Myanmar (54,000). China, surprise surprise, is also the biggest consumer and, despite being the biggest producer, is a net importer.

Demand comes from the electronics industry mostly, and shows no signs of abating. Solder accounts for around 50% of annual tin demand, with batteries, tinplate, chemicals and “other” making up the rest, according to a recent report by Macquarie.

With the global roll-out of 5G and the drive for greener technology, demand is set to increase, especially in solder, by 20% by 2025, says the International Tin Association, to somewhere near 450,000 tonnes. There is no substitute; tin is essential to the low carbon economy. Without it electrons don’t flow and electric-vehicle batteries don’t charge.

Supply, whether from mining or recycling, cannot keep pace. Indeed, disruptions to supply are ongoing. Following depleted production in Indonesia due to heavy rain in 2020-2021, the latest upsets are a mining shutdown in China’s Yunnan province for planned maintenance (the real reason probably being a Covid outbreak). The Malaysia Smelting Corporation also closed for 45 days due to Covid, maintenance issues and lack of feed and labour shortages in Myanmar – all key tin mining jurisdictions.

Warehouse stocks on the London Metal Exchange stand at around 2,000 tonnes and in Shanghai at around 3,000 tonnes – that’s no more than two or three days’ supply. The result is that the tin market is now in “backwardation”. That is to say spot prices (tin for immediate delivery) are higher than futures prices. That is a rare and bullish situation.

Tin for immediate delivery is $32,758 a tonne. Three-month futures stand at $31,716. You can buy tin now for delivery in 15 months at $27,613. The futures market, then, is predicting that these supply shortages won’t last. Hmmm.

The all-time high for spot tin in 2011 around $32,000 was briefly exceeded last week.

“Consumers are totally destocked,” says mining analyst Mark Thompson. “Producers are totally destocked. Traders are totally destocked. Demand would be running at about 1,050 tonnes per day, but supply is only around 950 tonnes per day.”

Three ways to invest in tin

So how to play it? There aren’t a lot of options. Buying physical tin or futures is not really an option, so you have to go with the miners, which are currently trading at prices concomitant with the futures markets – in other words, they’re priced as though the shortage of supply is temporary.

If you are able to buy Canadian stocks, perhaps your first port of call should be Alphamin (TSX-V: AFM). It’s also listed in South Africa on the Johannesburg Stock Exchange AltX (Johannesburg: APH). With a market cap of around C$850m, geology-wise, its Mpama North mine is probably the world’s best tin deposit.

Its main drawback is that it’s in the Democratic Republic of Congo, which is not top of most people’s list of go-to jurisdictions when it comes to investing. But when it comes to tin, beggars can’t be choosers. This is a low-cost producer mining high-grade metal, and a rare producing pure play.

It needs to sort out some communication basics – like putting its ticker next to its name on its investor presentation – but hopefully investor relations will be reading this and sort out such kindergarten stuff. I own this one.

There are two UK-listed pure plays at the more speculative end of the market. One is Afritin (LSE: ATM), which is in the early stages of production / late stages of development, depending on if you’re a glass-full or glass-empty kind of person, with its Uis project in Namibia. I own this one as well.

Often you get more leverage in bull markets by buying high-cost producers. Let’s say a company mines a metal for £70/lb and sells the metal for £100/lb. It makes £30/lb. The price of the underlying metal goes up to £110/lb, and so the profits of the company increase by a third.

Now let’s say a company mines the metal at £90/lb. If the metal price goes to £110/lb its profits double. High-cost producers can be very rewarding in bull markets. In bear markets, however, you can get destroyed.

Afritin’s flagship Uis project is a little too dependent on the lithium and tantalum by-product to be economically viable for its tin alone at $25,000 or $30,000 a tonne. But if tin goes to $40,000 or $50,000, then suddenly Afritin becomes a multi-bagger winner.

The other to look out for is Cornish Metals (AIM:CUSN, TSX-V:CUSN), which is developing tin properties in – well, I’ll leave it to you to work that one out. Some encouraging recent drill results, some well thought-of properties in what must be considered the home of tin, and well capitalised, this is another speculative means to get exposure to the tin story. I don’t own this one, though I probably should.

Daylight Robbery – How Tax Shaped The Past And Will Change The Future is now out in paperback at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere.

Mining analyst Mark Turner, who writes the IKN Weekly, a newsletter focused on mining in South America, recently told his subscribers in no uncertain terms to cut their exposure to Peru.

“Sell Peru”, he said. It is, as far as mining investment is concerned, “off the map”. In fact, he went as far as to recommend shorting mining companies with significant exposure to Peru.

The reason? “Resource nationalism is coming to South America.”

Turner knows what he’s talking about. He’s at the coalface. He lives in Lima.

Politics could hit the supply of copper

Peru’s elections are a drawn-out process and the deciding vote comes in June. Socialist Pedro Castillo is the front runner and he is promising supertaxes of as much as 70% on mining profits in a bid to stop foreign firms “looting”, as he puts it, the country’s mining wealth.

The consequences are predictable. International companies will halt expenditure on both exploration and development. Why would they do anything else, if there is no reward for them? This means job losses for locals. What’s more, companies will reduce production, so as to leave metal in the ground until a new, more mining-friendly president comes to power. Which means diminished supply.

Peru is the world’s second largest producer, after Chile. It produced 2.2 million tonnes of copper last year, roughly 12% of annual supply. But it doesn’t look like it is going to be the world’s second largest producer for much longer.

Meanwhile, Reuters reports that Chile, which produced 5.7 million tonnes, “saw output of the red metal fall for the tenth consecutive month in March, marking a modest but continual slide in production that began shortly after the coronavirus pandemic struck the country.” Year on year production has fallen by just over 2%.

The world’s next largest producer is China, on roughly 1.6 million tonnes. Yet China is a net importer. That’s an understatement: it’s on a copper buying spree. It imported over a million tonnes more refined copper in 2020 than in 2019, and rumours of state stockpiling abound. China’s internal production can’t even meet its own internal demand, let alone what it needs for its exports’ manufacture. Between 2005 and 2020 China invested over $56bn securing overseas copper assets.

China alone accounts for over half of world copper demand, followed by Europe, then the US and Russia.

The “green revolution” will consume a lot of copper

Copper is in a runaway bull market. Demand is everywhere. Back in 2017 the World Bank was forecasting demand increases of at least 50% over the next 20 years. If the world moves towards a low-carbon energy future, then demand could rise tenfold by 2050, it claimed. Tenfold! The cause, irony of ironies, is the green energy revolution.

In terms of metal demand, this revolution is anything but green. There is an immense, underappreciated materials intensity to green energy consumption in its many forms, of which copper is a major constituent. Alternative energy systems are on average five times more copper intensive, reports the Baker Institute Center for Energy Studies in Forbes, than their conventional counterparts.

Every 1,000 battery electric vehicles (BEVs) require 83 tonnes of copper – three times the amount needed by old-school motor cars. Wind turbines require 3.6 tonnes of copper per megawatt (MW) of output and photovoltaic cells four to five tonnes per MW.

30,000 BEVs can consume as much copper as a skyscraper. For the global passenger vehicle fleet to be one-third BEV would mean 300 million BEVs, or 20 million tonnes of copper. That figure is roughly equivalent to annual global copper demand. Never mind all the plumbing, wiring, weatherproofing, machinery, electricals, electronics and multiplicity of other applications that require copper.

And one forgets there are other countries in the world that use copper. It’s not just China.

All this adds up to one thing: a copper bull market

Is the green energy revolution narrative suddenly going to go away? I doubt it very much – views are too entrenched. It might be that an extraordinarily high copper price will change the narrative and the case for fossil fuels will get stronger. It might be that an overwhelming case is made that, because of the extraordinary metal demand and the fossil fuels required to meet that demand, green energy is not quite that green after all. I can see the argument being made – it is already being made – but I can’t see it catching on. In other words, copper demand is not going away.

It all looks very bullish. This is a bull market of the secular variety, it seems.

Copper slipped below $2/lb in March last year. For the chartists out there, it formed a wonderful five-year double bottom with the lows of early 2016. It’s since made its way steadily up and today sits around $4.50/lb. It closed April at the exact price, almost to the penny, that it closed ten years earlier, at the peak of its last bull market, in April 2011.

It could be that we form a multi-year double top, and that it pulls back from this incredibly historically sensitive price point, after what has been a bonanza year.

But the momentum is up. Demand is escalating. Supply looks like it is coming under pressure. And once it breaks above its 2011 highs, what can I say? Look out above.

One of the themes that has dominated my articles over the past few years has been the idea of the scalability of tech, especially anything digital; the digital economy has seen growth that has obliterated anything the physical economy – mining, farming, traditional industry – has achieved.

While the physical economy may have grown, perhaps by around 3% or 4%, since the early 1990s, the digital economy has gone from almost nothing to become, probably, the biggest economy on the planet.

Will the physical world ever make a comeback? Or even catch up?

Tech has dominated because it is so easy to scale

My go-to statistic to illustrate the rapid growth and current dominance of technology is that in 1990, the three biggest companies in Silicon Valley had a combined market cap of $36bn. Today the three biggest – Facebook, Google, and Apple – have a combined market cap of around $4.5trn. That’s over a hundred times bigger.

Trademarks, software companies, intellectual property, data – this where the value is. Data is described as the new real estate. Yet when I was a kid, I don’t think it even existed, certainly not in the way it does now.

Even money itself has gone digital. Only about 3% of money globally is now in physical form. Bitcoin is now (measured by market cap, at least), the 13th largest currency in the world. It didn’t exist 15 years ago.

The key to this rapid growth is scalability. A digital product can be endlessly and instantly copied. I can design a fantastic app once, upload it to the app store once, and it can be downloaded a million or a billion times. If Google can get some new groovy feature in its search engine, then once implemented it’s almost infinitely scalable.

But let’s say I design a fantastic washing machine. It takes much longer to get this washing machine to the world – the fabrication and distribution are all tricky, but perhaps most difficult is the burden of regulation in the physical economy, particularly as it attempts to cross the national borders.

By contrast, the economy of the internet is (almost) borderless. The digital space, or certainly the areas where the innovation is, is largely unregulated – how do you regulate something that hasn’t been invented? So digital escapes the ties of regulation that curb the growth of the tangible.

Then, because of the extraordinary speed of growth in digital, there is the potential for investors to make far quicker returns on their investment. And so the digital economy attracts the most capital, the most talent and so on.

With this in mind, let us turn our attention to metals.

The physical world is treacherous and time-consuming

You don’t get much more tangible than metal. Mining is in many ways the most analogue industry there is; it is the very opposite of the dynamic digital world. A geologist is studying rock formations that took thousands of years to take shape, and will take decades to mine.

Even compared to the production of other commodities, mining is slow. To take an oil well or a gas field from discovery to production might be possible in a couple of years. A farmer can get a new crop to market in a year; mining takes ten. Metals are a very different beast, yet they underpin everything we do.

Who’d want to go into mining? It’s a horrible business. Geologists have to go to some of the most unwelcoming and dangerous places on earth – from the freezing frontiers of the Arctic to darkest depths of war torn Africa. That’s before they even know if they’ve discovered anything.

At a grade of roughly 4.5%, Alphamin Resources has, in Mpama North, probably the richest tin mine in the world. If it was a software company, developers from all over would want to work for it, yet one of Alphamin’s biggest problems is attracting talent. Why? The Kivu province of the Democratic Republic of Congo, where it is located, has a long reputation for outbreaks of both conflict and Ebola.

Once you make a discovery (and many geologists make only one or two discoveries in their entire career), you’ve then got to prove the mine is economic. Variable metals prices make this a nightmare – a mine could work at a copper price of $4 per pound – but not at $3 a pound. How do you even know what the copper price will be in five years’ time, by the time you’ve got this thing producing?

Then you’ve got to raise the capital to build the mine. Who wants to invest in a mining company when you’ve got to wait ten years before it starts profitably producing? It could go to zero. Do you know what? I’ll just buy a Nasdaq tracker.

Then there’s the regulation. If you think the cross-border logistics of the washing machine industry are tricky, wait until you see the regulatory burdens placed on mining. Perhaps not without good reason, they are enormous, especially environmentally. That means further delay.

Let’s say you get your mine producing profitably. Who’s to say a government won’t then seize it – either taking control of the mine (as happened in Venezuela, for example) or via windfall taxes? Or actual crooks might try and steal the product (this is a major risk, for example, to the gold miners of Mexico).

Even ignoring all of those risks, to take a mine from discovery to production takes an average of ten years. It often takes longer. Who has ten years? I struggle to find a spare hour.

The result is an industry starved of talent, starved of investment and starved of innovation. Yet the metal it produces underpins everything we do. I could not be writing and you could not be reading this article without boring old copper, aluminium, tin, lead, iron and zinc.

Mining got a wake-up call in the 2000s and billions of dollars of investment went into metals, buoyed by the prospect of a huge Chinese infrastructure spending.

Some of that investment resulted in new discoveries and mines; much resulted in nothing. We spent the money, we explored, we developed, but the mine won’t work at today’s prices (especially so since the fall in metals prices post-2012). Some resulted in the multiple scams which perennially soil this business. Some simply got blown on expensive stays at the Savoy.

However, since 2012, with metals prices flat or falling, the industry has been starved of investment. It’s been surviving on diesel fumes. But something changed last year.

Tech’s one big weakness: it is still dependent on “real” world materials

Never mind the impact Covid-19 has had on supply chains: coronavirus is the great accelerator. Stuff that was going to happen anyway has been brought forward – and metals prices have been rising.

I’ve spent a lot of time on the phone this past week to metals traders and dealers. You might not think so to look at the gold price, but at the precious end of the market, physical bullion dealers are reporting unprecedented demand. One of the biggest US dealers has seen its turnover go from from $651m to $1.5bn to a record $3bn in just the past three years. There’s a similar story in Germany.

Talking to one trader from the floor of the metals exchange, he says this bull market is way bigger than the one we saw in the noughties. “I’ve been here since the 90s. I’ve never seen anything like this. Tin. Copper. There is just no excess stock in the concentrate markets.”

Just to explain that term, mines produce “concentrates” and sell to smelters who produce metal. The concentrates markets are rather opaque to outsiders; the surplus or deficit between mine supply and metal consumption gets hidden there as concentrate stocks go up and down.

“The concentrate stocks are at zero”, he says, “which means the maximum metal supply equals mine supply. It also means that metal production is dropping because there is no more draw down on concentrate stocks possible.”

We saw what happened with China in the 2000s, and a plethora of other countries want similar economic growth. America’s infrastructure needs rebuilding and increasingly interventionist governments the world over are getting involved in infrastructure spending of one kind or another to make themselves popular and secure their re-election.

We talk about the rise of the Asian middle class, but it hasn’t finished yet. And there’s the African middle class to come, not to mention South America.

The large mining companies have relied on acquisition rather than discovery. The smaller companies are finding it increasingly difficult to make discoveries. True elephants (huge deposits) are more and more rare, especially in accessible places. The quality of the grade is falling.

The bottom line is this: there is not enough metal. There hasn’t been enough metal for a long time because there has not been enough investment. Why? The money has all gone into tech – scalable tech.

There is one thing that will solve all of this: higher metal prices. I rather suspect the bull markets we have seen this past year are just the start. We might well now be seeing the physical economy starting to make a comeback.

Daylight Robbery – How Tax Shaped The Past And Will Change The Future is now out in paperback at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere.

When was the last time you heard about nuclear power and the demand for uranium? People used to debate the matter passionately, but it hasn’t been a hot topic in the developed world for some time now. The Germans have gone off nuclear power and the UK has so far proved poor at building new reactors.

The real story, however, is outside Europe and America. China, India, Russia, Belarus, Korea, Slovakia and the United Arab Emirates are collectively adding over eight gigawatts (GW) of new capacity in 2021. (A GW is equal to one billion watts, while an incandescent lightbulb consumes around 60 to 100 watts.)

There are 53 nuclear reactors under construction worldwide and over 300 have been proposed for this decade. Many countries in the developing world think that nuclear power is one of the crucial building-blocks of a green-energy transition and are spending huge sums of money on new capacity.

Meanwhile, even previously nuclear-phobic countries such as Germany are restarting some of their plants while the Biden administration in the US is making positive noises about – at the very least – keeping its existing fleet of reactors and maybe even building some new ones.

An illiquid market

Investing in uranium and gauging prices for uranium-based products can be tricky, however. The market is not like classic, liquid commodity markets where there are obvious supply and demand drivers and a panoply of financial-market prices and structures in tow.

Most utilities in need of uranium oxide (U3O8), the raw material used in nuclear reactors, do not tend to ring up a commodity trader and buy the product on the spot market, though that does happen. Instead, they sign long-term contracts with a few, strategically important suppliers from trusted countries, mainly Kazakhstan and Canada. They might also source supplies via the nuclear weapon-decommissioning programmes that have been operating for the last few decades. The demand from utilities for supplies is also not very price-elastic.

If utilities have enough raw material, they will stay away from the thinly-developed spot markets, which means that if one consumer – say Japan – suddenly stops buying, one can see sudden and prolonged drops in the price of U3O8. And that has certainly been true over the last decade. Even after recent increases, post-Fukushima prices are still 85% below their all-time high.

The Covid-19 supply squeeze

But the inelasticity of demand and supply can also result in sharp bounces. Utilities will have a steady need for supplies and if those long-term contracts start to finish, they might find themselves scrambling for more, especially if traditional sources of supply go offline.

And that has been the case during the pandemic. Cameco in Canada, the world’s second-largest producer, has shut every one of its uranium mines in Canada. Output at Kazatomprom, the world’s biggest producer, is at a multi-year low. The US produced a negligible amount of uranium in 2020. This sort of backdrop can trigger sudden surges: in 2007 prices increased fivefold in one year to $140 a pound (lb) as utilities panicked about scarcity of supply after a mine called Cigar Lake was flooded and another, Ranger, was damaged by a cyclone.

More bullish news

There is one other issue worth mentioning. The increasing cost of supply has not necessarily been reflected in spot market prices. A recent panel of experts at an event hosted by investment bank Canaccord Genuity (CG) argued that marginal costs are well above current spot prices.

According to a report on this event, the panellists think that “the presence of long-term contracts has masked the discord between spot prices and production costs; however this is expected to change as utilities re-enter the market in 2021 to re-contract”.

“With significant supply having already been removed from the market, and a slow ability to respond by producers, this is expected to be a tighter environment than what we have seen over the last decade… a straw poll saw average long-term price expectation among the speakers averaging $50/lb, compared to current levels of $30/lb .”

The Uranium Energy Corporation estimates that in 2021 global demand for uranium was 175 million lbs, while production reached 128 million, implying a gap of 47 million lbs of U3O8 for 2021 alone.

The options in London

The simplest way of playing any possible upwards move in spot prices is through a London-listed holding company called Yellow Cake (Aim: YCA), which owns a big reserve of U3O8. In recent weeks this unique vehicle has raised $140m via new ordinary shares to fund the purchase of additional U3O8.

The initial plan was to muster $110m, but owing to strong demand the raise was increased by $30m. The funds will be used to purchase 3.5 million lbs of U3O8 for $28.95/lb under the company’s existing contract with Kazatomprom. Additionally, Yellow Cake has agreed to purchase a further 440,000lbs of U3O8 at a price of $27.34/lb for total consideration of $12m.

According to calculations by Nick Lawson from alternative investments specialist adviser Ocean Wall, at the mid-March point Yellow Cake’s net asset value (NAV) is around 216p (based on a spot market mid-price of $27.51 for uranium) compared with a share price of 261p. So, Yellow Cake is not cheap in NAV terms; it is trading at a near-20% premium.

But if uranium prices do move upwards sharply, as I think is distinctly possible, then Yellow Cake’s share price could tick even higher. It is also worth mentioning that there are some more mainstream equity alternatives such as Cameco (Toronto: CCO; NYSE: CCJ), a giant miner listed in the US and Canada.

Investment fund Geiger Counter (LSE: GCL) owns a handful of mid to small-cap players in the uranium sector. Big diversified miners BHP (which owns the copper-uranium Olympic Dam project) and Rio Tinto, the operator of Namibia’s Rössing uranium mine, also provide some exposure.

Everyone is talking about a commodities supercycle, says Ashutosh Pandey in Deutsche Welle. Google Trends reports that searches for the term have hit the highest level in over a decade. Copper prices have soared by 75% over the past year. The red metal, dubbed “Doctor Copper” because of its “uncanny ability to predict” economic growth, is leading the charge.

Iron ore prices are up by more than 80% over the past year; aluminium has gained a third. Brent crude oil has jumped by 30% in 2021. Corn (maize) futures are up by 47% over the past 12 months, says Steve Goldstein on MarketWatch. The United Nations reports that food prices have reached their highest level since 2014. We could be in the early stages of an “upward price cycle of commodities... outlasting the typical economic cycle”. The last one ran from the late 1990s to 2008 and was driven by the growth of the Chinese middle class.

A return to normal?

Some analysts are sceptical that we are heading for a repeat. Commodity supercycles are rare, writes Joe Wallace in The Wall Street Journal. They are usually propelled by the rapid industrialisation and urbanisation of a big economy, as happened recently in China, or in post-war Europe and Japan. That creates huge surges in demand for “raw materials that existing supply struggles to meet”, driving prices higher “for years, even decades”. A strong global recovery this year will certainly bring a jump in demand for commodities, but that’s not the start of a massive new trend. It is just things returning to normal after the pandemic.

Instead of the late 1990s, a more apt parallel is the period after the global financial crisis, says James O’Rourke of Capital Economics. Then, as now, a credit-fuelled boom in Chinese infrastructure spending powered metals higher, but it didn’t last and prices fell back for most of the following decade. While industrial metals prices are likely to remain buoyant during the first half of this year, we think they will slide in the second half, says O’Rourke.

Where to look now

Talk of coming inflation and a commodity supercycle still looks “premature”, says Jumana Saleheen in the Financial Times. We are arguably only just coming off the back of the last one and few analysts are bullish about the long-term outlook for oil. If anything sparks a new supercycle it will be the green-energy transition, which will require vast investments in new electricity generation and charging infrastructure. On current projections there will be a 20% supply gap in “copper and battery grade nickel” come 2030.

It is in the industrial-metals markets for the likes of “copper, nickel, lithium and cobalt” where the “secular bull market hypothesis is most credible” agrees Eoin Treacy of Fuller Treacy Money. The rise of the electric-vehicle and new battery technology will drive a huge surge in demand for these commodities, the likes of which only comes along “once in a couple of decades… I am very bullish on industrial commodities overall and copper in particular.”

Want to make a lot of money? Here is my simple, step-by-step guide. One: identify a niche, strategic commodity that is essential in some way, in short supply – ideally due to years of underinvestment – and has a tiny market with few ways to play it. Two: buy it, as early in the cycle as possible. Three: sit back and smile.

How many times have we seen this story play out over the years? Uranium, phosphates, graphite, cobalt, lithium, helium, rhodium, rare earth metals. What might be next?

Today, we make the case that that metal is tin.

Tin is in short supply right now

The world typically consumes around 350,000 tonnes of tin every year. The biggest producer is China (85,000 tonnes in 2019), followed by Indonesia (80,000) and Myanmar (54,000). Then there is quite a big jump down to South America: Peru, Bolivia and Brazil, where annual production is around the 18,000 tonne mark.

Despite being the world’s largest producer, China is a net importer. With many of its smelters and plants seeing production cuts or closure, it has been stockpiling to meet its goal of self-sufficiency in semiconductors.

Indonesian production, meanwhile, has seen numerous problems. “Around a third of the country’s tin is mined offshore,” James Willoughby of the International Tin Association tells me in an email. “However, in the monsoon season, the waves are often too high for the dredges to operate without risking damage, and so output falls. This year, the weather has been particularly bad, and this has gone on for longer than anticipated”. Shipping container shortages have led to delayed deliveries and overall supply is down 40%.

Myanmar has been beset with political problems, leading to supply falls. Latin American production has run into Covid-19. On top of all that, no matter where the tin comes from, about 40% of global production comes from the unreliable source that is artisanal and small-scale miners.

In short, the supply side has been hit and stockpiles on the London Metals Exchange (LME), where most of the world’s tin is traded, are at record lows. LME inventories today stand at 1,750 tonnes. That’s little more than two days’ global consumption. A year ago the figure was closer to 10,000 tonnes. In Shanghai, however, inventories are higher, around 8,000 tonnes, and rising. Off-exchange inventory is also thought to be near extreme lows.

So what is tin actually used for?

About 50% of annual demand for tin, is for use as solder in electronics. This is why tin is known as “the glue of metals”. There are also, as Willoughby remarks, “significant tin markets in chemicals, tinplate, and lead-acid batteries”.

Demand has been strong for several reasons. With Covid-19 and the rise of remote working, many people have been upgrading the electronics in their homes – computers, TVs, kitchen appliances.

“This has benefitted tin a lot”, says Willoughby. “On top of this, housing construction in the US has been another driver.” The exodus from cities has led to a building boom. “Residential homes, typically in the suburbs, are often covered in a plastic cladding which uses a tin-based stabiliser to prevent degradation in sunlight.”

Some of these drivers may seem temporary, but they are not. Semiconductors, the rollout of 5G connectivity, the internet of things and the rise of electric vehicles all mean increased tin demand. Then there is its traditional use in tin plating and copper alloys, plus exciting future tech such as solar PV, thermoelectric materials, hydrogen generation, fuel cells and carbon capture catalysts.

In short, it’s a classic commodity supply-demand squeeze and the result is higher prices. Today the price is $27,300 per tonne. It touched $30,000 last month before correcting sharply with the tantrum in the bond market.

But demand is such that prices have quickly rebounded. The all-time high for tin was set at the peak of the commodities bull market in 2011 at $32,000.

As, or should I say, if Covid-19 becomes a thing of the past, some of the demand drivers might fade. People might stop spending on home electronics and spend instead on holidays, for example. But tin demand as the world decarbonises and electrifies should still remain. There is something of a structural deficit in supply.

We have been here before. I can remember many of the same arguments floating about in the 2009-2011 time frame, and tin went into a bear market that by 2015 saw the metal lose half of its value.

And it’s true that the squeeze won’t last forever. Tin’s a metal, and metal prices are cyclical. Nor is this the low – the low was in 2019, when it re-tested that$15,000 per tonne mark of 2015. But I would argue that this is not the high either, and the bull market has further to go.

How to invest in tin

The storage logistics mean buying physical metal is not an option. ETFs (exchange-traded funds) are few and far between and most spreadbetters don’t give tin as one of their metal options. Wisdom Tree however, does offer a tin ETC (exchange-traded commodity) that tracks the Bloomberg Tin Subindex.

The easiest option is to go old school and buy a mining company. If you want my picks, take a look at the piece here I wrote for the main mag last week. It’s a bull market. Enjoy the ride.

Meanwhile, if you’re not already a subscriber then get your first six issues – plus my beginner’s guide to bitcoin report – absolutely free when you sign up here.

Daylight Robbery – How Tax Shaped The Past And Will Change The Future is now out in paperback at Amazon and all good bookstores with the audiobook, read by Dominic, on Audible and elsewhere.

What’s happened?

Fears are growing that China’s current high-level review of its rare-earths policy could presage export restrictions that will wreck the supply chains for strategically crucial sectors including electric vehicles and renewable energy. China currently produces about 70% of rare-earth elements globally, and has used its dominance in the past as geopolitical and economic leverage. Citing anonymous sources close to China’s review, Bloomberg reports that Beijing could ban the export of rare-earths refining technology to countries or companies it deems as a threat. And although China has no imminent plans to restrict shipments to the US, it is keeping that option in its “back pocket” if Sino-US relations deteriorate further, the source said. A source quoted by the Financial Times similarly said that China is considering restrictions on the export of rare-earth minerals that are crucial to the manufacture of US F-35 fighter jets and other weaponry.

What exactly are rare earths?

They are the 15 metallic lanthanide elements on the periodic table, plus two other closely related elements, scandium and yttrium – and they are an integral part of modern life, crucial to several high-tech sectors. Despite the name, almost all of the 17 rare-earth elements are actually pretty plentiful in the earth’s crust. Sixteen of the elements are more abundant than gold. And one of them, cerium, is the 25th most abundant element on the planet. However, they tend to be widely dispersed, and their geochemical properties make them hard, environmentally damaging and expensive to mine and process, producing large quantities of toxic wastewater and radioactive residues. For that reason, there are very few places in the world where it has proved practical and profitable to mine them. Hence the name “rare”.

What are their uses?

They’re used in high-tech equipment in crucial sectors including electric vehicles and wind energy, consumer electronics, defence and oil refining. For example, powerfully magnetic rare earths such as neodymium, terbium and dysprosium are used as magnets in electric-vehicle motors. Hybrid car batteries also use the rare earth lanthanum. Magnetic resonance imaging (MRI) scanners in hospitals use the rare earth gadolinium. Apple iPhones contain rare earth elements and they are crucial components in solar cells and lasers. Britain has high hopes of becoming a renewables superpower in the coming decades. But each of its vast Dogger Bank wind turbines will rely on tonnes of rare-earth elements.

Why is China so dominant?

In part, geology: China has an estimated 40% of global reserves, concentrated in the sparsely populated northern province of Inner Mongolia. But crucially, in recent decades China has also had a far greater tolerance for the environmental damage inflicted by their extraction. It overtook the US as the world’s biggest producer of rare earths in the 1990, and has never looked back. It has also converted its control of the raw materials into dominance of the valuable next steps: turning oxides into metals and metals into products. In 1992 Deng Xiaoping quipped that “the Middle East has oil, China has rare earths”. But as The Economist points out, China’s position three decades on is “as if the Middle East not only sat on most of the world’s oil but also, almost exclusively, refined it and then made products out of it”.

And China has exploited this dominance?

In 2019, at the height of Donald Trump’s trade war with China, Beijing threatened to cut off supply of rare earths. And in 2010 it did create a genuine global supply crisis – and massive price rises – when it cut export quotas to punish Japan over a territorial dispute in the South China Sea, and help domestic manufacturers. However, their “cunning plan was eventually foiled by a combination of market forces and global trade rules”, says Alan Beattie in the FT. Higher global prices made it profitable to open mothballed mines in Australia, California and elsewhere. Smuggling undermined the export controls. And a WTO case brought by the US ruled against China, which largely complied with the decision. Since 2010, China’s proportion of rare-earths production has fallen from 95% to around 75%. However, a big slice of the difference is accounted for by just one player – the Japanese-backed Australian firm Lynas, which owns the Mount Weld mine in Western Australia and a vast processing plant in Malaysia.

But there’s no real need to worry?

Some commentators think the West has learned the right lessons from the 2010 scare. When Arab countries used their dominance of oil exports to push up the price of crude in the 1970s, says David Fickling on Bloomberg Opinion, the “outcome was not a permanent Gulf stranglehold on energy but a rush to diversify”. The same is happening with rare earths. They are important, yes, but political restrictions on exports will only cause major importers to reconfigure their supply chains to be more resilient – and would ultimately prove self-defeating for a Chinese economy that is far more globally integrated than it once was.

What’s the counter-view?

The strategic and security implications mean that the West cannot afford to be sanguine, however, say James Conway and Peter Ackerman in the FT. While “oil is a global industry, minerals processing and electric vehicle component manufacturing is almost exclusively Chinese”. If left unchecked, this dominance will become a “strategic vulnerability” for the US and Europe, especially if they are to hit climate policy goals. “We risk a scenario in which we swap our dependence on a chaotic oil market dominated by Opec countries that do not share our strategic goals, for a reliance on China for our future transportation needs.” A critical mineral supply chain that is less dependent on China is a matter of national security.

Have you heard the one about the commodity in short supply and rising sharply owing to demand from China? It’s the narrative that never stops giving, and this time the protagonist is tin. Tin prices are at highs not seen since 2011. The metal we associate with cans and pan alleys is essential to the rapidly-expanding global electronics industry, semiconductors, the rollout of 5G mobile communication networks and the Internet of Things (IoT), whereby more and more appliances and gadgets, ranging from toasters to self-driving cars, are connected online.

It is a key ingredient of the substance that binds together circuit boards and wiring, otherwise known as solder. Around 50% of annual tin demand is used in this way; it is considered “the glue of metals”. Electric vehicles, where tin is used in lead-acid and lithium-ion battery technology, also mean increased tin demand, as does homebuilding, particularly in the US, where tin is used in chemical stabilisers added to PVC pipes and cladding. There is its traditional use in tin plating and copper alloys, and also its expected future use in such exciting technology as solar photovoltaic (solar electric systems), thermoelectric materials, hydrogen generation, fuel cells and carbon capture catalysts.

A record supply squeeze

Meanwhile the supply side has been hit. A ten-year bear market has discouraged investment in new mines and existing facilities. The largest tin producer is China, but many of its smelters and plants have seen production cuts or closure. Myanmar was another large producer, but thanks to all its political problems exports have fallen. Latin American supply has faced the twin demons of Covid-19 and depleting resources. Supply from Indonesia has fallen by around 40% thanks to Covid-19 and environmental issues. CRU, a consultancy, says supply lagged behind demand by 8,000 tonnes in 2020, making three consecutive years of deficits. The 350,000-tonne market will see a deficit of 2,700 tonnes in 2021, according to the International Tin Association.

Inventories on the London Metal Exchange (LME), where most of the world’s tin is traded, are at record lows, just as China has been stockpiling to meet its goal of self-sufficiency in semiconductors. LME stockpiles stand at little more than two days of global consumption, when a year ago, they were seven times higher. Off-exchange inventory is also thought to be at critical levels. In 2006 environmental analyst Lester Brown said we would be out of mineable tin by 2026. Some might say Brown’s forecast is coming good. I’m not a great one for peak commodity theories: higher prices usually sort a market out and that is what we are seeing. Higher prices mean uneconomic mines can be brought back into production, while scrap tin, recycling and secondary production become more profitable. Tin was one of the first metals human beings ever used, so much so that it has its own day, Thursday, and a planet, Jupiter, associated with it. It is one of the “metals of antiquity”, and people were using it in the Bronze Age more than 3,000 years ago. I rather suspect, despite the predictions of Brown, tin is not yet making its last cry. What we are seeing is just an old-school bull market.

The stocks to buy

It’s hard to buy tin directly. To play this market, one must look to the miners, and pure plays are in short supply. Cornish Metals (Aim: CUSN) – with a market capitalisation of around £17m – is working on two Cornish projects, including the famous South Crofty mine. Longer term, I’m not sure how amenable the environmentally-conscious powers-that-be in Cornwall would be to the reopening of its tin mines. But that doesn’t mean there isn’t a shorter-term play to be had. Note that Cornish tin mines going back into production (still a few years away even if exploration and development go well) has in the past proved a topping indicator.

My number-one tin pure-play producer is Canada-listed Alphamin Resources (TSX Venture Exchange: AFM), worth C$700m, which has low-cost, profitably producing mines in the Democratic Republic of Congo. And if you want a geared penny stock that could make your investment back many times over, (but could also go to zero), look no further than Afritin (Aim: ATM). It is further advanced than Cornish Metals, though this is not fully reflected in its £30m market cap, and is looking to put the Uis project in Namibia, once the world’s largest open-cast tin mine, back into production.

There are exciting by-products such as lithium and tantalum, as well as the blue sky potential of exploration. In addition, Afritin has tin projects in South Africa. If it meets its targets over the next couple of years, and the tin market doesn’t implode, this has ten-bagger potential. But it’s a speculative mining play. What could possibly go wrong? (Disclosure: I own Alphamin and Afritin.)

Commodities have been in the doghouse for much of the last decade. The largest and best-performing specialist natural resources fund in this sector, BlackRock World Mining, has lost 11% of its net asset value (NAV) over the last ten years, although its share price does show a small positive gain. Commodity specialist Goehring & Rozencwajg notes that raw materials haven’t been this cheap compared to US equities since 1920.

Yet there are now signs of an incipient recovery as investors look forward to a global rebound in 2021, when demand for materials and energy products should improve. Iron-ore spot prices gained 33% between 1 January and mid-November; palladium 21%, uranium 19%, and copper 15%. Oil, despite a bounce to $50 a barrel in recent weeks, is still down by 34%, while platinum is down 6%.

Keep an eye on the greenback

Fluctuations in the value of the dollar have an impact on commodities too. Most are priced in dollars, so they tend to rise when the dollar weakens (this makes them more affordable for holders of other currencies) and vice versa.

A rising dollar is often a reflection of a global flight from risk, which implies concern over an economic downturn. As investment boutique Ocean Wall points out, “heavy fiscal stimulus and expansionary monetary policy could see the dollar’s position erode... in 2021, creating a positive feedback loop similar to what happened in the 1970s and 2000s when commodities reached historical highs.”

Lurking in the background is a possible long-term tailwind: the rise of inflation as the recovery picks up speed. Inflation bodes well for raw materials. As overall demand climbs, prices rise, putting upward pressure on the cost of raw materials needed to produce goods. It also takes a relatively long time to increase the supply of most commodities, so demand often eclipses supply in good times.

The most articulate explanation of what might happen came in a recent widely circulated note from Vincent Deluard, global macro strategist at America’s StoneX. In his latest global macro report, he surmises that inflation will be driven much higher by wages and bank credit, which are “finally rising”. The pandemic diverted consumption towards digital goods, which have no marginal cost, but the vaccine will redirect pent-up demand towards “real things”, which face physical constraints.

Yet it’s also important to sound a note of caution in the short term, as commodity prices tend to move erratically. The state of the energy markets shows how commodities can take their time to rebound. Guinness Asset Management argues that the path to higher oil demand might be uneven and vary by region, with much of the developing world still struggling with Covid-19 even in 2021.

As far as industrial metals are concerned, however, the outlook is arguably much brighter. Analysts at investment bank Goldman Sachs note that copper inventories in China have declined significantly.

They reckon that “peak... copper mine supply is fast approaching on the horizon (end of 2023) and is now closer than at any point in the last 20 years. This means the ten-year supply shortfall is now at a record level for copper”.

Smaller metals join the party

Uranium prices, meanwhile, have bounced aggressively while many metals associated with batteries are doing the same. The share prices of lithium producers in Australia have performed strongly as the market started to get excited about the outlook for lithium. Lithium-ion batteries are the key component in electric vehicles.

How investors play all these cross-cutting themes is vital. Many individual commodities can be tracked through individual exchange-traded funds (ETFs). But this is a risky and volatile way of capturing any upward trend – if you’re unlucky your chosen commodity could buck the trend. Nevertheless, I think copper and metals related to the new-energy sector will probably do best.

In terms of actively managed funds, that implies a focus on Geiger Counter (LSE:GCL) or Yellow Cake (Aim: YCA) – both of which invest in uranium – or on a battery-focused fund. In the broader mining sector, the standout fund is the BlackRock World Mining fund (LSE: BRWM), where managers Evy Hambro and Olivia Markham make lots of active decisions about which mining stocks to back.

It offers a useful yield of around 4.5% but it is also heavily exposed to precious metals (including the platinum metals), which account for just under 40% of holdings. Precious metal prices have their own unique dynamic. They tend to fall back in a cyclical recoveries but then rise as inflation starts to spiral.

Another option is the Baker Steel Resources Trust (LSE: BSRT). It concentrates on smaller and mid-cap businesses as well as private companies, all of which should outperform the bigger outfits in a recovery.

That said, its discount is tight at only 5% and it also doesn’t pay a yield. I am also wary of its near-40% exposure to precious metals. The CQS Natural Resources Growth and Income fund (LSE: CYN) pays out a hefty 5%-plus yield and also trades at a big 18% discount to NAV.

The fund is also more focused on mid to small-cap equities than BlackRock World Mining and thus might be more highly geared to a cyclical upswing but, again, precious metals are a hefty, circa 30%, exposure in the portfolio.

Latin America has suffered more from Covid-19 than any other region. The Financial Times points out that Peru and Ecuador have the world’s highest number of excess deaths per capita, while Brazil has the second-largest total of coronavirus deaths. The botched public-health response has also exacerbated the economic impact. According to the International Monetary Fund, a combination of a 9.4% drop in 2020 GDP followed by an estimated weak recovery of 3.7% in 2021 means Latin America will have incurred greater economic damage than any other region in the world.

But there is one bright spot among the carnage: Latin American metals mining looks set to benefit from the pandemic. The economic crisis has pushed investors towards gold, helping the yellow metal reach a new record high. Meanwhile, copper prices have eclipsed pre-pandemic levels, supported by stimulus packages in the EU and China.

I suggested MoneyWeek readers invest in Latin American mining in June 2019, and in October 2019 I looked at Ecuador's mining sector – nearly all the shares I tipped then have risen strongly, with some doubling. The long-term fundamentals I highlighted back then still apply, but the pandemic looks set to give the sector a further fillip, so this is a good time to revisit it.

Profitability is on the rise

The immediate impact of coronavirus was disastrous for Latin American mines. Despite being categorised as a strategic industry by governments conscious of the need to maintain export earnings as other sources of revenue dried up, many mines, particularly in Peru, were forced to close. When they did reopen, it was with elaborate coronavirus measures – such as keeping workers in a seven-day quarantine before they were allowed to start work – that added to costs.

Analysis of 15 gold majors by S&P Global Market Intelligence found that costs increased by 2.5% in the second quarter of 2020. However, the shutdowns cut supply, which eventually led to higher metals prices that outweighed the extra costs. Other elements of the coronavirus fallout, such as lower oil prices and declining local currencies, have provided a further boost. As a result, profit margins have increased for gold and copper miners across Latin America.

Metals were also given a boost by the unprecedented stimulus unleashed by governments in response to coronavirus. In the first few months following the World Health Organisation’s declaration of a pandemic in March, more than $13trn of stimulus measures were announced around the world. For the first time, emerging markets such as Chile and Colombia engaged in quantitative easing (money printing), while developed countries tried everything from wage compensation to boosting infrastructure programmes.

The first direct impact of this splurge of money printing and borrowing was that gold’s value against paper currencies began to rise. In addition to gold’s typical function as a safe haven during crisis, this was also a case of simple arithmetic. The yellow metal is priced in dollars, so if there is a finite amount of gold and a sudden increase in the amount of dollars then it makes sense for the paper money value of gold to increase. Indeed, analysis from the World Gold Council reveals a massive increase in demand for gold from financial products, such as gold-backed exchange-traded funds (ETFs).

That helped gold climb by 34% from the start of the year to August and reach a record nominal price of $2,061. It has since cooled off to around $1,921. Buying an asset when it’s near a record high is never normally a good idea, yet if you take inflation into account then gold is still well below levels it reached in 1980 and 2011. And with stimulus packages set to be extended in the UK, EU and the US, gold should receive more support in the years to come, especially as all this printed money raises the spectre of a nasty jump in inflation. That’s good news for Latin America, which produces 12% of the world’s gold.

Accelerating the shift towards electric cars

The region is even stronger in copper, where it produces 44% of global output. Indeed, just two countries, Peru and Chile, account for 40% of global copper production, a similar level of market domination that 13-member cartel Opec boasts with oil. Here prices will be supported by the green nature of Covid-19 stimulus packages in the EU and China. Improving infrastructure, including telecoms upgrades through 5G networks, will underpin demand for copper – as will incentives to encourage the spread of electric vehicles (EVs).

Covid-19 is therefore accelerating the shift towards EVs that was going to happen anyway. That’s why US electric carmaker Tesla has been the standout stock this year, overtaking Toyota to become the world’s most valuable car firm despite making a fraction of the cars. Analysts debate whether Tesla’s early lead in EVs will be overhauled when the established car producers switch to electric.

But either scenario will be good for the raw materials that go into EVs. A battery-powered EV uses about 83kg of copper, compared with 23kg in an internal combustion-engine car, with hybrids such as the Prius somewhere in the middle. But it’s not just copper that should benefit. Cobalt, nickel and lithium are also heavily used in different parts of the electric car and battery.

To give us some idea of the impact EVs will have on demand for metal let’s run through the numbers for nickel. Today there are between four to five million EVs on the road. By 2030 that figure is expected to have risen to between 40 and 50 million. At present the world consumes 2.34 million tonnes of nickel per year, with just 5% being used in EVs. By 2030 the growth in EVs will have added one million extra tonnes of annual demand.

Latin American mining’s competitive edge

The coronavirus factors I mentioned above apply to miners around the world – so why am I so bullish on those in Latin America? The first is that Latin America, which accounts for roughly 10% of the world’s GDP and a similar share of the planet’s population, produces a disproportionately large quantity of metals. In addition to its strong position in gold and copper, it currently accounts for 20% of zinc output, 51% of silver and 20% of iron ore. As for lithium, set to be another beneficiary of green stimulus, the lithium triangle of Chile, Argentina and Bolivia holds more than 50% of global reserves. The mismatch between the region’s output and domestic demand makes it a natural exporter.

It is also a low-cost producer. A renewable-energy revolution in Chile means miners in the country can now access cheap, green solar power. Peruvian, Ecuadorian and Brazilian operations can access low-cost hydroelectric power. Being powered by renewable energy is especially important for miners producing metals such as copper, zinc or lithium for EVs. As EVs become more common, their environmental benefits will come under more scrutiny and manufacturers will pay a premium for metals with a low carbon footprint. The same applies with social responsibility. Mining investors sometimes complain that Latin America’s myriad rules and regulations hold up new projects.

But at least that ensures that legal mining complies with global best practices. For example, much of the cobalt that Tesla or Apple currently use in their products is mined in the Democratic Republic of Congo, where child labour is rife. That doesn’t happen in legal Latin American mines, giving cobalt from the region an advantage in the market place.

Latin American taxes are also surprisingly competitive. For example, Chile has a lower fiscal burden for mining companies than Australia, while Peru and Ecuador have cut taxes in recent years. Indeed, Latin American countries have climbed up the rankings of the influential Fraser Institute’s Annual Survey of Mining Companies. Chile and Peru are the top-ranked in Latin America, while Brazil and Ecuador have made the most dramatic improvements in recent years. The region has steadily increased its “investment attractiveness” score in consecutive surveys, which is impressive when you consider that it has basket cases such as Venezuela and Guatemala weighing it down.

Huge potential in mega-deposits...

In mature mining jurisdictions – say, Canada, Australia or even Chile – you tend to have older deposits that have been mined for many years or even decades. Over time the grade of these deposits falls, meaning miners have to dig and process more ore to get the same amount of metal, which leads to rising costs. What’s exciting about Latin America is that it is home to some of the world’s latest discoveries of mega-deposits. These newly-found ore bodies have much higher grades, ensuring low-cost production when the mine comes online.

And more discoveries are on the way. The Andes copper belt has given Chile and Peru the world’s first and second-largest reserves respectively. Yet political and social factors have prevented the exploitation of large stretches of the Andes in Argentina and Ecuador. Now Ecuador has rewritten its mining code and enticed more than a dozen mining majors to set up offices there, while smaller explorers are searching for copper and gold. London-listed copper and gold developer SolGold’s recent Ecuadorian discovery, Alpala, due to begin production in 2025, could become the world’s largest underground silver mine, the third-largest in gold and sixth-largest in copper.

...implies vast scope for growth

And that’s just one discovery. To give some idea of the potential, mining accounts for 15% of GDP in Peru and Chile, but just 1% in Argentina and Ecuador. Given that they all share the same metal-rich Andes (indeed Argentina’s stretch is the largest of the lot), it seems fair to assume that there are plenty more discoveries waiting to be made in Argentina and Ecuador. Even in Peru, which has a well-established mining industry, there are $57bn-worth of stalled mega-projects – defined as deposits awaiting the green light for construction or held up by social protests or bureaucracy.

In recent years Peru has doubled its copper production to 2.5 million tonnes per year, making it the world’s second-largest producer. However, if it were to exploit all of its discovered deposits it would be able to double output again to five million tonnes and keep that rate of production going for 40 years without any new discoveries. That matters because analysts predict a crunch in both copper and gold supply in the next few years – perhaps as early as 2023. According to S&P Global Market Intelligence, 2010 to 2019 was the worst decade for copper discoveries since 1990, contributing only 16 major discoveries to a total of 224 over the last 30 years. The commodity-price crunch at the start of the decade forced majors to impose financial discipline and stay away from risky greenfield projects. As a result, “the sector faces a drop-off in mine supply in a decade or so, with few major copper developments entering the project pipeline”. Something similar happened in gold, where majors’ gold reserves fell by 26% between 2012 and 2017. Given that it takes between 15 to 20 years to take a gold or copper deposit from discovery to production, mining companies will focus on jurisdictions such as Ecuador and Peru, which already have plentiful resources waiting to be developed.

The prevalence of abundant deposits, high ore grades and low energy costs mean that Latin America will make the most of the coming metals boom. EVs may take decades to become a significant demand driver for metals such as cobalt, zinc, nickel, lithium or copper, while the inflation likely to boost gold could take time to materialise. And in the intervening years the prices of these metals is sure to fall as well as rise. But Latin America’s competitive advantages means that its miners will be best able to ride out the lows and benefit from the highs. We look at some of region’s best miners below.

What to buy now

All of the companies I tipped in my Ecuadorian mining story in October 2019 have risen by between 50% and 100%. I will now focus on just two. The first is Canada-listed Lundin Gold (Toronto: LUG), which since I wrote my piece has put its flagship Ecuadorian gold deposit into production – the country’s first large-scale gold mine. Now that Lundin has an operating mine it is a less risky prospect. One remaining risk is community protests, but here the firm has gone out of its way to keep neighbours onside. It even shut down its mine during the crisis – despite the government imploring it to remain open – out of respect for local concerns that its trucks would bring the virus to their remote communities.

Up by 84% since I tipped it, Lundin has more to offer as there is plenty of exploration potential around its gigantic Fruta del Norte deposit. And as Ecuador establishes itself as a mining jurisdiction, the shares will be perceived as less risky.

SolGold (LSE: SOLG) is the only UK-listed Ecuadorian pure play. The firm’s main target is 85%-owned Alpala, which will become the country’s largest mine when it begins production in 2025. Despite its name, SolGold is more of a play on copper than gold. Not possessing an operating mine makes SolGold riskier than Lundin, but it also has more upside. It is the largest exploration concession-holder in Ecuador. The share price has increased by 60% since the end of September on the back of recent discoveries at other targets. The big risk is getting the financing together to build its multi-billion dollar mine. But given the shortage of quality gold and copper projects it seems likely that majors or the market will support it. Indeed, Australian majors BHP and Newcrest have already bought big stakes in the firm. Even though it has doubled since I tipped it in October 2019, at the current price of 42p you will still be getting a discount on the 45p per share that BHP paid in 2018. Elsewhere in Latin America I would advise taking stakes in a handful of miners to diversify your risk. On the safe end of the spectrum is Fresnillo (LSE: FRES), the world’s largest silver producer and Mexico’s second-largest gold producer. It is up by 51% since I tipped it on 27 June last year. It’s a well-run major with lower debt and production costs than its peers and remains a solid way to play Latin American precious metals.

A new tip is Yamana Gold (LSE: AUY), which has mines in Chile, Brazil, Argentina and Canada. It has just floated in London. CEO Peter Marrone founded Yamana in 2003 and sees it as his baby. As a major shareholder he has “skin in the game” and has done an incredible job of building up an Americas-focused gold major.

At the other end of the precious-metal scale is tiny penny stock Rio 2 (Calgary: RIO), which is developing a gold mine in Chile. Its CEO and major shareholder is Alex Black, a man well respected in Latin American mining for turning one of his previous tiny explorers into a billion-dollar goldminer. The stock has jumped by 107% since I tipped it. But if Black repeats his successes it will go much higher. A similar small base-metals play is Brazilian nickel and cobalt developer Horizonte Minerals (LSE: HZM).

Antofagasta (LSE: ANTO), the copper giant, is up by just 9% since I tipped it. Yet the long-term rationale for owning this low-cost copper producer remains. Half of its output comes from its Los Pelambres mine, which is in the bottom quartile of production costs of copper mines globally. Peruvian miner Buenaventura (NYSE: BVN) was my only disappointing pick, down 24%. Being based in the world’s most severe coronavirus hotspot wasn’t good for a firm with nine mines dotted around the country. Now is a great buying opportunity.

The prices of key industrial metals have been enjoying a “spectacular rally”, says Buttonwood in The Economist. Copper has jumped by about 25% since the start of April, while iron ore has delivered 12% gains for the year to date.

Commodity bulls have China to thank for this rapid recovery, says Buttonwood. Steel blast furnaces were running at 92% capacity in the first week of June, which is above normal levels. For all the talk of the Middle Kingdom’s shift to a consumer economy, the authorities seem happy to use the old method of stoking a construction boom when a round of stimulus is needed.

Iron ore has emerged in recent years as the world’s “second most important commodity behind oil”, say Julien Hall And Fiona Boal in the Financial Times. The S&P GSCI Iron Ore index has more than tripled over the last seven years while many other metals have stalled. Now more liquid futures markets are making the steel ingredient easier than ever to trade. That makes iron ore an attractive “proxy” investment for those wishing to bet on the Chinese manufacturing sector without buying in directly. The current metals rally is also being driven by supply constraints, says Myra Saefong in Barron’s. Mine closures in pandemic-hit Latin America mean less iron ore and copper reaching global markets. Yet copper prices may struggle now amid a highly uncertain few months ahead for the global economy, says Johann Wiebe of Refinitiv.

The best bet may well be silver, says Taki Tsaklanos of InvestingHaven.com. As both an industrial and a precious metal it stands to gain even if another virus wave triggers renewed lockdowns. That is likely to mean even more emergency money printing, which is a boon for precious metals. Currently trading around $17.80/oz, he expects silver to approach $21/oz before the end of the year.