“I think going forward, the next leg of this bull market is really going to be driven by supply,” said Adam Rozencwajg of Goehring & Rozencwajg.
The copper price has reached all-time highs this year, but one expert believes the red metal still has plenty of room to run during the current cycle.
Adam Rozencwajg of Goehring & Rozencwajg said copper could rise as high as US$15 per pound.
“I think that there’s a very, very strong bull market ahead,” he said, explaining that after bottoming in the late 1990s, copper rallied until 2011 to 2012, rising seven or eightfold from its lowest to highest point.
“This market bottomed in 2016 at US$1.45, US$1.50,” Rozencwajg continued. “If you apply that same type of move this time … then I believe we could definitely be over US$10, maybe as high as US$15.”
The Investing News Network previously spoke with Rozencwajg in May 2018, and he noted that since then most of the copper demand-side factors his firm was anticipating have come into play.
Those include robust demand from China and India, as well as an increased understanding of copper’s role in green energy. “Now I think going forward, the next leg of this bull market is really going to be driven by supply as well,” he said, commenting that there are major problems in that regard.
Notably, said Rozencwajg, copper head grades have been steadily declining, while over the last 10 to 15 years new copper discoveries have reached an all-time low.
At first those factors were mitigated by a high copper price, which allowed miners to add to their reserves by using lower cut-off grades in their calculations. However, when the copper price began to fall that became less feasible.
What does that mean moving forward? Rozencwajg said investors may turn to companies that still have high-quality copper reserves left in the ground. “The companies we hold are typically the names that we believe do have high-quality undeveloped, or in the process of being developed, projects,” he said.
Aside from that, he suggested that an increase in copper exploration would be beneficial. However, he noted, “Whether or not that’s successful or not I think will be an interesting thing to see.”
Watch the interview above for more from Rozencwajg on copper supply, demand and what’s next.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.