Cu in this week’s Stock Tip!

This week’s Stock Tips from Vikingen and Aktieutbildning.nu!

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Recommended buy week 40: Copper (chemical symbol Cu)

Copper is now trading at around USD 10,301

Target 13 000 USD
Stoploss: 9 600 USD

Why is now a good time for Copper?

Technical analysis

See also the diagram below. Please note this is not advice to buy, this case is published for educational purposes.

• Strong upward trend.
• Large rectangle/triangle formation, since March 2020, now breaking upwards. We are moving from consolidation and low volatility to hopefully rising price and higher volatility.
• Vikingen’s Multimodellen, Kursband (weekly and monthly) and other models give a “green” light and a buy signal.
• Other metals such as gold and silver have risen sharply and are now approaching their peak? More industry-focused metals, such as platinum and palladium, have already started strong upward trends.

Strengths

• Essential for the transition: Copper is a critical metal for electrification. There is no cost-effective substitute in wiring, electric motors, transformers and batteries. An electric car needs 3-5 times more copper than a gasoline car.
• High demand: Demand is stable and growing structurally thanks to the deployment of renewable energy (solar and wind) and smart grids.
• Good recycling: Copper is one of the few metals that retains its value almost regardless of how many times it is recycled. A large part of the supply comes from recycled materials.

Weaknesses

• Geographical concentration: Much of the world’s copper production is concentrated in politically unstable regions such as Chile and Peru. This creates a high sensitivity to political conflict, strikes and regulatory changes.
• Price volatility: Copper prices are notoriously cyclical and extremely sensitive to the global economy. Downturns in China (the world’s largest consumer) can quickly bring down the price.
• Declining grades in mines: Existing large mines have gradually reduced the copper content of the ore, making extraction more expensive and energy-intensive.

Opportunities 

• Global electrification: Increased deployment of electric cars, charging infrastructure and storage systems (batteries) will drive massive, decades-long demand.
• New smart grids: Modernizing the world’s electricity grids to handle renewable energy production requires huge amounts of copper.
• Technological progress: Development of more efficient methods (e.g. biotechnology) to extract copper from low-grade ores.

Threats

• Substitution risk: In some non-critical applications, copper may be substituted by aluminum, especially if the price of copper rises too quickly.
• Environmental regulations: Increased environmental requirements and difficulties in obtaining a Social License to Operate from local communities can lead to costly delays or halting of new mining projects.
• Long lead time: It takes around 10-15 years to bring a new large copper mine into full operation, making it difficult for supply to keep up with rapid increases in demand.

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