The Case for Copper as the Top ‘Bullish Energy Transition Trade’

Copper is caught between the old Chinese super-cycle and the new energy transition super-cycle, with fund managers uncertain about the direction it will take.

China's commodities sector, including coal mining and metals production, is experiencing declining profits due to the worsening property crisis and economic slowdown, with steel producers being the hardest hit. However, there is potential for growth in metals firms linked to the energy transition, particularly in China's green copper consumption driven by electric vehicles and renewable power.

Copper prices may experience a significant price spike over the next three years due to its critical role in electric vehicle batteries and other green energy technologies, making it a potential alternative to oil as the world moves away from fossil fuels.

Clean energy systems, such as wind and solar, require significant amounts of metals like copper and zinc, with offshore wind using the largest amount of metals, including 8,000 kilograms of copper per megawatt of energy, highlighting the demand for these metals in the transition to clean energy.