Donald Trump’s US election win has not only been great for stocks, but the dollar too. But a surge in the dollar has weakened critical metal prices, thanks to the negative correlation between the dollar and commodity prices plus Trump’s tariff threats on China – a country that dominates commodity markets.
So, does that mean you should ignore commodities in 2025?
In my view, no. Here’s why…
US tariffs won’t put a damper on China’s global infrastructure, tech, energy and agriculture development projects
According to the US and European Tax Foundation’s Tariff Tracker, Trump’s first administration imposed nearly $80 billion in tariffs back in 2018 and 2019. But those did very little to slow the Chinese economy.
That’s because China has a firm foothold in many countries, which means it can quickly expand its manufacturing empire.
Just recently, China signed over $10 billion in agreements with Indonesia focusing on infrastructure, green energy, digital technology, and agriculture. And China revealed a $51 billion investment over three years in Africa for infrastructure projects.
And each one of these projects place a massive demand on various commodities and one critical metal, in particular.
Copper!
Copper has shaped human history and civilisation for millennia – but none more so than the 20th century with the rise of electricity.
As we harnessed electrical power, copper became an indispensable material, crucial to our energy systems and modern technology.
And its growth trajectory in the 21st century has exploded. Thanks to demand for the metal created by mega trends such as electrification, AI and data centres.
In a recent BHP report, “How copper will shape our future,” the miner estimates copper demand will see up to 70% growth. 22.1 Million metric tons over the next 25 years.
To put that into perspective…
The world’s largest copper mine – Escondida has a maximum annual production capacity of 1.35mt. That means, meeting the 22.1mt demand would require the equivalent of 16 new copper mines the size of Escondida, operating at full capacity.
The reality is, such discoveries are rare.
In fact, in the same report, BHP revealed copper deposits have become increasingly challenging to locate and extract. In other words, copper mines are now harder to develop than ever before.
Even if a new mine is discovered, it’s typically found deeper underground. That means, accessing this resource becomes more costly and complex.
Sure, recycled copper can help but it won’t be sufficient on its own. We need lots more primary supply.
So simple demand supply metrics dictate prices must rise to stimulate what BHP estimates is a $250 billion investment in the copper sector over the next decade.
Why Trump’s first presidency could provide a clue to Copper’s price direction…
Copper’s escalating supply shortfall is a recipe for higher prices. That’s why I think 2025 will be a year of a copper price recovery.
History backs this up too.
Consider at the start of Trump’s presidency in 2017, copper traded for just $2.50/pound.
By the end of his term in office, copper prices had risen to US$3.50/pound – around a 40% gain.
So, ignore this critical metal in 2025 at your peril. You could miss out on a significant profit-opportunity. If you want to stay in the loop where this market is headed and what to buy, then make sure you’re signed up to South African Investor!
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