Copper steps out of the shadow of gold and silver in this wide‑ranging conversation with StoneX’s Natalie Scott-Gray and Summerhaven’s Kurt Nelson. Jeff digs into why “Dr. Copper” sits at the heart of electrification, AI data centers, EVs, and defense, and how underinvestment in mines, fragile supply chains from Chile to the DRC, and China’s smelting dominance are setting the stage for structural shortages. Natalie breaks down the real fundamentals: tariffs, sulfuric acid bottlenecks, strategic stockpiling, and the difference between visible and hidden inventories, while Kurt connects it all to macro, inflation, and why investors may be underestimating copper versus the miners. Along the way, they hit on rare earths, environmental trade‑offs, and what rising retail interest in copper bars might signal about the next phase of the metals trade. SEND IT!
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From the Episode:
The Hardest Trade Is Holding the Thing That Doesn’t Hug You Back
The Derivative episode: Unlocking the Commodity Risk Premium with Kurt Nelson of SummerHaven
Check out the complete Transcript from this week’s podcast below:
Jeff Malec 00:09
Welcome to the Derivative by RCM Alternatives. Send it. Hello there. Welcome back everyone to The Derivative, brought to you by RCM Alternatives, where we’re just a few weeks away from launching the new website, which will better highlight things like our SMA platform, our work with ETFs, and more. We’ll still have the blog posts up there. Just came out with a new one this week on how trend following doesn’t work well with our variable rewards desire hardwired into our brains, so go check that out, RCM alts.com/blog On to this episode, where we talk not that shiny metal, nope, not even that other shiny metal. It’s not the McDonald’s, it’s not the Burger King, it’s the third place, Wendy’s of metals, copper. We’re talking where they dig it up, where they refine it, what we use it for, and everything in between with Kurt Nelson of Summer Haven, who runs the CP XR X Copper ETF, and Natalie Scott Gray from Across the Pond, senior metals demand analyst at Stonex. Send it. All right, everyone, welcome back. We’re here with Natalie and Kurt, how are you guys?
Kurt Nelson 01:22
Very good, Jeff. Thanks.
Jeff Malec 01:23
Thanks for coming on. We did a pod with Kurt about a year or so ago, so if you want his bio and all that good stuff, including a little history on his nice commodity timeline behind him, there, go listen to that podcast. We’ll put it in the show notes, but Natalie is a first timer Natalie Scott Gray, is it? Do I say Natalie Scott, or that’s your last name, Scott
Natalie Scott Gray 01:46
Gray? Together, just to make it
Jeff Malec 01:48
okay. So I’m just gonna stick with Natalie to keep it easy. So Natalie, first timer here. So give us a little background, how you got into this crazy commodities world.
Natalie Scott Gray 01:57
So my career began probably when I was studying, um, I did a master’s degree in chemistry, and this is back in 2010 11, so showing my age, where I was using rare earths, and that was the time. There’s a lot of attention on them, having then done internships in Hong Kong, working for natural resource investment companies. I knew I loved the metals world, so my first, you know, real part of my career was six and a half years spent with GFMS in London, as well, and there I learned how to do detailed supply and demand models in order to do price forecasting, but I was actually largely on the precious metal side, and then I joined Stone X about six and a half years ago, and I’ve been doing analysis here, but it’s definitely different from just doing supply and demand models. In theory, you know, working with the trading with a breaking house on an intra-day basis, where a price is going to go all the way out to 10 years, 20 years. You know what’s going to drive these prices, really looking at not just the fundamentals, but the impact on the macro, particularly, what are investors doing to prices? Obviously, tariffs have kept us very busy, but I’m based in the London office, here in Moorgate as well, with Stonex.
Jeff Malec 03:14
Love it. I didn’t know Stonex had a London office, but there you go. Um, and Kurt, give it, you’re there at the office, where’s the office? Give us a quick rundown.
Kurt Nelson 03:23
Sure, I’m in, in our home in Stanford, Connecticut. You know, we’ve been here. We started the firm here in 2009 You know, I look back on that, and I think I could have started a PE firm or gone into, you know, tech or chips, micro, you know, micro processors. Instead, I did commodities just in time for a 10 year bear market, but
Natalie Scott Gray 03:42
this should
Jeff Malec 03:42
have been in PE. Those guys,
Kurt Nelson 03:44
they’re PE. Yeah, I know that, or truck driving, like my mom said. But this has been, you know, this is what we do, and we’re really passionate about, as you know, you know, we, they couldn’t shake us from this market, even with the tough times, and if anything, we’ve just recommitted. So we would do diversified commodities, metals and copper, in particular, are a focus of ours, and they have been for a while, and yeah, so that’s we’re busier than ever right now since we last talked.
Jeff Malec 04:10
And Natalie, if you hadn’t come into this side of the world, would you be like making what do they call them now? The not fake diamonds, but the diamond, yes, lab grown. Sorry, I couldn’t find the name, but is that a metal or no precious element?
Natalie Scott Gray 04:27
No, it’s not a metal, it’s carbon. I think I’ll stick to the metal side now. I mean, looking what’s happened with diamond prices, unfortunately, I think it’s a great invention, lab diamonds for those who want more accessibility, but it’s definitely transformed the market, but that’s what happens. I mean, if we look at nickel, it’s a similar type of case where both supply and demand sides in the space of a decade have transformed, so always respect the unexpected. I think
Natalie Scott Gray 04:59
- It,
Jeff Malec 05:07
so wanted to come on, talk copper. I feel like everyone’s talking rare earths, and we did a pot on uranium earlier this year, is kind of a hot topic, but good old copper kind of gets forgotten about, like the penny. We retired the penny here in the US, so let’s start big picture. Nadia, we’ll go back to, of like, why is it important. What are we doing with copper? Has it always been this important? Is it more important than ever? I’ll let you just take it from there. There were like six questions in there, but
Natalie Scott Gray 05:32
yeah, of course.
Jeff Malec 05:33
What’s what’s your macro take on copper? I
Natalie Scott Gray 05:35
mean, copper has always been important, you know. It goes right back through into history, just even think of the Roman period, but I mean, copper now is to answer your question, more important than ever. It’s a metal that’s got unique characteristics, it’s got very high electrical conductivity, just under that of silver. So, silver is the best if you’re looking at a periodic table, but silver is much more expensive than copper, but it’s really these characteristics that it has, is that it’s a universal metal. So basically, we call it actually Dr. Copper in the market, because of its universal applications. It’s used in construction, it’s used in transport, industrial machinery, and more and more now, why it’s so important, because of its electrical conductivity, is that it can be used in power grid infrastructure. So, when now you hear the word AI, you hear data centers, it’s used in electric vehicles, so areas like electrification, digitalization, new green energy, renewable energies, all of these kind of end-use sectors, you can’t really substitute copper out for a lot of them. There’s torques in the market that aluminum sometimes is substituted for copper, but really in a lot of instances you just cannot replace it with anything else. So it is absolutely at the backbone of the industrial world, I would say
Jeff Malec 07:03
that was all just an excuse to have you say aluminum. The Brits say it so much nicer, aluminum. And so, Kurt, what’s your thought, Dr. Copper? To me, well, two things. One, Natalie, quickly, what’s the difference between conductivity and lateral conductivity? Like, does that do something different, or that’s just what we call
Natalie Scott Gray 07:20
- What from electrical conductivity? You mean first, last?
Jeff Malec 07:23
Yes. Or what? We maybe I miss her. Miss
Natalie Scott Gray 07:26
conductivity.
Jeff Malec 07:28
Oh, I heard you say lateral. I’m like, ooh, what’s
Natalie Scott Gray 07:30
that gonna catch me out? I wasn’t sure what you meant either.
Jeff Malec 07:34
So just right, it’s a good conductor. Silver is better, but much more expensive and harder to come by. And Kurt, I’ve always thought of it as Dr. Copper, because it’s kind of a macro tell, right? It’s used in all those things, so if the economy is booming, copper is going to be copper demand high, and vice versa, so people would always kind of use it as a predictor. What’s your thoughts? Is that still the case? Have you ever used it like that in some of your models? Well, it’s certainly associated with economic productivity and economic activity, that’s why they call it Dr. Copper. So, the doctor is not that it’s a medical doctor, it’s a doctor in economics. So, you know, you can, you can read the tea leaves about where, where people think the global economy is headed by the price of copper. I think that talks about the demand side, but of course, copper is, we think, the most important thing about commodities generally are their inventories, and we’re sometimes asked, well, how do
Kurt Nelson 08:30
you forecast supply and let’s separately forecast demand? I said, well, we look at all of those, but if you think about where they intersect, it’s in inventories, because you could have demand go up, or you could have supply go down, or both, and I fear that we’re going to have, we’re getting like the, the double whammy here, we’re going to have greater demand for copper, partly because of the the new energy transformation towards renewable, towards electrification, towards electric vehicles, maybe there’s been some slowdown, particularly in the US, as we become anti, you know, wind farms and anti-electric vehicle at the administration level. Consumers are voting with their dollars, though. We’re buying EVs, you know, we’re still interested in that, in that reliability, that additional clean source of energy. So that’s that shift is still going to happen, and that was been there’s been an accelerant that I couldn’t foresee, which was this, I think 10s of billions understates has made hundreds of billions that’s been committed globally by private industry and by governments on data centers and AI, and the, you know, the, as Natalie said, it’s like having you need a pipeline for electricity, just like you need a pipeline for gas or oil, and so you have to build them, and those things are made. There’s a huge need for copper, you know, in an EV itself, you know, in the, in some of these renewable energy sources, you need copper, but then you need to transmit it, you need to get it from A to B. I think that the the. Demand for copper was already outstripping supply, and now it’s just, you know, to borrow another commodity spread, you know, gasoline on fire, like we, our demand is just going to become explosive, and a whole separate issue now is going to be the, you know, the closure of the Straits of Hormuz, that’s happened, it’s been coming up in three months, and we don’t have resolution yet, and I think that that’s also interestingly going to affect copper as well.
Jeff Malec 10:26
Let’s stick a pin in that one. We’ll come back to that one. Thank you for calling them wind farms, or hopefully you’re going to say wind turbines. It drives me crazy when certain people call them windmills, like they’re not – they’re not milling anything, they’re big huge things generating energy. There’s no milling involved. Stop calling them windmills.
Kurt Nelson 10:42
That’s right.
Jeff Malec 10:44
And then, but don’t you? Does anyone have thoughts like the data center has become polarizing? People don’t want them in their backyards. I was at a conference in Puerto Rico. They’re talking about putting one underwater offshore, so it’s like, are we just gonna.. I mean, that kind of answered the question. Me, we’ll just put them out of the way. Oh, you don’t want it in your backyard next to the kids’ school. We’ll move it into the desert in Utah, or whatever,
Kurt Nelson 11:07
an electrified data center, which is not only underwater, it’s under salt water.
Jeff Malec 11:10
Yeah, like
Kurt Nelson 11:12
what could go wrong?
Natalie Scott Gray 11:14
And then
Jeff Malec 11:14
Natalie, I hadn’t thought of it that way, like, so it’s both in the electric motors and whatnot, but it’s also the transmission, the wires we’re talking about, and that’s an actual fun fact, right? We used to call copper the symbols HGC, old school, and it was the wire that I used to work with, an old school broker, and he’d call in an order, he’d be like, we need to buy 10 copper the wire to delineate it, I think from the LME copper, I don’t
Natalie Scott Gray 11:39
know, or the majority of products, if you look at copper, it’s wires and rods of copper, about 70% goes into that,
Jeff Malec 11:48
really, which is just for transmission into a whole load of different
Natalie Scott Gray 11:52
applications, but I would say looking particularly ahead, then it’s the power transmission, which is the strongest driver for copper at the moment, so it depends on how you look at it. Because AI for data centers, it’s still less than 2% of copper demand at the moment. It’s very fast growing, about 30% a year in volume terms. It’s very small, so I’m sure we’ll get on to what the fundamentals for copper and prices will be driven by, but I think there’s a lot of maybe misconception sometimes in the copper market for what’s driving prices that the headlines don’t necessarily put out there in the newspapers that especially retail people will be reading,
Jeff Malec 12:35
and it doesn’t matter. My simple 10 brain here is thinking, like, well, if we bury the cables, it’s still going to be copper, right? If it’s under sea, it’s still copper. If it’s up in the air,
Natalie Scott Gray 12:44
yeah. And that’s where you can have the argument with the substitution for aluminum. That’s probably one of the big areas where copper is getting substituted, but if you are going underwater, or particularly kind of in cities where you absolutely need the reliance of that conductivity. Then that’s why copper wins out in our argument.
Jeff Malec 13:07
What is the aluminum issues? Just doesn’t,
Natalie Scott Gray 13:09
it’s just not just doesn’t have the same conductivity as copper.
Jeff Malec 13:14
So you need to like concentrate it more to get a similar effect.
Natalie Scott Gray 13:18
Yes, so it could be, could be more, they could be thicker. I mean, aluminum prices are actually going off the charts at the moment as well.
Jeff Malec 13:28
And then, how do we separate this all from rare earths? Would you throw it into the.. I mean, it’s not a rare earth, there’s tons of it, right? But
Natalie Scott Gray 13:34
of aluminum or copper,
Jeff Malec 13:37
copper.. sorry,
Natalie Scott Gray 13:38
I mean, then I would say they’re completely different things when we’re looking at rare earths, you know, China and Inner Mongolia, not only do they have the majority of the deposits there, but it’s also the downstream processing, so that is similar when you’re looking at copper, but when you’re looking at rare earths, you’re looking at heavy rare earths, they are radioactive, or they have that material within them, so it’s a very different type of kind of downstream processing you’re looking at when you’re trying to refine rare earths,
Jeff Malec 14:18
and let’s get into that for a minute. So, you have to dig it out of the ground. We’ll come back to that, where all these places are, but then it has to be processed, has to be refined down into usable, well, it has to be made into wire, a right. But what does that refining look like? That’s,
Natalie Scott Gray 14:32
I mean, so the background for copper really is that two thirds of all copper is mined in South America, so predominantly in Chile and in Peru, then the biggest producer on the smelting side is China. It’s got absolute dominance, so it produces something like 58% of the world’s copper. So a lot of the ores or concentrates are shipped over to China. They will then smelt them. And refine them and then export either products or the refined copper back to the rest of the world, so pretty much with the majority of base metals, China is the most important market, because it’s not only the biggest producer, but it’s the biggest consumer of these metals as well, and the dominance of China, and the fact that a lot of these smelters can be backed by the state means that if we have situations where profit margins aren’t particularly favorable for smelters, which is something that we have, because there’s not a lot of refined, sorry, there’s not a lot of mined copper coming out, the mining side has got a lot of supply risks in it, China can still be producing refined metal, but smelters in the rest of the world start to struggle. So, the copper backdrop really on the mining side is that there was huge underinvestment for decades into the mining side, so there aren’t enough projects in the pipeline now for forecast demand. So, big picture, we would expect that the copper market will start moving into structural deficits by 2030 and in places like South America, it’s not just that you, you’ve had, in a case, in, let’s say, lithium or cobalt, or the price of copper has suddenly gone up, that you know there’ll be more investment in mining, and we will get this material out. The average timeline from kind of first discovery to first metal production for a copper mine has been extended from something like 12 to 17 years, because of permitting issues. The fact that all grades aren’t particularly good, there’s a lot of issues getting water availability, you know, mining it needs a lot of water to these processes to go through. You have a lot of social, political unrest as well. So, the mining
Jeff Malec 16:49
salt water, normal one,
Natalie Scott Gray 16:51
exactly not salt water. The largest deposits in the world are in the Atikama Desert in Chile. So, at high altitudes continues the challenges on the mining side, and then even on the smelting side, have only accelerated dramatically. I would say, in the last decade,
Jeff Malec 17:08
then I think you.. sorry, go ahead. I was gonna say, you probably have on your wall there the cure for high prices is high prices motto somewhere on your wall there, like, is that we haven’t gotten there yet, the vice versa of that, the prices haven’t got high enough for them to start these projects.
Kurt Nelson 17:24
Yeah, I think there’s the near term, medium term, and long term, and I mean, even before this, the this conflict in this in Iran, and in the straighter for moves, the we were very constructive on metals generally, because of the this, this is like a slow-moving train wreck that’s coming, and we’ve known about it for a while, that we have. There’s no fracking, there’s no, like, we got a shortcut in the US. We used to, you, if you’ve been around as long as I have, you remember stories about tight oil, gonna, or not, tight oil, excuse me, we’re, we’re gonna run out of oil, sorry, that there’s gonna be oil, peak oil, sorry, peak oil, that you know the production in the Middle East is getting less and less, and we’re going to be importing more and more, and this is a crisis coming. And then necessity is a mother of invention, and we invented something, which was horizontal drilling and hydraulic fracturing in the US. You can’t do it everywhere, you can do it where you have access to water and you have access to gas and oil that are that are locked into the geological formations, so there’s places like in China where you can’t do it, but we can do it across the US, and it’s being, it’s being used elsewhere outside the US now. There is no shortcut in metals, it’s still old school, you know. It says, as Natalie said, it takes, it doesn’t take just years, in some cases over a decade to locate permit site, and then it’s the capital intensity. There’s billions of dollars to open a new mine of any kind of large scale. Those dollars were flowing into tight oil, into tight gas, or into timber and farmland by investors who we work with. There wasn’t any kind of excitement or interest in the metal, so it was under invested in the 2010s So we’re coming up on this, that’s why I call it a slow moving train wreck. Is there’s no urgency to it, but it’s going to be bad, and it’s going to last a long time to fix. And now, in the midst of that kind of, we had a medium long term constructive view on metals. I think that Hormuz has kind of distracted the world from this, this slow-moving supply shortage
Jeff Malec 19:27
without, because we have shortage.
Kurt Nelson 19:29
Yeah, we have these crises of, you know, oil, gas is $6 a gallon, and you know, and we worry about other things, like, you, it’s bad if we don’t have copper, but it’s not like food or water, and Maslow’s hierarchy, this, the Straits of Ramuz are infecting, are going to affect fertilizer availability, which is food, and you know that has a lot of consequences. The Arab Spring happened because of a wheat shortage, you know, that was so the consequences here are big, but nothing has been fixed, you know, I think um. A couple examples that Natalie might have further thoughts on, but Cobra Panama, this is one of the biggest new copper mines opened in the last, you know, five years. Huge investment, foreign investment into Panama, an amazing mine, and it’s after years of development and financing and staffing, they’re ready to go, and they get a new political leadership in Panama that decided that the deal was wrong, not fair. So they halt, they forced production to halt.
Jeff Malec 20:32
Basically, I don’t think it’s been
Kurt Nelson 20:34
nationalized. I think it’s on the bubble. I don’t know what most recently, but I think it was just a, it was a wake-up call about what can go wrong with a new mine. Do you have.. do you know where that’s gone? Natalie,
Natalie Scott Gray 20:45
I mean, so really the issue there was environmental, what the mine would do with the country, despite the fact that the revenue generated for it and the exports for Panama for a very large portion of GDPs of the country, I mean, in our view, so it’s about 1.6% of global output, Cobra Panama. We do expect that the mine will come back on, maybe within a year, if indeed they get, you know, the political go-ahead. Now, with a situation that we have with the copper, with there just not being enough, the fact that we do have a new mine, could all grades, it seems inevitable that it will have to be supported at some point, and the benefit definitely in Panama would be grades. So we do expect that mine to come on, but it’s coming off, I can tell you, absolutely nobody in the market was expecting that to happen, so it just highlights again the very fragile supply situation for copper, particularly not only because there’s only a handful of countries that really produce it on large scale, but the risks that you have now, and you know the second biggest producer at the moment has taken over from Peru is now the DRC, and of course you know I don’t have to tell you the risks associated with you know politics,
Jeff Malec 22:12
Democratic Republic of Congo,
Natalie Scott Gray 22:13
yeah, or you know artisanal whining, and so the situation we had with copper at the back end of last year is that we were meant to see a real acceleration in mine output with new projects coming online, particularly from the DRC, but we had just a handful – flurry is probably the better word to say – of disruptions that happened that were you can’t control, so there was flooding that happened in the DRC for the Camila Kaku mine, which meant that output dropped by about 28% We had earthquakes in Chile, so we saw the El Tiente mine have lower production, and we had issues again, mudslides in Indonesia, Grasberg, huge mine there, owned by Freeport. They actually integrated, so you’d think it’s safer that you have a mine and then you have a smelter that feeds off that, but in fact we saw the reverse, because the mine had to, you know, temporarily shut, and then the smelter didn’t have enough material, so even out of, you know, human errors that could happen, you know, we’ve seen so many disruptions that have happened in the corporate supply chain that you just can’t predict, so only having a few countries that produce this level of material, and the backdrop we have just shows you how fragile really the situation is.
Jeff Malec 23:26
When I think of cocoa, right, that’s the same situation, basically comes from two countries, they had drought, and look what happened, like supply gets erupted and rockets higher. Why don’t these countries, or do you foresee a future where, right, where China and the US are fighting over all these proxies. You could say we attacked Venezuela, so China couldn’t get that free oil. What do we do? You see a scenario where they just, us or China says, “Hey, Peru or Chile, here’s $500 billion we want all the access to this copper.
Natalie Scott Gray 23:56
Well, I mean,
Jeff Malec 23:58
and well, right? Or we’ll fund your new mine, like we’ll partner with you on the new mining. Here’s the cash for that.
Natalie Scott Gray 24:03
I mean,
Jeff Malec 24:03
but we want to..
Natalie Scott Gray 24:04
China’s been amazing in their positioning. Longstanding have they been investing outside of their country because they don’t really have the actual natural reserves they want. So, their power position is that they have the technology on the smelting side, which is far in advance. They actually have over capacity there, but they do need to make sure they can get those natural resources, so they will do, I imagine, what they can in any circumstance to make sure that they do have those trade deals in place, and they do invest in countries all over the world across the base metal space, particularly again, just to bring aluminum into it, you know. They’ve actually, in China, imposed a 45 point 5 million to land capacity ceiling in the country, so they have been aggressively investing in smelters outside of the world, so Indonesia predominantly. Even Angola places across Africa, so they know what they’re doing, and yeah, they will make sure that they get enough material.
Kurt Nelson 25:10
The irony, Jeff, is it if the US said, “You know what, we don’t want all this ore to go to China, we’re going to bring it to the US instead. If there was this competition for ore, the problem is that we, we’ve exported that pollution, you know, to other countries, including China, where they embraced it. We, as Natalie said before, you have to have a sophisticated, technologically advanced smelter to process this ore in scale, and historically that was, we associate mining and metals refining with pollution and environmental risks, it actually can be done pretty safely. It doesn’t need to be the nightmare that it was, you know, 50 years ago. But our view was, listen, that’s that’s something that we don’t really want in the US. We’re happy for China to go develop all that. So that’s those were decisions that we made strategically, you know, a few decades ago. So we couldn’t take all that ore, we would have to, just like we don’t have new oil refineries in the United States for a few decades, we don’t have the ability to process that, we’d have to catch up, and there’s a whole lot of the global economy, which is built around free trade and specialization and globalization, and so this, these isolatory kind of moves, nationalism, you know, kind of do everything ourselves, that’s another way to do it, but it’s a quite a shock for to the system right now, so my point being, I just, I think we, we actually, it’s our interest for all that, or to keep going to China, where they can efficiently smelt it and process
Natalie Scott Gray 26:42
it, mm
Jeff Malec 26:42
you touched on something there. Is that the dirty little secret of going green, and all this electrification of like we still have to dig this stuff out of the ground and smelt it, and right there’s pollution, maybe not on your street, but there’s pollution somewhere in the world to get you to the same place, or do we think net net it’s better?
Kurt Nelson 27:08
I think it’s.. I don’t know if your view on this, Natalie, but I mean, I think it’s better today, certainly than it was 3040 years ago. There’s much more regulation, much more awareness, and technology has.. you know, we don’t have fracking, but we have modern ways to, you know, to refine and process in a safer way, but there is a stigma, you know, an example. I grew up in Minnesota, and one of the largest copper deposits in North America, in the US, was found up in northern Minnesota. It’s a metals-rich area, they call it the Iron Range, over by Duluth, as well. But this particular copper deposit is very close to the Boundary Waters, which is, you know, an environmental mecca for Minnesota, and really for the US. It’s this incredible, pristine, undeveloped, you know, wonderland of lakes and forests, and so on. And so I think it was Biden stopped it, he’s put a complete stop to the moving forward on developing any kind of mining or getting funding for it. I don’t know what Trump’s going to do. He’s had other things on his radar right now, although in general he’s been positive towards using our domestic resources and federal land where we need to. Mining has still been second fiddle to oil and gas, so that’s an example of another mine that it doesn’t exist yet, and I don’t know if it ever will. The copper is there, it’s in the ground. We is there the will to extract
Jeff Malec 28:32
it? I used to go up to Qued Eco, which is the Canadian side of Boundary Waters, as a kid. So I’m, yeah, keep that mine out of there. We would just drink right out of the lake, would just be canoeing, and you just stick your cup in there and drink water right out of the lake. Probably can’t do that today, but Natalie, got any thoughts on all that?
Natalie Scott Gray 28:48
Absolutely, I mean, definitely Trump’s goal is to, you know, bring the smelting side, the downstream side to the US, and you know, actually the US has been an exporter of copper concentrates, there is material there, absolutely, like you’ve said, but they just do not have the smelting capacity right now on the copper side, and that takes time to build, so it’s not something that will be able to happen overnight. I think the most dramatic thing that we’ve seen has been actually the introduction of tariffs on imports, particularly for copper. When he first came into office, he put aluminum and steel tariffs back on on imported raw materials and derivative products as well, because he had previously done that in his first term. But the introduction, or really the threat that he’s going to put tariffs on refined copper imports, has been one of the most significant things that has impacted prices over last year, and also now starting to do that again. So, we do have tariffs on derivative products of copper going into the US, but the 30th of July is the deadline that we’re going to hear about it for potentially five. Signed copper imports, and I would say that’s arguably the most significant thing in the copper market that will happen this year, whichever way that goes,
Jeff Malec 30:10
and that, that, what’s that tariff level?
Natalie Scott Gray 30:13
Well, that’s what we don’t know. So, what we’re waiting for is what was outlined as potentially 15% by 2027 so the beginning of 2027 and then move it up to 30% by 2028 across the market. Very divided views. Some people think no tariffs will be announced because we didn’t hear about tariffs on critical minerals, which was meant to be the verdict was meant to come out in October. Then we had the US government shut down, then in January he delayed it by 150 days, so we could have no tariffs. Some people think they’ll come in as exactly as has been outlined, and some people think that maybe it’ll be a lower tariff, or the timeline will just be extended. But if we look back at last year, the expectation that we were going to have those tariffs, we saw huge quantities of copper, refined copper, being shipped into the US, because the CME LME arbitrage, you know, jumped to something like $3,000 premium, if not, it’s more. So, if we look at, I mean, UN common trade data, and it’s probably more material that’s gone in, but it’s at least 1.6 million tons of refined copper that went into the US over the course of last year and continues to go into the US now, so you know if tariffs go in as expected, and we hear on the 30th of July that they’ll come in at 15% in the beginning of 2027 you know, we will see that CME LME arbitrage jump open again, and it’s likely we’ll have a lot more material go into the US, not because they need it for demand purposes, but just because of the advantage of the arbitrage trade, and that then starts to starve the market outside of the US of copper. So that’s what happened the whole of last year, and was the reason why copper prices initially lifted, and then there’s different reasons as we get into the back end of why copper then jumped up, but you know, on a fundamental basis, and particularly, you know, Kurt, you said talking about stocks, Q, they’re global, if you look at all the stocks, so Shanghai Future Exchange, and you look at LME, and you look at Comex, they hit their highest level on record ever in Q, so globally loads of copper stocks, but if you look at where they were split, the majority sits in the US. So, where there is increasing demand or stronger demand, let’s say Asia, and particularly China, they didn’t have the material. That’s how the story starts to unfold in copper when you look at it on a regional basis
Jeff Malec 32:41
and dig into that more, so that’s pure traders, they’re like commodity houses are buying it up without the tariff in the US, and then selling it back into London and Asia, that’s the arbitrage retirement,
Natalie Scott Gray 32:52
so that what happened is that, yeah, so I mean, also when you, when you look at the different exchanges around the world, so the main ones are Comex in the US, and then LME, which is global, but London-based, and and then the Shanghai Future Exchange. The CME is more favored than the LME if you’re talking about speculative players that are wanting to bet on copper, and copper price is going higher. So, here, think your macro players, think your hedge funds. The CME is more attractive because the LME is quite a difficult date structure, so if you’re going to place a bet on copper, you’re probably going to do it on Comex. So you know, if you were bullish on copper, and there were reasons to be bullish on copper, as we’ve already talked about with the supply side pre the threat of these tariffs, you know, people would place positions on CME anyway, but the physical premium in the CME rose so much that that was advantageous for anyone who was trading on it, and so trading houses absolutely were trying to ship material into the US to take advantage of that high premium
Jeff Malec 33:56
in the Shanghai. So those are the three main futures we’re saying, like nine, what’s the percent split, there, like 80% of the volume is in the isn’t CME comics.
Natalie Scott Gray 34:05
I don’t know what the absolute breakdown is. It also does change quite a bit, but on the speculative side, I would say the CME is the largest. But retail, you can have retail access on the CME on smaller contracts, like micro copper contracts, and you can have retail interest on the Shanghai Future Exchange, as well, but if you’re talking about the Shanghai Future Exchange, it’s protected, it’s a domestic exchange, you know, not anybody can go on it, that you have the Ione, which is a Chinese-based but international exchange, but the Shanghai Future Exchange is, is domestically market players there, really, it doesn’t have the international,
Kurt Nelson 34:45
and I think the three of those combined to like those, that’s where you set global prices for copper, you know, they have different, whether it’s speculators or driven, like we think of the Shanghai markets in general, or the Chinese futures markets, or the, you have. Or producer hedging, you might see more of that in the US and in London. I think one of the things about exchanges is that they produce warehouse stocks, they tell you what’s on warrant or on exchange. You don’t know what a private warehouse might hold, but you can at least observe on a regular basis the inventories that are reported by Comex, LME, and Shanghai, and so you add those up, and you get it, you get a sense of the global supply of copper, at least in a reliable figure. And I think Natalie’s point was that the global supply of copper seems to be okay, but with this regionalization, you know, we’re getting a lot of storage in the US, and you’re getting kind of regional shortages, regional scarcity, because of these, these tariffs. It’s a completely human-driven thing. It has nothing to do with the copper market, but these, these things are moving anyway. We’re literally moving copper around the world because of these call it political or economic policy changes.
Natalie Scott Gray 36:01
Yeah, so I mean, just to kind of clarify, I’d say, like, you know, if we’re forecasting copper prices, the three main drivers we’d have before was what’s the outlook for macro economic health, you know, that ties into Dr. Copper, because of its universal applications, you know, what’s the path of monetary policy doing, what’s the US dollar doing, how’s the health of China? What’s the level of geopolitical tensions? All of those things roll into the macro. Then, if you’re looking at fundamentals, it’s looking at your supply and your demand, and you’re looking at your stocks. Then we will look at the role of investors or speculative investors separately, and how it can impact copper, because we’ve learned definitely in the last couple of years, particularly in 2024 that speculative investors have the ability to move copper prices completely away from what the fundamentals, all the macroeconomics is actually telling you, it’s often short-lived, but you know you can get frenzied appetites, a lot of money going into copper, because you’ll hear a headline, supply, you know, structural deficits are here. It’s used in AI. A lot of money suddenly follows in, and it can take it to nominal highs that we’ve had, but money that goes in often comes out quite quickly. But this US tariffs and US policy, as of last year and now this year, has become our fourth price driver for copper, because it’s not something that we’ve had, and because of the serious significance in global trade on the back of expectations of what they will be,
Kurt Nelson 37:29
and I think Dr. Copper, you know, this notion of economic activity, it kind of goes, I mean, copper has been around for millennia, right, that as either for trade or used it to help, you know, develop, you know, the Bronze Age, you know, copper has been around, and it’s been used, the doctor copper, I think, I think about, like, the post World War Two era, when it was copper being used in housing construction, copper being used in washing machines, and things like that, you know, it was just a general industrial activity, but I think that’s still really critical. It’s really important, but this demand for these AI centers, like I think that’s going to have.. if we said, well, we think there’s going to be a slowdown, GDP is going to still grow, but maybe be halved on a global basis. Do we think that then half of these AI centers are going to not be built? I mean, I think that’s that money is being set aside, separate from like large appliance purchases, and you know, home building, you know, expansion, and other things. So it’s like it’s like an incremental new demand, which may be more resilient to GDP. So it’s like Dr. Copper and a postdoc
Natalie Scott Gray 38:38
completely. I think if we’re looking at where we are at the moment with US dollar strength, but particularly what’s going to happen with interest rates, you know the market has completely kind of swapped its expectations from the back end of last year, having, you know, rate cuts in the US, potentially now we won’t have them all, we could see hikes in the US or Europe, so focus, you know, on future demand growth for copper, like you said, for the traditional demand areas, it’s a lot more of demand by volume, but it’s the sectors that aren’t going to be impacted by cyclical, which are, I think, new productive forces like AI, like electrification, digitalization, that are completely separate and hold up on their own
Jeff Malec 39:23
with they’re probably using a lot of copper and all those drones that are getting blown up over there in the Middle East too right
Natalie Scott Gray 39:29
defense definitely it’s used in a lot of defense applications copper I
Jeff Malec 39:43
To talk me through, like, what’s the base demand or supply right now? Like, how much of it are we getting out of the ground a year, and how much do we think we need? You said by 2030 it’s increasing. Like, what do those numbers look like?
Kurt Nelson 39:55
Let me try to answer it first, because I have probably the least information on this, so I’ll exhaust my not. College, and then now they can correct me and fill in the gaps, but I think about like 20 years ago we used to maybe dig up 15 million tons a year and we’d consume all of it, and then it was 20 million metric tons, and then now I think at least about 25 million metric tons a year globally, so this is like how much we use up and how much we extract, and those have been really close, if you look at them over the last 3040 years, they grow at the same rate, and they kind of have to, because there’s no substitute for a lot of these copper uses. So, supply and demand are very tight. We, or say, production and consumption are very tight. That’s why I would think of
Natalie Scott Gray 40:38
- Yeah,
Kurt Nelson 40:38
I think we’ve been in a deficit for more years than than a surplus going back over the last 567 years, and so the whole, the demand and the supply of copper have grown, but it doesn’t respond well to shocks, and the only thing that can really give in a short term is price.
Jeff Malec 40:58
So, did he nail the numbers now?
Natalie Scott Gray 41:00
Yeah, yeah, of course. So, I mean, you’re bang on it with mine production for this year. We’re just under 25 million, that comes out if we’re looking at refined production. So, that’s once it’s gone to smelted refined, it’s high grade, but we’re about 28 million now. Looking at whether we’re in surplus wood, it goes
Jeff Malec 41:18
up,
Natalie Scott Gray 41:19
so the amount of refined does, because you’ve got scrap material coming in as well, so the mine production is purely the ore coming out of the ground. And then refined also has scraps, so that’s why it’s higher.
Jeff Malec 41:30
All the retired pennies,
Natalie Scott Gray 41:31
well, I mean, recycling is, it can, it contributes about a third of output every year, and it’s definitely an area of strong interest and investment moving forward, of course, because it’s there’s not enough material, so we need to try and try and recycle it if we can. I mean, so what I would just caution when we’re talking about supply and demand or market surplus or deficit, that the technical version, if you’re saying, is the copper market in a surplus or deficit that’s refined supply minus refined demand for that year, you don’t look at stocks, so the reason why you don’t do that is because stocks have been around forever, so it completely muddies the water of what’s actually happening on a year to year basis. So, if we’re looking at market balance like that, then we do have a very tight market, we’ve got about 250,000 tons market surplus, so very small. What I would say is for a market to be hugely out of balance, either in surplus or deficit, has to be more than 2% of what demand is for that year. So, 250,000 tons surplus, basically you could call the market balance, and in that scenario, then often copper can take its price queues from the macro economics or investors. Having said that, we do, if you account for stocks as well, which you should do, and you can look at things like the consumption ratio, so that is all available stocks, and you divide it by demand for that year, paints quite a good picture, where actually for the last eight years we’ve seen the consumption ratio increase, so the amount of material around the world that’s available versus what demand is has been increasing, so a building surplus, you could say, with respect to that, but where stocks are, they’re not available necessarily where demand needs it, so that’s, you know, you really got to take that with a pinch of salt, but when we are talking about my original market balance, surplus or deficit, we will start to see structural deficits by 2030 developing, because there is just not enough material coming out of the ground, and there is no quick fix for that, and then that’s when you’ll start to see stocks, which already above ground, really start to dwindle or pull down, and that is the crux of really the long-term outlook for copper, and why it’s a metal of so much interest, not just for its uses, but for the fact that the supply side right now is facing structural deficits, and that there’s very limited options of how that will actually change,
Jeff Malec 44:05
and stocks, you mean just storage, right? So they, China in particular, they store all these commodities, they’ve been buying it up and just sticking it in the ground, or
Natalie Scott Gray 44:13
whatnot. Two ways to look at that, you can look at visible exchange stocks, so that is material held in the warehouses, so held in CME warehouses, held in LME warehouses, so CME are just in the US, LME have warehouses all over the world, and
Jeff Malec 44:28
then as collateral for their hedges. Absolutely,
Natalie Scott Gray 44:30
it’s really what you need to know with that is actually it’s seen as the market of last resort, the material that’s actually held in warehouses, but yes, it’s what underpins the exchanges, and you can track really what’s happening across the exchanges, and that’s very important with that material, but you will also have stocks which are not visible, so they could be in warehouses like China bonded warehouses, where they’re not technically in China yet until. But they pull them out and then you have to pay tax on it. We definitely now have a new scenario where trading houses have become more integrated into the value chain for copper and they can hold material that can be very difficult to track how much material they have, and then on top of that, you have your strategic stockpiling, which China has long been doing. Now we know the US is wants to do it as well. They announced Project Vault, I believe, the back end of last year, where they want to have two months worth of supply of critical minerals. Copper was deemed a critical mineral November last year, but also around the world, other countries have started to say they want to build strategic reserves of their own. For China, it’s very difficult to know how much material is there. We estimate minimum 2 million tons. So then, if we go back to the US, and I say about 1.6 million tons went in in a period of a year, that shows you how significant that that draw was on tariffs. But that’s where material is is held in the copper market, but we have to appreciate that a lot of it may not be necessarily, you know, printed visibly for us to know where it is, and that starts to make things a little bit more challenging as well.
Jeff Malec 46:16
What are your guys’ thoughts if I put my contrarian hat on and be like, actually, these Rio Tinto, these guys are nailing it, right? They’ve, they haven’t had to spend the money, they’ve been perfectly in line with the production to supply the market, they’re making money like that, they’re doing what they’ve, and I could argue they’re doing what they’re supposed to do, they’re like keeping their shareholders happy, right, and but you’re saying they can’t just turn on the spigot, they can’t just say, like, okay, now we need to increase. I don’t know of two minds, of like, one, they seem like they’ve done it well to this point, because there hasn’t been a big spike. Copper has been relatively subdued, or are they doing it on purpose and saying, like, the malinvestment will drive up copper, and then when we put in the new mining, we’ll make more money.
Natalie Scott Gray 46:57
I mean,
Jeff Malec 46:58
I don’t know if there was a question in there, but
Kurt Nelson 47:00
they’ve had to play defense for a long time. Remember that this, this, like the copper being around $1,400 you know, or say 14,000 in the, in the on the LME for Metrotronic, kind of close to all-time highs, I think, Natalie, but that’s sort of a newer phenomenon, like this, that no one cared about metals, they prices were declining 1510 years ago, so these, you know, when you think about Rio Tinto, or these other Glencores, or other mining companies around the world, they were trying to survive, they didn’t have access to capital that, you know, banks were starting to pull back of their financing to them, so their spread, if they could get financing, it costs more. Yes, this is a relatively newfound thing that they’re making a lot of profits, and they’re not like aggressively expanding mine production or opening new mines, because they’re just, they’re just coming out from under like a decade of really hard times. There’s something else I want to talk about too, because these, I don’t disagree at all with Natalie’s idea about, like, 2030 being sort of the consensus about when things are really going to start to hit a wall of demand versus supply. Those are projections based on kind of what we know now. You know, three years ago we weren’t talking about AI, AI data centers and their demand for, you know, copper, so the copper market itself doesn’t deal well with these sudden shocks, and one of the things we know about commodities, if you think about a normal bell-shaped curve, equities tend to have a fatter left tail, like the bad news tends to take things down sharply more than you get, like the week you don’t get the Monday morning news for a stock, where, hey, you know, we, we just figured out how to cut profits margins, or cut our expenses by 20% over the weekend, and the stock pops 20% Usually, it says something negative, like a
Jeff Malec 48:56
CEO was on the Jumbotron at the concert with not,
Kurt Nelson 49:00
yeah, that was a very expensive Coldplay concert. So, the opposite is true of commodities. Bad news tends to be good for price, and so you have this fat – what we’ll all call fatter
Jeff Malec 49:11
tails. Yeah,
Kurt Nelson 49:13
and so let me just highlight one that we can talk about briefly around copper, which is the Straits of Hormuz, closing everybody, and first thing you focus on is oil, and get, and maybe you focus on natural gas, although we don’t worry about that as much here, but I can tell you that the Philippines and Japan, and a lot of countries, are really freaking out. They rely so heavily on the Middle Eastern natural gas. But another sort of a sleeper that you aren’t aware of, that I’ve only become informed about in the last month or two is sulfur, so 50% of the world’s sulfur goes through the Straits of Hormuz, and you need sulfur to make sulfuric acid, which is critical in some of the leaching and processes used for some of the, you know, the smelters or the refiners, it’s pretty. Pretty critical to go from an ore to a, you know, to a refined copper, and so a lot of these shortages that are going to happen because of the Straits of Ramones being closed for so long haven’t been felt yet. We’ve been in this weird fantasy land where the ships that left in February were arriving in March and they were arriving in April and getting where they needed to go and it’s only now in May and we’re really going to start to feel it in June and God help us if we’re still in July that now now we’re going to run out and so the things that we’re going to run out of in addition just oil and gas is going to be you know urea and nitrogen based components for fertilizer, sulfur is also needed for fertilizer, but it’s needed for sulfuric acid to help process copper. Whenever we turn those ships back on, and we start moving, they can power through the straits. It’s going to take another six weeks for them to look where they’re supposed
Jeff Malec 50:59
to go to return to go back, right? That just full stop.
Kurt Nelson 51:04
There’s a lot of dominoes that haven’t people haven’t seen how they’re lining up, and they haven’t really fallen yet, but some of them are really big dominoes. And I think I’d be curious, Natalie, if you think that’s sort of like a surprise that the market’s going to wake up to at some point. The specialists are going to get it, they’re going to see it, but I haven’t seen that flow through price yet.
Natalie Scott Gray 51:25
I mean, I would argue on both sides of that. So, yeah, this, the sulfistor and sulfuric acid, definitely in the copper market has been something that’s heavily been spoken about for the last six weeks. I would say, particularly, we had the world’s biggest copper conference down in Santiago, in Chile, which was the beginning of April, and that was, I would say, the biggest topic. I mean, what I would say on both sides is I think for energy prices, particularly, we haven’t seen the price reaction potentially that we should be seeing, particularly if we look back to, you know, when Russia invaded Ukraine back in 2022 the issue there, you know, oil prices were higher than they are today, and that was on the expectation, because we had supply concerns about what sanctions were going to do, but actually Russia just had to divert where that energy was going. We’re in a much worse situation in the Middle East, where you know energy exports are just being completely curtailed, because they cannot come out, or you know, they’ll start to slow down, and the impact of that’s much more serious. And I think we haven’t seen it in the pricing, because there is this market optimism that there will be an end to the war. So, looking at supply and demand ultimately, and I’m going to come on to the supply risks, so they’re very real for copper with sulfuric acid, but I’m also cautious that I just do not think the markets are priced in. What will happen with demand destruction? We haven’t seen it in any of the figures, like PMI manufacturing figures, and the reason for that is I think there was front loading ahead of the war. We’ve also had China tax rebates since the first of April, they’re getting rolled back, so there’s a lot of front loading of exports. Not trying to get too technical, but I, and we always see this, and we saw this again in 2022 So, if I’m talking about metal prices now, in that period we saw nominal highs in Q, but then by Q of that year we had the worst quarterly fall in the index for base metals since the global financial crisis, because of demand destruction. So, I do think that’s something we haven’t seen yet, and there’s not supply that’s not a good thing, but if demand really does get hit seriously, then it becomes maybe secondary. Having said that, I mean the background with the with the sulfur story is that now, yeah, sulfur prices are up about 80% because of its use with fertilizers, China, the biggest export market in the world for sulfuric acid, has banned exports. They actually limited quotas up until April, and then now, since the first of May, they’ve banned exports of sulfuric acid. So, for the copper market, about 11, no, it’s about 17% globally. There’s two ways to produce copper, but the one that uses sulfuric acid is solvent extraction and electro winning, so that’s 17% of copper. 60% of that method is used in the DRC, the second biggest producer in the world, and about 6% in Chile itself. So you’re correct, I would absolutely agree with saying that the risks are building there, because so far it’s been the jump in sulfur prices, and then sulfuric acid prices that have hurt output, you know, for these producers, but it will be the physical scarcity of either being able to get hold of sulfur or sulfuric acid that will start to play on the supply side, and that hasn’t been priced in. I would agree with you, there has been a jump on the risk, but we haven’t seen any producers in the DRC have to pull back production yet, because they have stocks of about two to three months worth of sulfur and all. So the nature of that type of processing is you spray the acid on on your rocks, and then that takes time as well, but the risks are very real, and we’re starting to approach them as we get into the summer months.
Jeff Malec 55:11
Yeah, I was going to ask you to dig back into your chemistry days and tell me how that works. They, so they spray it onto the rocks, and what happens? Well,
Natalie Scott Gray 55:18
that’s exactly, you know, as the description is solvent extraction, and then electrowinning, so you will put the acid in to break it down, and then you’ll go through the elector winning process, and that’s one of the ways, which kind of hydro metallurgical way of processing, rather than pyrometallurgical, which means with heat and smelting, which is the vast majority, particularly in China, where copper is actually smelt of undergrad heat, and that produces your refined copper.
Jeff Malec 55:50
And when I’m thinking of these big smelting plants, I’m thinking of, like, Gary, Indiana, and all the steel plants, and the blight, and the flaming, and all that stuff. Is that what it looks like? Just heat,
Natalie Scott Gray 56:01
and not to the same degree that aluminum is, or steel, they’re much more energy intensive than copper is.
Jeff Malec 56:07
Okay,
Natalie Scott Gray 56:08
but you know, along the same lines, where it’s got a bigger carbon footprint to be using heat for the smelting process versus the hydro metallurgical method, so
Jeff Malec 56:28
Kurt, let’s finish up with the investment. Right, sounds like we’re all bullish: a commodities, b metal, c copper. So, why should someone look at copper, the commodity, versus copper miners? What’s your thoughts on that?
Kurt Nelson 56:43
Yeah, you can see different metals plate, for example, you can buy gold, right? People buy gold, that’s been probably as old as people extracting and holding copper as human society. You can buy GLD, you can buy, you know, an ETF, you can buy gold bars, you can even buy them at Costco, the or you can buy gold miners, I think you can buy copper miners, you know, you can, that’s something you can do. There’s, there are ETFs or portfolios for that. Our view is that neither one’s right or wrong, but just understand, in a business, you know, and you’re investing in a, in an economic enterprise, so they have labor costs, they have financing costs, they have idiosyncratic risk, you know, for example, let’s go back a British company, BP. If you go back 1520 years, you could say, well, I don’t know, trading futures is hard, and I don’t, I don’t have, you know, it’s just a hassle. I just have a brokerage account, I can just buy British petroleum, I’ll just buy BP, and I’ll get oil. And then we had, instead of getting an oil company or oil, you got an oil spill, and you know the price of oil doesn’t move, and the price of the stock falls 50% so that’s how they’re different. I think that the benefit of investing directly into a commodity instrument like copper is that it’s a pure play on the economics of the metal itself, or of the commodity itself. There’s nice inflation characteristics, you know, the inflation beta of an equity investment is very different than the direct drive benefit of a commodity. I think when you think about inflation, like, what does it mean? What does that even mean? There’s different definitions of inflation. The most basic way is it’s just the consumer price index year over year change, so it, and that’s what the, that’s what you hear reported, that’s what the Fed and central bankers around the world look at before CPI, it’s PPI, the producer price index, that’s kind of leads CPI going up, so the producers pay a higher price, they don’t pass it on to consumers, and then eventually it flows through to CPI when they can’t take it anymore, and they raise prices. What happens before PPI? Commodity prices go up, yeah, that’s that’s that’s what happened. So I think that you have a stronger relationship there, and I think part of the interest, just generally, because we’ve seen more interest in commodities than we’ve seen in over a decade, and I think part of it is because of the fear of inflation, and inflation is going to be all things being equal, good for commodities and commodity prices, and it’s going to be quite painful. We know this for financial assets like stocks and bonds,
Jeff Malec 59:10
but do you think copper gets left behind because it’s right, like $120 for one barrel of oil? What’d you say it is? $14,000 for a whole ton of copper,
Kurt Nelson 59:21
yeah, I think, but what becomes more interesting is like looking at the looking at the supply demand balance, and as Natalie said, you know, they’re they’re they’re fairly tight, and they have been historically, but we’re coming up on, you know, a known shortage if everything stays the same, and I think that’s a little different, like we were not going to run out of oil in the United States. We have a shipping and logistics problem in the Middle East right now, but you know we’re not. We still have a lot of infrastructure around the world for extracting and refining oil and energy products, and we’re just under invested in metals. So I think what’s more interesting about copper is that it moves into shortage more often. Aluminum rarely does. I mean, there is an issue right now because of the cost of power going up a lot, and actually a smelter in Qatar that got hit while it was processing aluminum, and I think the aluminum froze up inside of it, and so it’s going to take some time to get that going again, but you know, copper is one of the metals that we do have, sort of just in time inventory for generally over over time, having this disruption to supply just creates this really, really sharp price impact.
Natalie Scott Gray 1:00:36
So I just, I just add to that also, I think, this move towards strategic stockpiling for copper is only going to increase the fact that it’s now critical mineral in the US. You know, it’s really becoming a security concern, if, like, more than anything, actually. And all countries want to be able to make sure that they do have copper, and that theme I think is isn’t going to change, and that’s something that has altered towards copper in the last five years, but really been accelerated in the last two,
Jeff Malec 1:01:12
and I was going to say, you write gold, silver, copper, the three classic metals, people have been crazy, retail has been crazy on gold, then it leaked into silver earlier this year, and then that famously unwound in RA, but do you feel like copper will be like kind of people will start to wake up and that retail flow will come into
Natalie Scott Gray 1:01:32
copper? It already did, so the back end of last year, you know, we had a perfect storm of the driving factors on all of the driving factors, but I would say, why we went into 13,000 why we went into 14,000 was this spillover effect. I mean, we had the US currency debasement trade going on, and that was a frenzied appetite that you know you’ve outlined for precious metals, but it did spill into copper and it did spill into aluminum as well, and we can see that from the retail interest on the Shanghai Future Exchange and Comex absolutely saw the back end of last year, and some of that momentum has come out, but I think the long-term strategic views, if we’re talking again about macro money hedge funds, if they are placing bets for the longer term, copper is something that is already very much in their sights and probably will become more and more, and you know, anecdotal story. I’ve worked in the metals industry for 13 years, and my husband’s grandfather asked me about how can he buy copper the other day, so that shows you, you know, the interest retail coming in, and actually Stonex ourselves on our Stonex balloon platform in the next couple of months, we already sell gold and silver bars and coins, but we’re going to be selling copper bars for the first time as well.
Jeff Malec 1:02:51
What will a copper bar? Who can do that quick math? What will a copper bar cost?
Natalie Scott Gray 1:02:56
I guess it depends on the size. I think there’ll be a variety
Natalie Scott Gray 1:02:59
of, yeah,
Kurt Nelson 1:03:01
it’s a metric ton, so you have to, you know, bring a truck
Natalie Scott Gray 1:03:05
exactly, not quite using precious metals
Jeff Malec 1:03:19
before we leave. Natalie, what are.. well, I’ll think of something for you next, Kurt, but we usually finish up with something fun, so I’m going to give me your Mount Rushmore, that’s a US thing, sorry, your top four, so you don’t have to pick your favorite thing. Top four London restaurants..
Natalie Scott Gray 1:03:34
oh, London,
Jeff Malec 1:03:35
I didn’t prep you for that, sorry.
Natalie Scott Gray 1:03:36
So I love Italian, I think the River Cafe is really good. There’s somewhere that I want to go I haven’t gone, called River. I went to a small little French place in Covent Garden called The Social, that was wonderful, very good for a date night. And I went to Magori a couple of weeks ago, also in Covent Garden, very beautiful. I would recommend that, and there’s a lot of good cocktail spots before there as well in that area, so it’s a nice evening out.
Jeff Malec 1:04:11
And my, we talked about the lab-grown diamonds. What’s your.. do you have any hacks for men trying to find nice gifts for their wives? Is there like a copper bracelet, like, is what.. what’s the best value for, in a right, as a metals person? What’s the best value they can find?
Natalie Scott Gray 1:04:28
Well, for jewelry,
Natalie Scott Gray 1:04:30
or
Natalie Scott Gray 1:04:31
yeah, diamonds are a wonderful thing. When I was in Hong Kong last year for LME Asia Week, one of our colleagues was going to get has become engaged now, but I could overhear him talking about not being sure what to get, and so I had to take him by the hand, and I took him to jewelry stores to look at normal diamonds, and also to look at lab-grown diamonds, and I think if you want to have something like a tennis bracelet or something with a lot of diamonds on it, I would go lab, there’s nothing wrong with
Jeff Malec 1:04:59
that. To me, right, I have problems sometimes, like buying gas, or doing like I’m in the airport, I can’t, I won’t convert my currency because I know too much about the prices, right? So, do you run into that problem of like, this is stupid, this thing is like x, what it should be for
Natalie Scott Gray 1:05:14
this, I mean, the amount of metal is now is not a great time to be buying gold jewelry or silver jewelry,
Jeff Malec 1:05:20
exactly, yeah, right. Kurt. How about we’ll go with your favorite New York City restaurants? Right, you could go Stanford. Sure, throw out your Connecticut if you want. I’ll let you pick Connecticut or New York.
Kurt Nelson 1:05:34
Sure. Wow, so in New York, I just last week we, so we went to the family went to Broadway, and we saw Daniel Radcliffe in something called Every Brilliant Thing, which was a blast, because it’s an audience participation play, and it was for my wife’s birthday, and I got her to be in the play briefly, so kind of she got to read it, read a business, read an index card, and have a line, I said, “You can say you were on Broadway with Daniel Radcliffe. We went to this amazing pizza place called Don Antonio, which I know the best thing about it is that it was walkable distance from Times Square, so you know that was that was fun, and there’s nothing like 1000 degree authentic Neapolitan pizza oven to make you food every 30 seconds on demand. Another New York City, going out the other way, like, for, like, a fancy night, my been there a couple times, Coach C O T E, it’s, I think, it’s the only Michelin-starred Korean barbecue or Korean steakhouse Korean barbecue place in the US, and it deserves it, and it costs like it has one, but we’ve had some really special dinners there, so those are,
Natalie Scott Gray 1:06:39
it’s
Jeff Malec 1:06:40
so funny that Michelin is attached to fancy restaurants, right? Like, I know back in there was
Natalie Scott Gray 1:06:44
like a
Kurt Nelson 1:06:44
tire company,
Jeff Malec 1:06:45
yeah. How far you would drive, like the food was worth driving that far to get, but it was like the oddest branding of all time. Awesome. Anyone have some last thoughts, or should we wrap it there?
Kurt Nelson 1:06:58
No, I just really enjoyed doing this. I love your podcast, it’s really fun. Natalie, thank you for being here with us to help us fill in some of my gaps of knowledge about the metals market.
Natalie Scott Gray 1:07:06
Pleasure to be here as well. It’s very interesting, and I think the interest for copper and then having ETFs or more availability to be able to invest in it is really going to be a theme that grows. So, it’s interesting to hear more about it from particularly your point of view, great.
Jeff Malec 1:07:21
Love it. Thank you, everyone. All right, that’s it for the pod. Thanks, Kurt. Thanks, Natalie. Thanks, RCM, for sponsoring. Thanks, Jeff Burger for producing. We’re off next week, and then the rest of June will be Chicago month, where we’re talking to Chicago-based people and firms about all the good fun stuff in Chicago. Peace.
This transcript was compiled automatically via Otter.AI and as such may include typos and errors the artificial intelligence did not pick up correctly.
