Copper is so hot that a mining firm turned down a $39 billion takeover bid because it was too low
Copper is so hot that a mining firm turned down a $39 billion takeover bid because it was too low
A mining company called Anglo American with big copper mining operations in South America just turned down a $39 billion acquisition bid because the price wasn’t high enough.
Right now, copper is a hot commodity; its price is near a two-year high and headed higher. Copper is so hot because it’s in cars and phones and power lines. It’s also in solar panels and wind turbines, meaning it plays a major role in the renewable energy transition.
“There’s absolutely no doubt whatsoever that increased demand is going to be reflected in copper,” said RJO Futures Chief Market Strategist Eli Tesfaye.
Tesfaye said he wasn’t surprised when he heard the mining company turned down a $39 billion offer. “If you anticipate higher price action, then it behooves you to kind of wait it out a little bit.”
The jump in demand is likely here to stay. Copper will play a major part in meeting clean energy goals, according to Barbara Arnold, a professor in the department of energy and mineral engineering at Penn State.
“How many more wind turbines can we install? How many more solar farms can we install? Knowing that you also are going to have to, at some point, start having batteries battery storage installed as well,” she said. “And it’s gonna take a lot of copper.”
The jump in price isn’t just from an increase in demand for copper. It’s because the supply hasn’t been increasing along with it.
“If there’s going to be a shortage to meet demand, prices go up. That’s Econ 1,” Arnold said.
There are a few reasons supply isn’t keeping up. One problem? The mines that already exist are producing lower and lower grade copper ore, making the process more expensive. The other? Getting new mines up and running can take more than a decade.
And that process has been getting more complicated, per Blue Line Futures chief market strategist Phillip Streible.
“Due to increased regulations, and safety and awareness of what’s going on with the environment, mining — they’re just becoming more efficient — things like that, which has resulted in less copper supply coming out there,” he said.
So, copper demand is expected to stay high, the road to more copper supply is full of hurdles, and mining companies like Anglo American can wait for higher bidders.
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