A fresh copper bull cycle is being “born” that should fuel further consolidation within the mining industry, Blackrock, the world’s largest asset management group, has predicted.
The boom in artificial intelligence and the energy transition have created “a big new demand source” that is not being met by supply after a decade of underinvestment in new copper projects, according to Evy Hambro, chief investment officer of Blackrock’s natural resources team and global head of thematic and sector investing.
The “complexity and risk of adding new capacity in the resources space, and the time that it takes to do so”, could drive miners to acquire assets over building new copper mines, since the world’s public mining groups are trading at such low valuation multiples, he said.
“If you’re paying six or seven times multiples, then you’ve probably got a lot of your money back by the time a new mine would have started to generate cash,” Hambro said.
Growth in the AI and defence sectors will boost global copper demand by 50 per cent by 2040, S&P Global projected this month. However, it warned that supplies are expected to fall short by more than ten million tonnes a year without more recycling and mining.
The veteran mining investor was speaking less than a week after it emerged that Rio Tinto had reignited talks with Glencore over a potential combination of some, or all, of its operations. Blackrock is the second largest shareholder in Rio Tinto, after the state-owned Aluminium Corporation of China, according to Factset data.
A mega-merger would create the world’s largest copper miner, at a time when the major mining groups are racing to gain greater exposure to the transition metal.
The London Metal Exchange official copper spot price hit a record high of $13,335 a tonne last week, alongside an unusually broad rally in precious and base metals after concerns about American military intervention in Iran and the independence of the US Federal Reserve.
Copper recorded its best annual rise in more than a decade last year as President Trump’s tariffs and fears of a global shortage spurred a rally in the red metal. The price of copper traded on the London Metals Exchange rose 44 per cent last year, the highest yearly increase since 2009 when the world was emerging from the financial crisis.
However, analysts at Bank of America said last week that metal prices, including copper, appeared to be “stretched”, given potential challenges to Chinese demand, which it estimates will expand by 0.5 per cent this year, the lowest since 1988.