Hello copper traders, you’re a happy bunch this morning.
The red metal just had the best price spike since 1968, according to Bloomberg.
What’s the story? Mr Trump is up to his usual tricks. This time he’s threatening to hit copper imports into the USA with a 50% tariff.
What he hopes to achieve with this is a mystery to me. Copper is a vital metal for US industry in general. But then again, maybe it’s all bluff and bluster.
Either way, copper has now broken into an all time high after threatening to do so for some time.
There’s no reason to think it’s going to go down, either, if the market views Trump as serious.
The race is on to buy up what you can before the tariff goes into effect.
Oddly enough, I wrote about this idea in my last issue of my paid advisory, Australian Small Cap Investigator.
However, in that instance, I was talking about the potential for the market to hoard oil in relation to the Middle East conflict.
It didn’t play out in oil, but it might play out in copper over the next few weeks.
I told you yesterday about one of my small cap recommendations, called Develop Global ($DVP). That’s a copper producer. On the ASX, there’s also Sandfire Resources ($SFR) and MAC Copper ($MAC) as two other producers.
Let’s see how strong the bid is on these three today. And, of course, BHP and RIO have big copper exposure in their mining portfolios.
Commodities are suddenly becoming a lot more interesting.
We already know that gold is roaring. Now we have Trump juicing the copper price. Oil rallied around the Middle East flare up.
And both Murray Dawes and I think lithium shares might be bottoming out and going into an accumulation phase as the industry stabilises from the recent bear market.
Oh, then there’s the looming gas shortfall that most industry types say is going to start hitting east coast Australia in the next 1-3 years.
If all this doesn’t get your pulse racing a little bit, then please, see your doctor.
Commodity stocks can be very lucrative when the commodity in question goes into an uptrend. Copper has every chance of doing that.
Of course, a word of warning at this point.
Commodity trading and investing are notorious for their difficulty. There are always a lot of variables in play, most of which can be hard to see.
Case in point is a stock like Bellevue Gold ($BGL). Despite a roaring gold price, BGL is down 50% from its former high around $2 per share in August 2024.
That’s because it’s been forced to downgrade its production guidance and financial forecasts.
An article in The Australian recently suggested they might even have to downgrade again.
Point being: individual stocks on a thematic like gold or copper can be barnstorming belters or dithering duds.
One way to protect against this kind of binary outcome is to invest in a basket of names.
For copper, an ETF that fits the bill is the Global X Copper Miners ETF ($WIRE). That’s not a recommendation, just an idea.
You need to know what type of investor you are: a risk taker or more conservative.
I’m a risk taker, at least in the share market.
We can also think about the “downstream” effects of the Trump tariff. One, at least to my mind, is the extra burden it places on the US auto industry.
This is already under huge competitive threat from the surging Chinese car brands.
China’s industrial strategy is to own the electric car vertical and obliterate the legacy Western brands.
“Jim Farley, the CEO of Ford, said on Friday that the Chinese EV industry posed a serious threat to the American automaker…
“Their cost, their quality of their vehicles is far superior to what I see in the West,” Farley said.
“We are in a global competition with China, and it’s not just EVs. And if we lose this, we do not have a future Ford,” he added.
Electric cars have more copper in them than ICE vehicles. Trump is putting a further noose around US auto costs by messing with the price of copper into the US.
China is coming for the global transportation market in more ways than one. More tomorrow.
Best wishes,
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Callum Newman,
Editor, Small-Cap Systems and Australian Small-Cap Investigator
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