The world is poised on the edge of a new copper supercycle

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Think about today’s growth sectors – renewable energy generation, electric vehicles, AI – and the one thing they all have in common is an insatiable appetite for copper. To take one example, it requires three times as much copper to generate the same amount of electricity on a solar farm as in a gas-fired power station. Nearly eight times as much using offshore wind.

This is why BHP has alighted on Anglo-American. And why the target has rejected a £30bn bid as “highly unattractive”. We should expect BHP to raise its offer and it may also end up in a battle with other potential bidders.

Lack of supply is one of the principal reasons to think that the price of copper, even at a two-year high of nearly $10,000 (£7,980) a tonne, might be poised for further gains. Copper production, like that of all commodities, is highly cyclical. To make it worth the cost, the environmental challenges and the long and risky timescales, the price needs to rise from here. In recent years, dwindling demand from China’s struggling property sector has kept a lid on the price and made it more attractive for companies to hand cash out to shareholders rather than invest in new capacity. Between 2012 and 2020 capital expenditure in the copper industry fell by more than 40pc.

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