Jeff Currie on Why Copper Is His Highest-Conviction Trade Ever

Joe Weisenthal (0:02)

Bloomberg Audio Studios.

Tracy Alloway (0:04)

Podcasts, radio, news.

Joe Weisenthal (0:17)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:23)

And I'm Tracy Alloway.

Joe Weisenthal (0:24)

Tracy, copper has been on the tear again.

Tracy Alloway (0:27)

Yes, yes it has. It's kind of weird because I remember recording a number of commodities related podcasts a couple of years ago, where everyone was super excited about copper, and there was this long-term structural theme about systemic undersupply. So the idea that we hadn't invested in new mines for ages, and it took so long for new mines to come on stream that there just wasn't going to be enough copper to power all these new electric vehicles or electrify the grid, all these big things that the world wants to do.

And then for a couple of years, copper just kind of went away, the price started dropping, and now it's back.

Joe Weisenthal (1:11)

This is the problem, right? And I think that that interim fall and it did for like 2022 and much of 2023 was sort of back in the basement a little bit. This does seem to be the core problem that people have identified, which is that we can be almost certain that there is a long-term huge demand for copper from all the capital spending that's going on for electrification in particular, EVs, et cetera.

And we can also, I think, as many analysts have observed, forecast supply fairly easily because we know what mines are out there, we know that mines have a really long lead time, et cetera, from decision to break new ground to actually producing copper. So there are these certainties. But then the problem is, in the meantime, when you have these periods of spot weakness where there isn't a supply shortage, where there's plenty of copper, those periods don't exactly encourage companies to get mining or get digging. And in fact, they could slow down expansion plans even if everyone knows the long-term math checks out.

Tracy Alloway (2:13)

Absolutely, there's that mismatch between the short-term and the long-term outlook. There's also that tension on the ESG side of things as well, this idea that you want abundant copper in order to decarbonize the energy system. But at the same time, a lot of people who are ESG-minded are going to feel very uncomfortable about encouraging new mines in Chile or something like that.

Joe Weisenthal (2:37)

Yeah, yeah, that's right. And obviously, they have big environmental impact, they have big water impact, and so forth.

But as we said at the beginning, copper is once again front and center. The price is back on the rise. We're back talking about this long-term structural mismatch, et cetera. And so I think it's time to sort of delve deeper into this question and see where the math is today, so to speak.

Tracy Alloway (3:02)

Yeah, I have the Ghostbusters theme in my head, and it's like whenever you want to talk about copper, who are you going to call? This guy.

Joe Weisenthal (3:09)

We're going to talk to Jeff Currie. So we've had him on the podcast at least a couple of times before.

Back in 2021, we talked to him, and he talked about this idea of like a new commodity super cycle. And of course, oil was surging and all these commodities were surging as the global economy was reopening.

Then we talked to him again in 2022, and he said that copper specifically may end up being one of the tightest commodity markets he's ever seen. So real issues with supply.

And again, looking pretty good these days. So we are back with Jeff Currie, who is now in a new role. So when we talked to him before, he was the head of commodities research at Goldman Sachs. But today he is the chief strategy officer of energy pathways at the Carlyle Group. So Jeff, thank you so much for coming back on Odd Lots.

Jeffrey Currie (3:57)

Great, it's a pleasure to be here. And hey, copper 10,000 and Odd Lots, here I come. So just like a clock.

Joe Weisenthal (4:04)

There's our headline right there. So Jeff, why don't you talk to us about the last few years? It's been like over two years since we've talked to you. So what's happened in copper world or commodity world over that time?

Jeffrey Currie (4:14)

Well, let's go back and lay out the super cycles thesis that we put forth back in, it was October of 2020 The bottom line is the story is more compelling today than it was then. So you really have to ask what went wrong. So let's start with the story and then let's go to what went wrong over the last 12 to 18 months. So if we go back and review the story, there was structural supply constraints, which we called the revenge of the old economy. Put bluntly, poor returns in the old economy, saw capital redirected to the new economy, starving the old economy of the investment it needed to grow the supply base. Pretty straightforward story, still the story in markets like copper, even oil to a lesser extent, but it's pretty much apparent across the old economy. So structural supply story, very much intact. What about demand?