Robert Friedland on the World's Monumental Shortage of Copper

Joe Weisenthal (0:03)

Hello, Odd Lots listeners, I'm Joe Weisenthal.

Tracy Alloway (0:06)

And I'm Tracy Alloway.

Joe Weisenthal (0:07)

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Tracy Alloway (0:11)

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Joe Weisenthal (0:21)

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Tracy Alloway (0:30)

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Robert Friedland (0:49)

Bloomberg Audio Studios, podcasts, radio, news.

Joe Weisenthal (1:04)

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

Tracy Alloway (1:10)

And I'm Tracy Alloway.

Joe Weisenthal (1:11)

Oil has been in the headlines a lot lately. Just a bit. For obvious reasons. But, you know, it has gotten the headlines, but another commodity that's near basically at record highs, that just keeps to be going straight up for years now is copper.

Tracy Alloway (1:27)

Yeah. So copper, I think, reached a new high of it was something like 14,875 a ton earlier this week.

It is down about 3% as we're recording this episode, I think it kind of speaks to, I guess, one of the tensions when it comes to copper, which is everyone has been saying, or a lot of people have been saying, that there is this long term, strong demand impulse for copper because data centers use copper, we need it to electrify the grid, all of that stuff. And yet the price has often lagged behind, and moreover, you get this volatility that means people who actually produce copper are sometimes reluctant to increase production. And in fact, I was looking at a note from our colleagues over at BNF recently, and they were saying that this year, we might have the first decline in copper production since 2017

Joe Weisenthal (2:22)

I mean, this is part of why so-called super cycles can happen. And we've talked about this in so many different roles, both with the pure like sort of like resource extraction industry, but even now, there's sort of like manufactured goods, like if we were to talk about memory, which is you can have these like periods of volatility.

You don't really want to invest more during periods of volatility. Then you sort of have like a scarcity of capacity. Then it ramps up the price, and then it's like, I'll build more, but then it's like, I don't remember that.

Tracy Alloway (2:52)

Memories are long, right? And we saw that in shale as well.

Joe Weisenthal (2:55)

Memories are long. And then, you know, it's like, I guess it's human psychology.

Everyone finally taps at the same time. And they're like, you know what? We're going to massively expand mining operations, which don't happen overnight by any stretch. And then suddenly you get gluts and your shareholders get mad at you, et cetera. Why don't you just ride this wave, et cetera? And so these things can then just persist and feed on each other for a long time. But to your point, it's a crucial, you know, there's so much interest these days in resource nationalism, infrastructure, electricity, and so forth. And copper really is at the center of it.

Tracy Alloway (3:30)

Did you see this is a slight tangent, but did you see the tweet from Peter Schiff?

Joe Weisenthal (3:34)

No. What do you say?

Tracy Alloway (3:37)

With copper at 6.85 per pound, the melt value of a pre-1982 penny is 4.5 cents. And he calls it, he calls melting pennies not only risk free, but the upside potential is huge, which is kind of funny because I'm pretty sure that melting down US currency is in fact illegal in the US. And so there might be a little bit of a risk there.

Joe Weisenthal (4:02)

I also think about how much legwork and effort you would have to do to even find a bunch of pre-1982 pennies and whether that would come to more than three pennies each when you think about the effort. Anyway, but yes, copper.

Tracy Alloway (4:18)

I mean, that said, that tweet is funny for many reasons, but there is a lot of supply, copper supply, that comes from recycling. And that is in tension with the new production as well.