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Is Peak Copper Coming?

Markets and supply chains across the commodities spectrum have taken hits from the COVID-19 pandemic. The base metal copper is no exception. Now, some analysts are once again calling for peak copper in much the same way as others have voiced concerns…

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Markets and supply chains across the commodities spectrum have taken hits from the COVID-19 pandemic. The base metal copper is no exception. Now, some analysts are once again calling for peak copper in much the same way as others have voiced concerns over peak oil or peak gold.

After the 2008 recession, copper surprised everyone with its rapid ascent — propelled by China's stockpiling program, it hit record-high prices. In 2011, concerns that peak copper was on the horizon were exacerbated by the rapid industrialization seen in China. As the Asian powerhouse's copper demand skyrocketed, copper stockpiles had a tough time meeting the increased demand.

That raised the question of when the market will reach peak copper. The predictions surrounding the timing of peak copper were are all over the map, ranging from 2020 to 2100.

While it's clear now that 2020 wasn't the year copper supplies would peak, there are still signs in the red metal's fundamentals that a tight supply scenario — and higher prices — is on the horizon. Unlike peak oil, which was reversed with the help of fracking, no such technological advancements are available for copper production, and there are no viable alternatives for the metal across its many industrial uses.

Peak copper: China's key role in demand

In the past decade, strong growth from China has resulted in accelerated copper demand. In a market already known to operate on thin margins, Chinese demand has quickly created a copper supply deficit. The potential for other emerging markets to enter periods of rapid growth is also fueling speculation that increased demand for copper has only just begun.

Furthermore, interest in copper as an asset class has been piqued, and prices are now being impacted by investment demand in addition to traditional physical demand. Copper is deemed a strategic asset in China, and it provides a way to diversify from the US dollar and US treasuries.

In 2011, the tightening balance between copper supply and demand resulted in a rapid rise in the red metal's prices. Copper hit a low of US$1.32 per pound (US$2,910.09 per tonne) in January 2009, then surged to US$3.55 per pound (US$7,826.40 per tonne) by April 2010 on its way to an all-time peak of $4.58 per pound (more than $10,097 per tonne) in February 2011.

Copper prices have mostly traded under the US$3 (US$6,600) level for the past decade. However, a looming supply crunch, exacerbated by coronavirus-related supply disruptions, is pushing prices up again. The price of copper reached an all-time high in the second quarter of 2021, trading above US$10,700 per tonne.

Going forward, a long period of undersupply is expected in the copper space, and that has the potential to send prices even higher in 2022 and beyond.

Peak copper: Why supply is lagging

While copper demand is expected to rise, supply may not keep pace. This is resulting in speculation that we are on the path to peak copper. However, according to a 2019 report out of the University of Iceland, the researchers believe that focus on recycling copper scrap will help delay peak copper.

The Copper Development Association pegs the current known worldwide copper ore resources at nearly 5.8 trillion pounds, of which only about 0.7 trillion pounds, or 12 percent, have been mined throughout history. Plus, nearly all of that mined copper is still in circulation, as the red metal's recycling rate is higher than that of any other engineering metal.

So why is the market faced with a supply deficit? The copper supply deficit isn't due to a lack of available copper to mine, it was caused by complications in bringing high-quality copper to the market.

In an interview with Rick Rule at the 2020 Sprott Natural Resource Symposium, Robert Friedland of Ivanhoe Mines (TSX:IVN,OTCQX:IVPAF) said, "The copper price probably needs to double its current price for the average low-grade copper porphyry in Peru or in Chile to become viable."

Similarly, back in 2019, Reuters reported, "The copper industry has suffered from years of underinvestment, and it is now working feverishly to develop new mines and bring fresh supply online as the electrification trend envelops the global economy." Expected global copper shortages have major end users of copper worried about the security of their supply chains.

"There are (copper) deficits being forecast by many of the brokerage firms — Goldman Sachs (NYSE:GS) is one of the ones leading that," Rob McEwen, chairman and chief owner of McEwen Mining (TSX:MUX,NYSE:MUX), told INN in an interview. "I feel that the demand for copper is going to increase with the growth of Asia, with the growth and the proliferation of electric vehicles and (copper's) use in regenerative energy. I think we're entering a strong period of demand for copper."

McEwen Mining recently created McEwen Copper, a subsidiary spinoff of the company's copper assets including the Los Azules project in Argentina.

It's worth noting that copper exploration and mining require a great deal of capital investment. The last major investment cycle was in the 1970s, and although we are currently in a cycle of increased exploration spending, new discoveries are few and far between, and have not been enough to compensate for the decline in ore grades from the larger, older mines.

The other big factor impacting new supply to the market is the time it takes to get a new mine into production. First, an economically viable reserve has to be discovered, and then this discovery has to be developed. Many projects don't even make it past this point. Often, by the time a mine is about to be constructed, the metal's price collapses and the project is abandoned.

What's more, miners that make it past the point of exploration and into construction and mining are faced with a multitude of potentially time-consuming delays, including everything from equipment shortages to permitting problems.

Peak copper: COVID-19 further tightened supply

The worldwide COVID-19 crisis has further impacted the copper supply crunch. In July 2020, Eurasian Resources Group CEO Benedikt Sobotka noted that the impact of the pandemic had shrunk the mine project pipeline due to lockdown-related delays and capital expenditure guidance cuts from copper miners. Sobotka warned that the supply impact of the coronavirus will extend far beyond 2020.

Speaking at a webinar that same month, Bruce Alway, director of metal research at Refinitiv, said, "(There are) sizeable losses for both copper and zinc at the mine level, which at the peak saw around 110 operations affected."

Moving ahead, S&P Global Market Intelligence commodity expert Thomas Rutland stated, "We forecast consumption will outstrip production over the period to 2024, resulting in a growing refined market deficit and increasing copper prices."

Bloomberg reported in October 2021 "Copper's immediate prospects are supported by low inventories, while the shift to low-carbon energy sources paints a rosy picture for the longer term." However, on the other side of the equation, "global shipping bottlenecks and energy shortages in China and Europe are dimming the demand outlook heading into next year."

There are also clear signals further down the supply chain, most notably in China, the world's largest consumer and third largest producer of copper. The slowdown in China's property sector as a result of the debt crisis in the country's real estate market has been the biggest factor influencing the global copper market in 2021 outside of the COVID-19 pandemic.

So is peak copper really coming? Perhaps not yet, but it's clear the supply and demand situation could remain tight, leaving a market that's potentially ripe for investment. If you'd like to learn more about copper's fundamentals, click here to read our introductory guide.

Don't forget to follow us @INN_Resource for real-time news updates!

Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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Government

“The Omicron Variant” – Magic Pills, Or Solving The Africa Problem?

"The Omicron Variant" – Magic Pills, Or Solving The Africa Problem?

Authored by Kit Knightly via Off-Guardian.org,

Yesterday the WHO labelled the sars-cov-2 variant B.1.1.529 as a “variant of concern” and officially named it “Omicron”.

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"The Omicron Variant" – Magic Pills, Or Solving The Africa Problem?

Authored by Kit Knightly via Off-Guardian.org,

Yesterday the WHO labelled the sars-cov-2 variant B.1.1.529 as a “variant of concern” and officially named it “Omicron”.

This was as entirely predictable as it is completely meaningless. The “variants” are just tools to stretch the story out and keep people on their toes.

If you want to know exactly how the Omicron variant is going to affect the narrative, well The Guardian has done a handy “here’s all the bullshit we’re gonna sell you over the next couple of weeks” guide:

  • The Omicron variant is more transmissable, but they don’t know if it’s more dangerous yet (keeping their options open)

  • It originated in Africa, possible mutating in an “untreated AIDS patient” (sick people are breeding grounds for dangerous “mutations”)

  • “it has more than double the mutations of Delta…scientists anticipate that the virus will be more likely to infect – or reinfect – people who have immunity to earlier variants. (undermining natural immunity, selling more boosters, keeping the scarefest going)

  • “Scientists are concerned” that current vaccines may not be as effective against the new strain, they may need to be “tweaked” (get your boosters, and the new booster we haven’t invented yet)

  • “Scientists expect that recently approved antiviral drugs, such as Merck’s pill, will work as effectively against the new variant” (more on this later)

  • It’s already spreading around the world, and travel bans may be needed to prevent the need for another lockdown

We’re already seeing preparations for more “public health measures”, with the press breathlessly quoting “concerned” public health officials. We’re being told that a new lockdown won’t be necessary…as long as we remember to get boosted and wear masks and blah blah blah.

Generally speaking, it’s all fairly boilerplate scary nonsense. Although it is quite funny that the Biden administration has already put a bunch of African nations on a travel ban list, when Biden called Trump a racist for doing the same thing in 2020.

AFRICA

It’s interesting that the new variant has allegedly come from Africa, perhaps “mutating in the body of an AIDS patient”, since Africa has been the biggest hole in the Covid narrative for well over a year.

Africa is by far the poorest continent, it is densely populated, malnourishment and extreme poverty are endemic across many African nations, and it is home to more AIDS patients than the entire rest of the world combined. And yet, no Covid crisis.

This is a weak point in the story, and always has been.

Last Summer, the UK’s virus modeller-in-chief Neil Ferguson attempted to explain it by arguing that African nations have, on average, younger populations than the rest of the world, and Covid is only a threat to the elderly. But five minutes of common sense debunks that idea.

The reason Africa has a younger population, on average, is that – on average – they are much sicker.

There are diseases endemic to large parts of Africa that are all but wiped out in most of the Western world. Cholera, typhus, yellow fever, tuberculosis, malaria. Access to clean water, and healthcare are also much more limited.

And while it has been nailed into the public mind that being elderly is the biggest risk factor for Covid, that is inaccurate. In fact, the biggest risk factor for dying “of Covid” is, and always has been, already dying of something else.

The truth is that any REAL dangerous respiratory virus would have cut a bloody swath across the entire continent.

Instead, as recently as last week, we were getting articles about how Africa “escaped Covid”, and the continent’s low covid deaths with only 6% of people vaccinated is “mystifying” and “baffling” scientists.

Politically, African nations have shown themselves far less likely to buy into the “pandemic” narrative than their European, Asian or American counterparts. At least two “Covid denying” African presidents – Pierre Nkurunziza of Burundi and John Magufuli of Tanzania – have died suddenly in the last year, and seen their successors immediately reverse their covid policies.

So maybe the Omicron Variant is a way of trying to fold Africa into the covid narrative that the other continents have already fully embraced. That will become clear as the story develops.

Of course, it’s also true that being “African” is media shorthand for being scary, relying on the deeply-seated xenophobia of Western audiences. See: “Africanized killer bees”.

But, either way, Africa is the long game. There’s a more obvious, and more cynical, short term agenda here.

THE MAGIC PILLS

Let’s go back to the Guardian’s “Omicron” bullet points, above:

  • Scientists are concerned by the number of mutations and the fact some of them have already been linked to an ability to evade existing [vaccine-created] immune protection.

  • Scientists expect that recently approved antiviral drugs, such as Merck’s pill, [will work effectively] against the new variant

The “new variant” is already being described as potentially resistant to the vaccines, but NOT the new anti-viral medications.

Pharmaceutical giants Merck and Pfizer are both working on “Covid pills”, which as recently as three days ago, were being hyped up in the press:

US may have a ‘game changer’ new Covid pill soon, but its success will hinge on rapid testing

In the US, an emergency use authorisation can only be issued if there is no effective medication or treatment already available, so the vaccines not being proof against Omicron would be vital to rushing the pills onto the US market, at least.

If Omicron is found to be “resistant to the vaccines”, but NOT the pills, that will give governments an excuse to rush through approving the pills on an EUA, just as they did with the vaccines.

So, you bet your ass that testing is gonna be “rapid”. Super rapid. Blink-and-you’ll-miss-it rapid. Rapid to the point you’re not even sure it definitely happened. And now they have an excuse.

Really, it’s all just more of the same.

A scare before the new year. An excuse to make people believe their Christmas could be in peril. An exercise in flexing their control muscles a bit, milking even more money out of the double-jabbed and boosted crowd, now newly terrified of the Omicron variant, and a nice holiday bump to Pfizer’s ever-inflating stock price.

At this point either you can see the pattern, or you can’t. You’re free of the fear machinery, or you’re not.

There is one potential silver lining here: It feels rushed and frantic. Discovered on Tuesday, named on Friday, travel bans on Saturday. It is hurried, and maybe that’s a reaction to feeling like the “pandemic” is losing its grip on the public mind.

Hopefully, as the narrative becomes more and more absurd, more and more people will wake up to reality.

It has been pointed out that “Omicron” is an anagram of “moronic”.

One wonders if that’s deliberate and they’re making fun of us.

Tyler Durden Sat, 11/27/2021 - 23:45

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Spread & Containment

Israel Moves To Ban All Foreigners From Entry Amid Omicron Variant Fears

Israel Moves To Ban All Foreigners From Entry Amid Omicron Variant Fears

Israel’s Knesset is set to hold a special emergency "coronavirus cabinet" late Saturday night where government officials will vote on enacting a complete closure of…

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Israel Moves To Ban All Foreigners From Entry Amid Omicron Variant Fears

Israel's Knesset is set to hold a special emergency "coronavirus cabinet" late Saturday night where government officials will vote on enacting a complete closure of the country to foreign travel. The ban will tentatively be in effect for the next two weeks.

Already Israel has banned all foreigners arriving from the majority of African countries in recent days on fears that the highly-mutated Omicron coronavirus variant, which first emerged in South Africa, could be the next deadly wave - and with the vaccine possibly doing little to stop it.

AFP/Getty Images

The greatly tightened travel and tourist restrictions are expected to be announced late Saturday night or early Sunday. It's expected to also include a new mandatory quarantine of three days or more for vaccinated Israeli citizens who've returned from traveling abroad. For unvaccinated inbound Israeli citizens the quarantine will be a week.

The fresh travel rules come as authorities scramble to do contact tracing on exposures related to at least one confirmed Omicron case:

Authorities are scrambling to locate 800 Israelis who may have been exposed to the new Omicron variant of COVID-19, a defense official said Saturday.

The Health Ministry confirmed one case of the new variant in Israel, and said there were seven other suspected cases who were awaiting test results.

Four of the suspected cases returned to Israel recently from international travel, and three had not traveled, raising fears of community transmission in Israel.

Prime Minister Bennett ahead of the vote said the government is "preparing for any scenario." And concerning the new still somewhat mysterious variant, the country's interior minister said, "It looks like it might be more infectious, so we’re taking action as fast as possible."

Just days ago the health minister Nitzan Horowitz announced that Israelis will likely have to get a fourth shot, also as children between the ages of 5 to 11 have begun receiving the jab. Ironically the foreign tourist ban is now being re-imposed for one of the most highly vaxxed nations on earth.

At least 80% of all Israelis 16 and older are now considered fully vaccinated.

Tyler Durden Sat, 11/27/2021 - 23:15

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Government

Mexican Authorities List Conditions To Reboot “Remain In Mexico” Program

Mexican Authorities List Conditions To Reboot "Remain In Mexico" Program

Authored by Tom Ozimek via The Epoch Times,

Mexican authorities have laid out a series of conditions for reviving the “Remain in Mexico” program, the Trump-era…

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Mexican Authorities List Conditions To Reboot "Remain In Mexico" Program

Authored by Tom Ozimek via The Epoch Times,

Mexican authorities have laid out a series of conditions for reviving the “Remain in Mexico” program, the Trump-era framework under which asylum-seekers were returned to Mexico to await the processing of their claims, with the development coming in context of the Biden administration’s plans to reinstate the policy following a court order.

Mexico’s Foreign Ministry said in a Nov. 26 announcement that talks have “intensified” with the United States on rebooting the program, known as the Migrant Protection Protocols (MPP), but that Mexican authorities are waiting for a formal response from the Biden administration on a number of concerns.

“The government of Mexico … has raised various concerns of a humanitarian nature regarding the asylum procedure in the United States,” the ministry said, adding that it has “highlighted the need to improve conditions for migrants and asylum seekers, so that they have better legal advice” regarding the processing of their clams, which Mexico said, “must be carried out as expeditiously as possible.”

One of the conditions is for the United States to accelerate development programs for southern Mexico and Central America in order to address the root causes of migration.

Another is for Washington to offer individuals deported under the MPP program medical care and vaccination against COVID-19 “to protect their right to health and prevent the spread of COVID-19 in communities on both sides of the border.”

Mexico has also requested that the United States respect designated return points, taking into account local security conditions and the capacity of Mexican authorities “to provide adequate care to migrants.”

Another “essential” request is for Washington to provide funding for shelters and non-government organizations “in order to improve conditions for migrants and asylum seekers in a substantive way.”

The demands come as talks between the two countries continue on reimplementing the MPP program after a court in August ordered that the Department of Homeland Security (DHS) reverse its June decision to halt the policy.

“In compliance with the court order, we are working to reimplement MPP as promptly as possible,” DHS spokesperson Marsha Espinosa told Axios.

”We cannot do so until we have the independent agreement from the Government of Mexico to accept those we seek to enroll in MPP,” Espinosa added.

“We will communicate to the court, and to the public, the timing of reimplementation when we are prepared to do so.”

The Biden administration is facing an unprecedented surge in illegal immigration that critics say is fostered by its lax enforcement policies, including halting MPP and curtailing the use of Title 42, which is used to expel illegal immigrants during the COVID-19 pandemic.

Tyler Durden Sat, 11/27/2021 - 16:45

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