Talk about “copper”: the copper market has already entered the supercycle

◇The reason for the sharp rise in copper prices was the suspension of operations at the Panama copper mine, but the main reason for the sharp rise was “bomb buying” by both the US and China ◇
 
LME copper futures prices hit an all-time high at the beginning of last week, and soaring gold, silver, and copper prices have been reported one after another in the mass media. Until now, gold, silver, and copper prices, above allThe rise in copper prices is closely related to changes in the Chinese economy and US interest rate trends, and it rises and falls with constant discipline depending on the economy and interest rate cyclesI'll do it. The US ISM manufacturing index in March surpassed the temporary milestone of 50, and since China's economic statistics are gradually showing a sense of bottoming out, there are many ordinary analysts and commentators who point out that expectations for economic recovery led to an increase in copper prices. However, even so, the Chinese economy, which is the largest consumer country, is still sluggish, and while the high US interest rate environment continues, there is still a sense of incongruity with the high price update of the copper exchange rate. Actually, what is the “copper exchange rate”We have entered a “super cycle” that we have never seen beforeI'm looking forward to it. Of course, there is a translation for this, and to sum it up in a nutshell, “bomb buying” by both the US and China has boosted copper prices.

First, what is the background of the current sharp rise in copper pricesThe Panamanian Supreme Court ordered the suspension of operation of the copper mine because the Cobre copper contract between the country's government and Canada First Quantum Minerals was unconstitutionalIn addition (difficult to resume this year), due to navigation difficulties associated with a drop in the Panama Canal water level, there was a view that copper was in excess demand. Also, the US authorities sounded an alarm that there would be a shortage of electricity during the summer season this year, and they pointed out that the cause was a decline in the operating rate of new energy power generation such as solar energy.New demand for US power generation equipment is rapidly emerging, and demand for copper wire is also rapidly increasingThat's why I did it. However, these are only the triggers for the sharp rise in copper prices, and they are not the main causes that push up the all-time high.

China is the largest consumer of copper in the past, mainly driven by strong demand for real estate and basic infrastructure. However, in recent years, with the spread of EVs, which is a national policy, copper demand for batteries and motors has become a new growth engine, and it has temporarily attracted attention as next-generation petroleum. There has been a change in the situation since last year. In addition to China, the United States is also involved in the scramble for copper.The US and China are not fighting for leadership in the EV field, and actual demand for copper from data centers for AI will be larger than expected in the futureTherefore, a fierce battle is already unfolding to secure copper.

Of course, data centers are powered by power sources, and copper products such as electric wires and bus bars used in connection with electricity account for about 75% of the total copper usage of data centers. In addition to Microsoft, Amazon, Alphabet, and Meta in the US, the rush to build data centers by Alibaba, Baidu, Tencent, etc. in China is spurring copper demand. Also, in addition to copper demand as a power supply,Optical fiber for connecting to data center servers is shifting to high-speed copper. Demand for copper in data center “interconnections” has also expanded to 22% of the total, which is the main reason that copper demand has entered the largest “super cycle” ever. In fact, the spotlight was concentrated on the “DGX GB200 NVL72” at NVIDIA's GTC2024 held in April this year, and it is no exaggeration to say that it played the leading role. The “NVIDIA GB200 NVL72” is an exascale computer housed in one rack based on the company's next-generation platform “Blackwell,” and the real-time performance of parameter LLM inference in trillion units can be accelerated by 30 times. One thing I want you to pay attention to36 Grace CPUs and 72 Blackwell GPUs are connected to the NVL72In addition to doing it,It is equipped with 9 NVLink switches, and uses “5,184” high speed copper wires！

Refer to the old model standards previously disclosed by NVIDIA,The total length of over 5,000 high-speed copper wires is over 3.2 km. The diameter of each high-speed copper wire is approximately 7.10-9.44 mm, and the weight of copper wire per rack is approximately 1.4 tonsI'll also do it. If shipments of the “NVIDIA GB200 NVL72” were to rise to 50,000 units, it can be estimated that this product alone would generate a new copper consumption of about 70,000 tons. The above is a simple trial calculation by the author himself, and there are always errors. However, I don't think there is much other than doing this kind of trial calculation, so it should be a reference and you can understand the scale of the rapid increase in copper demand. In addition to power supply (75%) and interconnections (22%) in data centers, the remaining 3% of the total HVAC systems, pipes, etc. are also made of copper in so-called cooling systems.

Profit-taking sales to overheated gold, silver, and copper prices were conspicuous in the last few business days. Related stocks, which have skyrocketed, are also completely weak. If the above scenario “Copper Super Cycle” is true, I would like to take this adjustment phase as a sneak peek. Among related stocks, Freeport McMoRan (FCX) is the most major and royal road in the US, and if it falls into the 50 dollar split, the deliciousness of a hot buy rises again. If you are looking for a sense of relative cheapness, pay attention to 2 brands: Chianci Copper (00358), which is listed in Hong Kong, or VALE (VALE), which is a major iron ore company that is also listed in the US.