What’s going on here?
The world’s biggest independent commodity trader decided that metals are the way to go.
What does this mean?
Vitol made $23 billion in profit last year, which mainly came from energy investments – think oil, natural gas, and power generation systems. Yet this week, Vitol confirmed that it’s moving at least one eye onto the metals market after a long time spent turned away. The trading firm predicts that the next decade will be a biggie for metals, and the second-biggest commodity trader agrees. Trafigura expects that the rise of electrically powered systems – electric vehicle charging stations, renewable energy, and AI data centers – will lead to an insatiable appetite for their key ingredient, copper.
Why should I care?
For markets: Copper is a showstopper.
Trafigura believes that by 2030, supply of copper will land four to five million metric tons shy of demand. To make matters worse, the firm says that AI systems and data centers could potentially add another million to that deficit. And because companies will pay up for their lot, not least because copper could make or break their AI ambitions, the metal’s price could hit the sky. It’s already started the ascent: the price of copper hit a 15-month high on Wednesday, and copper miners’ share prices are on the up as well, since higher prices would pad out their profit margins.
The bigger picture: Hedge your bets.
Higher commodity prices feed into prices of everyday stuff – it’s basically impossible to make anything without metal or energy, after all. So if prices stay higher for longer, that raises the risk of an inflation sequel and makes it harder for central banks to trim interest rates – and remember, higher rates can weigh on stocks. Commodities could be worth a look, then. Not only do they let investors catch a ride while prices are high, but they could hedge a portfolio against inflation and stock market dips.
