Transcript: Copper May Be the Tightest Commodity Market Ever
These days, all commodity markets are booming. And oil gets most of the attention for obvious reasons. But the big story of the next decade could be copper. Thanks to booming demand for EVs and overall electrification of everything, alongside minimal investment in new mines, copper might be the tightest commodity market the world has ever seen. At least according to Goldman Sachs. On this episode of the podcast, we speak with the firm’s top metals strategist, Nicholas Snowdon, about how high copper could potentially go. The transcript has been lightly edited for clarity.
Points of interest in the pod:
Why the copper deficit is going to get so big — 5:35
Why total demand is going to boom — 8:15
Where will the copper come from? — 11:30
It takes longer and longer to build a new mine — 14:22
Peak production is on its way — 22:13
The copper bear case — 30:06
Why copper $100K is possible — 35:19
Joe Weisenthal: (00:11)
Hello, and welcome to another episode of the Odd Lots podcast. I'm Joe Weisenthal.
Tracy Alloway: (00:16)
And I'm Tracy Alloway
Joe: (00:17)
Tracy, I feel like a lot of our best episodes are often based on something in a previous episode. And we're like, “oh, that sounds interesting.” Like, we did the dredging episode because of something that we learned about when we were talking about why your luggage was stuck or why your goods were stuck.
Tracy: (00:34)
Yes. That's exactly right. And this is a similar episode, isn't it? We heard something interesting and it came from the commodity space and we've decided that we need to dig in a bit further.
Joe: (00:45)
So earlier in the year, a couple months ago, I recall we were having a chat with Jeff Currie, who is the top commodity strategist at Goldman Sachs. And of course the, the overall topic was just like this tremendous commodity inflation that has been the story for much of 2021 and 2022. And a lot of the focus has been oil and a lot of the focus has been food, but then he also said that copper specifically might be one of the tightest commodity markets that we've ever seen in history.
Tracy: (01:17)
Yeah. Which is kind of surprising because I mean you just don't hear copper talked about as much as something like oil and gas, but if you look at the price chart of copper, it's been coming down in recent months, mostly because of, um, you know, concerns over China's economic growth and the lockdown and things like that. But it's not necessarily a market that is screaming structural under investment and supply tightness.
Joe: (01:43)
Right. I think there's sort of like this long term story, because the increases in demand for copper are expected to be very high unlike oil. It takes a really long time to get new production online. It's not like you just like put a new rig out somewhere in Texas and the Dakotas and start pumping. There's a lot of demand for copper and although the prices are down recently, it's still up a lot since pre-crisis. So it's still a tight thing, but I think structurally long term, apparently it seems like it's gonna be a tough market.
Tracy: (02:18)
Well, this is what I'm trying to get at, perhaps inelegantly, but copper is something that we don't talk about that much. But if you look at at the long term dynamics, it seems to have some resemblance to what we've seen with oil and gas. So big booms and busts that kind of lead to structural under investment or under exploration and unwillingness to expand minds also because of environmental concerns.
And then the reason that's so interesting is because if you look at what's going on with the attempts to electrify everything, attempts to bring down emissions and things like that, well, you're gonna need electric wires for that. And so copper becomes a really important strategic commodity that is nevertheless kind of overlooked at the moment.
Joe: (03:04)
Yeah, totally. So the line that Jeff used in our podcast, he said, “I would argue copper is likely to be the tightest commodity we'll have ever seen.”
So it was like, alright, we gotta follow up. And so we are going to follow up on copper with a colleague of Jeff’s. We are going to be talking to Nick Snowden, who runs metals research at Goldman Sachs. And he'll explain that line and what we should be watching for with copper. So Nick, thank you so much for coming on Odd Lots.
Nicholas Snowdon: (03:58)
Really a pleasure, pleasure to be on with you both.
Joe: (04:01)
What does that mean? When we talk about a tight commodity market, how do you even define that?
Nicholas: (04:08)
I think when we look at the outlook for the copper market over, over the course of the next 3, 5, 10 years, what we see are essentially impossibly large deficits developing over that timeframe. By the middle of this decade, we're forecasting the largest ever deficit in the copper market. So just two years away from now. And by the end of the decade, the largest ever long term deficit.
So I think, you know, what that's telling us relative to, to the starting point already of a very low inventory is that this market has such severe imbalances that, you know, they're not kinda resolvable at current price levels. And I think that's crux of the issue in the copper market. It's just an impossibly tight future. At today's price that there's no fundamental adjustment underway that that can meaningfully solve what lies ahead.
Tracy: (05:10)
So can you dig into that a little bit further because, you know, I mentioned the price action in copper recently. It is up a lot over the past year or two, but it has been coming down. And so I guess my question is what is it that you guys are seeing that the market isn't currently seeing and what is responsible for the looming supply imbalance that you just mentioned?
Nicholas: (05:35)
Yeah, sure. I mean, I think there, there's a kind of a horizon difference there. You know, I think in the near term commodity markets are ultimately driven by spot fundamentals.
And you know in the current kind of environment we are seeing a weakness in Chinese demand due to the COVID lockdowns that has generated some softening effect on, on the market. On top of that, we are seeing slightly stronger exports of copper out of Russia than was expected when you go back to the beginning of the invasion. So that's creating a bit of softness in the market and, and that has certainly weighed on price, but, you know, those are short term transitory issues in, in the copper market. When we talk about the, the structural bull market copper that's underpinned ultimately by, by two key factors, one, um, you know, that's essentially no decarbonization without copper.
It's an absolutely integral ingredient of the key green technologies: EVs, EV charging infrastructure renewables. A I think we see the demand impact from decarbonization efforts over the course of this decade generating as much of a, of an uplift, a copper demand as China did in in the 2000s.
At the same time, that's coming up against an environment where we hit peak copper supply within the next two years, and there's a complete absence of fresh investment coming into the sector. And so after that peak, supply is trending into an open ended contraction. So you have this, clear tightening tension between this boom in demand tied to the green transition and, you know, a complete lack of growth coming from, from the supply.
Joe: (07:47)
Let's talk more about the demand side. So in 2022, right now, how many tons of copper does the world use, I don't know, in a day or a year or whatever, however you like to measure it? And what is the sort of industry or usage breakdown. And then what do you see as that number, the total volume demanded in the year 2030, and what will be the segmentation of where that demand is coming from?
Nicholas: (08:15)
So, I mean, if you look at the, the global copper market today, demand in 2022 will, will come in at around 24 million tons. So the way we look at that demand breakdown is, green versus non green demand. Today the world is dominated by non-green demand.
That's copper going into construction, you know, wiring in your house, wiring in electronics in cars in the grid. So of the 24 million tons this year will, that will make up about 22 and a half million tons. So it’s the absolute dominant driver of global copper demand today and green demand, which we categorize as electric vehicles, electric vehicle charging infrastructure, and then the kind of green power sector.
So wind and solar that, that only amounts to about one and a half million tons of copper demand today. But if you look at what's gonna play out over the next 5, 10 years, that balance between green and non green demand is gonna switch quite quite sharply. By 2025 green demand will have doubled: going closer to 3 million tons. And by the end of the decade that number will have risen to between 6 and 7 million tons. So green demand will go from, from today being only about 5% of the global demand to closer to 20%. So an immense uplift. And you know, I think key is it it's already starting to play out. You know, we're already seeing incredible growth in the EV sector, particularly in China.
You know, the growth rates there are spectacular. A near doubling in market size well beyond, any expectation going back to the beginning of this year or, or next year, but, but also in Europe as well. And we're also starting to see really aggressive growth in green infrastructure. And that's not just China that that's Europe as well. So, you know, it, it's no longer theoretical demand, even though it's a small part of the market it's growing at a very rapid rate. Um, and that, that rate is gonna accelerate over over the course of the, the next few years.
Tracy: (10:47)
So I think I'm gonna ask the same question, but just from the supply perspective. So where does copper come from? Or maybe a better question is how hard is it to get copper? Cuz I think copper, I think, you know, big mines that are bringing out new supply, but I also remember back in 2008, 2009, when we also had very high copper prices, there are all these stories about people stealing scrap metal in order to get bits of copper and, and sell them for loads of money. So how difficult is it to actually source and what does the supply path actually look like for the next few years?
Nicholas: (11:30)
The first point to make is that there isn't a shortage of copper in the Earth's crust. There are lots of potential mine options out there, but we're just not seeing capital flowing into, into those projects.
And, and I think it's very different to what we saw in the two thousands because in, in 2002, when that bull market began almost immediately, you saw the supply side respond, you saw projects being approved and investment flowing rapidly. And the supply side really almost moved in lockstep with the increase in price. This time round that isn't occurring at al. Over the last two years, even though the copper has doubled, there hasn't been a single new copper mine approved.
So it's a startling difference. And I the reasons for that are similar to some of the issues facing broader commodity extraction industries. But I think the number one constraint on the copper mining industry is the experience of the last cycle. Because the mining industry faced a near death experience in in 2013 and 2014 as a result of the overbuild in response to high prices in the mid late two thousands. And, and I think now you have you know a much more conservative mentality amongst management teams in the mining sector, reflecting that experience.
And so that conservatism, you know, is very difficult to erode and it's certainly still firmly in place. I think it's not just that though. Also, I think, you know, what's different now to 20 years ago is also we have the ESG influence on investor allocation, but also at a micro level, you know, so less capital has flown into, into commodity sectors because they haven't screened well, um, through, through the ESG filter.
But, but also, uh, you know, at a micro level at a mining level, if you want to build a, a copper mine today, you know, even before you break ground, um, you will, will spend two to three years waiting to, to get the right permits to actually move forward with construction 20 years ago, that same process took six, maybe 12 months maximum. So, you know, wow, much, much higher hurdles from an environmental and social perspective.
Joe: (13:55)
Is this a global phenomenon that everywhere around the world? CauseI'm not particularly surprised that say in certain developed markets that that there's been a big change in terms of the environmental expectations and the permitting process. But is this like a global phenomenon?
Nicholas: (14:22)
Yeah. I mean, look. One of the hardest places in the world to, to get a, a copper project going today is Chile. And Chile is the Saudi Arabia of the copper market. And that is one of the places where the permitting process has more than tripled in length. So it is incredibly difficult, but I think the other problem is that, you know, young people have not been going into the mining sector for the last decade.
They've been going into tech. And so what that means is you've got a real bottleneck now on skilled labor in the industry. There aren't enough engineers to a project.
If you want to wanna get it off the ground. So there's practical bottlenecks, there's ESG bottlenecks, and there's just conservatism around spending money. And, and on top of that, investors are, are kinda getting a great cash return story from, from the mining sector, you know, very, very high free cash flow yield. And they're not demanding growth from, from the sector either. So you, we're not, we're we're first innings in, in terms of the, the supply response for, for, for copper. Certainly
Joe: (15:31)
Tracy, it's just so fascinating. How so many of these stories keep align of like totally the lesson having to unlearn the lessons essentially of the last decade in order to make
Tracy: (15:40)
Any yeah. We internalize trauma from the last cycle. And now we're very careful about fueling the next boom bust cycle, but in the meantime you get this underinvestment and higher prices, but they don't seem to do very much. One thing I'm wondering is let's assume that everything stays pretty much as it is. Environmental regulations stay put, because people do care about the climate. And there are concerns about digging stuff out of the earth. And here's continued under investment for various reasons. How fungible is copper? Like what are the alternatives that could be used when it comes to something like electrifying a car or something like that?
Nicholas: (16:21)
Well I think one thing we've gotta recognize about copper is that it is not a raw material where it has close competitors. In its key role as a, as a conductor, um, because it's such a good conductor, um, that, you know, it really has a primacy over it, its key roles in, um, the grid in cars. Um, now that's not to say there aren't other potential conductors, but you know, things like aluminum, um, you know, require a lot more aluminum to achieve the same level of conductivity as, as copper. And so it's just not practical for uses where you have a, a small amount of space. Um, and so really there isn't a competitor for copper for, you know, for, for, for the majority of it, of it, of its key roles. Um, that's not to say that there couldn't be some substitution towards other raw materials in, in, um, kind of less space confined.
Nicholas: (17:18)
I think aluminium is top of that list. But look, if you look at the aluminium market right now, that's facing its own story of under investment on the supply side and also is levered to the green transition. And that's reflected in the very rapid run out in aluminium price that we've seen over the last 18 months.
So the most obvious potential substitute is also facing its own near record deficits. And so it's not, you know, an attractive substitution choice. So I mean, I think the answer to you would be there isn't really an obvious raw material that can step in.
Now look, necessity is the mother invention. And you know, if copper prices go to the levels that, that we expect, if not higher, then, you know, will that incentivize much greater efforts in, in terms of, of trying to find alternatives or perhaps more reasonably kind of dilution of the level of copper used in some of these, um, uh, areas. And that that could well play out, not just in non green uses, but also new new areas. So you may well see slightly less copper used in an EV in five, 10 years time, partly because of the high prices. And just partly because it's technology, that's new, that's developing and, and over time they'll find efficiencies. I think that's probably more of the demand effect you'll see than, you know, a kinda a material step away from copper to, to another raw material.
Joe: (18:53)
You said something that I wanna go back to cause it seems extremely important. And it's not something I don't know if any other guests have really talked about it, which is the talent crunch. So it's like, okay, there's the cash shortfall, the reluctance to invest and the underinvestment and so forth and the sort of ESG environmental considerations.
But of course we just had this decade, right, where if you are a talented person, and you want to make money and have a booming career, you probably went into software or or something like that. Can you talk more about this idea, the talent shortage of like, what happens when the best and the brightest don't want to work in, uh, extractive industries?
Nicholas: (19:37)
I think the most obvious impact is that you just have a shortage of labor to drive supply adjustments. There literally are a handful of teams recognized around the world who are good at building and growing production at copper mines.
Now that reflects the lack of new entrants into the mining market. But I think that that really just limits the pace at which you can undertake new new projects. So even if you decide today, you know, we are gonna spend several billion on a new copper mine, you're still gonna struggle to find the engineering team to, to support that. So I think that's a bottleneck and and a further delay on, on response. But of course the other aspect is that, you know, you probably can find the, the right team, but you're gonna have to pay top dollar together.
And, and so that then feeds into this risk of capital cost escalation, which is exactly what we saw back in the two thousands prices of, of inputs into projects, labor machinery, fuel, you know, we're all rising rapidly. And so initial capital costs for projects ended up being far too low versus where they ended up. And I think that's, that's a very real risk that, that we're facing in, in the mining sector today. And on top of that, yeah, it means costs are just rising. So the cost curve in, in the copper mining industry and in many other metals is, is inflating and, and the top end of the cost curve, the most expensive mines in the world to, to operate, you know, is now within touching distance of today's copper price. Um, so I mean, that's actually important for supporting where prices are, but it, you know, it doesn't solve anything in, in terms of the structural imbalances in this market. It just makes it that more expensive to solve and ultimately supports the idea that we need, um, much, much higher prices than we have today.
Joe: (21:43)
So this is one and a half questions, but what does the supply outlook look like for the existing set of copper mines that are in production? Like how much are they going to fade in terms of how much more can be pulled out of them? And at what point will we see the dam break, so to speak such that these high prices and this high demand actually does induce someone somewhere to break new ground on a mine?
Nicholas: (22:13)
So I think if you look at current production what we have over the next 12 months is a kind of final spurt of growth set to come through.
And then we hit peak production at the end of ‘23or in the beginning of ‘24. So there is a little bit of growth, that's from a small number of projects in Chile, Peru and in the copper belt in Africa. But then after that, we essentially flatline, and then on the, the kind of current guidance from, from producers, we'll start to, to enter a phase of open ended contraction of around 1% a year from, from 2025 onwards.
So I mean, that's pretty set in stone. I think, you know, in terms of, you know, what's the, the, the kind point that, that kind of changes that, um, I think it really has to be price, but I think it also has to be a realization that, you know, copper is this absolutely key raw material for the green transition and, you know, is gonna be a, a hurdle, a bottleneck on the planned pace of, of decarbonization.
We're just not gonna have enough copper around to support the necessary growth in, in green technologies on, on, on the kind of current roadmap. So I think, you know, that means price has to be absolutely key, but I think it also has to be a function of policy makers, um, governments kind of grasping that fact and, and perhaps kinda easing the, the ability to grow production. Um, so I think it's a confluence factors, um, but you know, absolutely number one, it, it has to be much, much higher prices cause today's price is not gonna moving the needle of all in, in terms of, um, producers, you know, interest in, in, in investment.
Tracy: (24:18)
One thing we've seen recently with certain commodities that might be in immediately tighter markets are the actual customer of these commodities trying to secure their own supplies. So for instance, Tesla signing deals in order to get stuff like nickel from specific suppliers. Is that something that you would expect to happen with copper that sort of vertical integration of end users actually trying to strike deals to source their own supply?
Nicholas: (24:51)
I think it's perfectly possible because I think the issues that the copper face faces right now is far more extreme than some of the battery raw materials where, where you've seen that proposed. You know, I think we're not in as acute a stage of shortage today as some of those other metals. And so it's not as front and center, but I think in two, three years time, given how tight things are gonna get, we will be hearing very, very similar conversations around copper.
Now that's absolutely too late. Those conversations need to be happening today. And, you know, if the miners are not willing to start to invest, then you know, it should be these key downstream consumers who are pushing, pushing that. So I think, yes, absolutely. I think that will have to happen. But it will probably happen too late. Um, and, you know, as a result, prices are gonna go absolutely ballistic to the upside and, you know, the downstream will suffer because of the the current sort of intransigence in, in terms of supply investment.
Joe: (26:05)
What are the environmental costs of mining? I mean, obviously I assume the the countries and governments that are reluctant to rapidly approve new mines have legitimate concerns about the environmental risks. So what are they? And then specifically, like how much do we all have to become Chilean political experts now to understand what's gonna be happening in the coming years?
Nicholas: (26:29)
I think from a mining perspective, you know, I think the mining sector has actually been very good at reacting to the new kind of ESG standards on operations. You know, there's no kind of challenge for the mining sector in, in terms of respecting new rules, respecting nature, and the water supply.
Joe: (26:55)
What does mining do to the water supply? What have we seen in terms of the environmental cost?
Nicholas: (27:00)
The mining sector is a relatively intensive user of water. So if you have a mine up high in the mountains, in the Andes and local communities around there, then governments want water to flow to local communities. And so, you know, no, there's no questioning of that at all.
But I think what it means is that the miners have then had to invest in essentially pumping seawater up from operations and desalinization plants. So what does that mean? Well, it just means additional costs and time in terms of getting the, the, the minds up to, um, the, the, the kind of level of operation they need now, you know, on top of that in some, uh, regions you've, you've had pretty bad drought and, and certainly that's been an issue in Chile, an ongoing issue in Chile for the last few years. And, you know, depend mining is a very water dependent process. The more water you have, the higher, the throughput of, of the kind of awe through the system and, and the yields you get
Joe: (28:09)
On that, I'm sorry, what is the use of the water? I don't know much about mining engineering.
Nicholas: (28:14)
Yeah, well, you essentially have to kind of wash the material that's coming out of the ground. So it's a kind of a cleansing process. And so, you know, the lower the flow of water the lower the yield. So it is key. But mining companies are resolving that. But it adds to the cost to the system.
So look, I think it's, there's no doubt the mining sector, particularly the copper mining sector has has been successful at adapting to ESG hurdles. And I think if anything it held itself to a very high standard before that became a kind official mantra. That comes with additional cost and time in getting a project off the ground.
Tracy: (29:21)
So what's the bear case for copper here? And the reason I ask is because, um, I saw an article on the Institute of Electrical and Electronics Engineers, which obviously I read very religiously and the article was called practical power beaming gets real. And this was like Nikola Tesla's dream, right. That instead of using wires or some type of physical conductor to transmit energy, you could actually do it in a different way, like a bolt of lightning that goes from one thing to another, that sort of thing. And I mean, I wonder is, is that the ultimate bear case for copper, that we develop some sort of new technology that means you actually don't have to conduct through wires?
Nicholas: (30:06)
I think there are two things that could transform the story.
The first would be if we get, you know, a production technology shift. So we we've seen that play out in other commodity markets over the last 20 years. The most obvious is oil and and shale in the US. Is there any evidence of that type of production technology shift occurring in copper? The answer would be “no.”
You know, there's some developments at the margin around achieving higher returns from tailings deposits which is the waste that mines generate during the production process. Typically those tailing deposits are kind of left on the side, but, but there is some technology being developed that, that can actually achieve quite a high return on, on the copper within those, but that's really a marginal production gain that there's certainly nothing along the lines of, of she, and, and I think even if there was, if you look at the history of, of production technology in the mining sector, it's incredibly slow to, to adapt.
So in copper, back in the 1980s, there was a, a new production process called SX/EW that that actually became quite a meaningful influence on production, but not until the end of the 1990s and into the 2010s. It took over a decade for that technology to scale up, you know, and have kinda mass adoption. So there's nothing in our line of sight. And even then I think it would be very slow. So that's not a solver at least in the 2020s.
And, and then, you know, on the demand side that that there isn't an obvious raw material competitive substitute. You can't rule that out. There's clearly a lot of work being done on, on these kind of alternatives, but we just don't see that happening.
And I think that's why when we look at the story that just isn't the mine supply response coming through in time to meaningfully lower the deficits in this market. So mine supply in our view is not gonna the solver.
So what are we left with? Well, you know, really what you're left with is demand destruction, right? And I think this is why we have such a bullish target on copper because to achieve demand, destruction in copper is much, much harder than in agricultural or energy products. And, and the reason for that is that the end-consumer in the goods that they consume that have copper, the copper is really a very small part of the cost of that good.
So for the copper price to drive demand destruction in in cars, in electronics, you're gonna have to see a massive outsized move in the copper price to achieve the necessary increase in, in, in the cost of the total. Good to, to drive that destruction, demand destruction. It's very different to energy and agricultural commodities where you are really kinda nearly majority exposed to the oil price or the wheat price with the food on your, your table. It just doesn't work that way in metals.
Joe: (33:33)
This is really fascinating. I hadn't thought about that. So copper is absolutely crucial to EVs, but it's not so big of a factor in the price of an EV that it's actually gonna like change anyone's plans to build or buy one until you just get run out. But, you know, we just have like a couple minutes left here. So in London, I think price is right around $9,300 a ton.
What are the scenarios where it could go, I think I've seen $15,000, but what are the scenarios? And then if we were to get some sort of demand destruction, like, are there any use cases at that price that becomes economical and they'd have to drop off?
Nicholas: (34:17)
I think the reason see prices going to to $15,000 are: One, we're already in a very tight market. The COVID fiscal stimulus effects of the last two years have generated incredibly large deficits in many metals, copper included. And so we start really this, this kind of green supply crunch story already with very low inventories in the system.
But then the next leg higher is ultimately gonna be a reflection of that progressive green supply crunch, essentially removing the remaining inventory from the system over the next three years. And then the market having to go to incredibly high price levels to, to generate that end demand destruction. The thing about the copper market is that we've never been in such an extreme set of fundamental circumstances. We've never had to go to end demand destruction pricing to achieve a rebalancing.
The bull market of the two thousands was nearly entirely solved by supply responses. And that very rapid increase in mine investment. That's clearly not gonna be the majority solver this time. So when we say $15,000, what we're saying there is, you know, copper's gonna have to go to a price level well beyond any level we've seen before historically to achieve that demand destruction. 15,000 could prove conservative. Absolutely.
And, and the reason why I say that, you know, look at oil in the two thousands. Oil started that decade trading at $10 to $20 a barrel and ended the decade trading at $140, $150 a barrel. So, you know, a sevenfold increase in price to adjust the market enough, to solve imbalances that we all faced in 2000. That were very similar to what the copper market faces today. So we don't rule out the copper could, could be a $50,000, could be a $100,000 commodity. And that there are plenty of commodities that have achieved that — look at lithium. You know, lithium is trading five times above six times above the the cost curve today. This does happen in commodity markets when you face such extreme, fundamental imbalances.
Joe: (36:40)
Well, Nick, this was absolutely fascinating. We could talk to you for a long time. We gotta have you back on again at some point, but I learned a lot really appreciate you coming on Odd Lots, and I will be paying close attention to copper over the next decade for sure.
Nicholas: (36:59)
Thanks for having me.
Tracy: (37:01)
Thanks so much, Nick. Yeah, that was fantastic.
Joe: (37:17)
Wow. Tracy, a hundred thousand dollar copper, did you hear that?
Tracy: (37:22)
Yeah. And I mean, I'm looking at the price chart of lithium to his point and like 500% gains. It is not unheard. But the one thing that, that struck me in that conversation and you picked up on it already, but just this idea of how difficult it is to get away from these boom bust cycles.
Because everyone comes out of the last experience thinking that's the way the market is. That's the way the world works. That's the way it's always gonna be. Uh, and then they proceed to become very fiscally conservative. It's all about cash flow versus funding, new exploration and digging. And then we end up with the tight market. And then it seems like it's hard to get out of that. I guess this is the question, right? Like whether or not higher prices do incentivize more production or whether or not something has fundamentally changed.
Joe: (38:11)
It really is striking. I mean, I was always sort of aware though, like, okay, you have short cycle commodities and long ones. So it's like, you could start to ramp up oil production pretty fast right now, if you added some more rigs, you could theoretically add acres to agriculture and get more wheat, corn, and soy in a few months. But I was always sort, you know, I understand that it's not an overnight or even one year process to get a new mine online, but the fact that like we're now in this two year commodity bull market, and we still haven't seen any new groundbreaking on anything we might need even higher prices yet. And then given that, that was pretty striking is like, it used to be nine months. Now it might be three years that like, you could start to see why this could be, as you know, Jeff said, the last time we talked to him, the tightest commodity market we've ever seen
Tracy: (39:03)
It also kind of begs the question of whether or not you need some sort of stability mechanism there. So, you know, the oil and gas market has OPEC, which has at various times been described as the central bank for, for crude oil. And I wonder if you had something to sort of soften some of those troughs right. And peaks, or just try to offset human nature. Right. And in the fear greed cycles, I don't, yeah. That's probably it's yeah.
Joe: (39:33)
The lithium chart, by the way that you mentioned is totally insane. I hadn’t realized that move.
Tracy: (39:34)
I didn't realize either.
Joe: (39:38)
And so like also I thought his point was really interesting about like how the end users of copper for as important as it is. That's not the key price. And so it's like, you could have like, what, I don't know, a triple like of the copper price, it's not gonna affect the price of a Tesla that much. Right. If it's, and so you get in this situation, which like, well, it's not gonna discourage any buyers. And so the demand just keeps going straight up anyway. So much in there. And I, we gotta do more like on the whole talent thing.
Tracy: (40:10)
I think this is exactly what it is, right. Is you think of it as a market, but ultimately the decisions that are impacting the market are being done by actual people. And so we need to talk to like the head of a mining company and ask them why don't you drill more? Or why don't you dig more?
Joe: (40:30)
Or we need to talk to the dean at the Colorado School of Mines for Texas A&M, about whether students are excited about going into mining again
Tracy: (40:39)
Yeah. I think we should do that. All right. Should we leave it there?
Joe: (40:49)
Let's leave it there.