Despite the global copper market’s looming long-term supply deficit, talk of substitution as a savior is more smoke than fire, according to JPMorgan analyst Patrick Jones.

While concerns about copper being swapped out for cheaper materials have been frequent, Jones notes, “Substitution & thrifting could accelerate over the medium term, especially in newer technologies such as xEVs and renewables, we do not believe it will be sufficient to fill the long-term market deficit.”

Why It Matters: No Escape From Deficits

The energy transition has put copper in the spotlight, with demand surging due to its vital role in electric vehicles (EVs) and renewable energy infrastructure.

As Jones highlights, “xEVs typically contain 2-4x as much copper as Internal Combustion Engine vehicles,” which positions copper as a vital component for future technologies. Even though improvements in battery technology could reduce copper intensity in EVs, growing vehicle size and battery density are likely to offset these gains.

The China Conundrum

China, responsible for over half of global copper demand, poses a unique challenge when it comes to substitution. “In power generation, we do not expect significant further aluminum adoption in thermal power generation or offshore wind, given technological constraints and significant substitution has already occurred in onshore wind,” Jones says.

Although solar power could see increased aluminum use, safety concerns and regulatory hurdles remain significant barriers to its broader adoption in other areas.

Jones also emphasizes the importance of copper recycling: “Now that historic copper networks are being replaced, this ‘urban mining' could release material copper scrap supply by 2030.”

Mining Plays To Watch

JPMorgan remains positive on long-term copper prices and equity exposure. In North America, Jones favors Teck Resources Ltd (NYSE:TECK), while in Europe, he highlights Lundin Mining Corp (OTCPK:LUNMF) for its “re-rating potential and de-risked growth pipeline.”

In APAC, Sandfire Resources America Inc (OTCQB:SRAFF), Zijin Mining Group Co Ltd (OTCPK:ZIJMF), and CMOC Group Ltd (OTCPK:CMCLF) are top picks, with Rio Tinto PLC (NYSE:RIO) and Anglo American PLC (OTCQX:AAUKF) (OTCQX:NGLOY) being key diversified miners deriving over 20% of their EBITDA from copper by 2025.

Jones remains cautious, however, on miners with “more expensive valuations and more idiosyncratic risks,” including Antofagasta PLC (OTCPK:ANFGF), Southern Copper Corp (NYSE:SCCO), and Jiangxi Copper Co Ltd (OTCPK:JIAXF).

Electrification Boom: Another Copper Catalyst

Beyond mining, Jones points out that greater electrification is a strong driver for cable and charging infrastructure names like Prysmian SpA (OTCPK:PRYMF) (OTCPK:PRYMY), ChargePoint Holdings Inc (NYSE:CHPT), Xuji Electric, and Sieyuan Electric.

In addition, he sees a potential upside for telecoms like BT Group PLC (OTCPK:BTGOF), which stands to benefit from recycling legacy copper telecoms wiring, with the company expecting to recycle about 200kt of copper from its network.

“We forecast the global copper market will face a ~4 mmt deficit by 2030E given accelerating demand growth and limited supply additions,” Jones concludes, also stating that while “substitution could diminish demand and delay larger deficits, it is unlikely to close the long-term supply gap.”

Investors should brace for higher copper prices as the supply-demand gap widens, with mining and electrification plays looking poised to benefit.

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Image created using artificial intelligence via Midjourney.

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