We've Got an Appointment With 'Dr. Copper'

We chat with a variety of companies both public and private as well as other institutions while studying up on companies for the portfolio. This keeps us informed of what is going on today and on the lookout for potential future opportunities.

Occasionally, we share these chats -- like the one about agricultural commodities with Sal Gilbertie of Teucrium. Now, we want to discuss another commodity, copper, and a conversation we had with Darryl Jones, the CEO mineral exploration company Alpha Copper (ALCUF) .

This topic relates to the demand-driven reasons behind the portfolio's positions in Ford Motor (F) , ChargePoint (CHPT) , Vulcan Materials (VMC) , Nucor (NUE) , and United Rentals (URI) . Traditionally copper prices have been viewed as a barometer of the overall economy, given the prevalent use of copper in a wide number of industries -- including construction, transportation equipment, and electrical and consumer electronics. As such, it's often referred to as "Dr. Copper," but the conversation we had with Jones is leading us to think how the market views copper and copper prices may need to be rethought.

Recent economic data points to a slowing of economic activity, something that tends to lead to softer copper prices, but as Jones points out, the shift to electric vehicles as well as the impact of the Biden Infrastructure Law stand to drive copper demand. EVs can use up to three and a half times the amount of copper compared to an internal combustion engine. Roughly $201 billion in spending tied to the Biden Infrastructure Law is expected to drive demand for copper while the number of EVs expected to hit the road grows to 20.6 million by 2025 up from 6.6 million in 2021 according to Bloomberg NEF. As that demand rises, however, the copper industry is expected to have an annual shortfall of 4.7 million metric tons in the coming years. That is prompting companies ranging from Glencore (GLNCY)  and BHP (BHP)  to Vale SA and Anglo American (NGLOY)  to look for their next projects, including those being developed by Alpha Copper.

We found the conversation very confirming on several fronts and it means we will also be keeping an even closer eye on copper prices as the pivot to EVs accelerate and spending with the Biden Infrastructure Law shifts into gear. Given the nature of Alpha Copper's business, which Jones explains rather nicely during the conversation, and the company being pre-revenue as well as the portfolio's risk profile, we're not inclined get the involved with ALCUF shares in the near-term.

F, CHPT, VMC, URI and NUE are holdings in the AAP.