Jeff Currie Talks Commodities

Published May 14, 2024, 2:38 PM

Carlyle Chief Strategy Officer of Energy Pathways Jeff Currie shares why copper has become ‘the highest conviction trade’ he’s ever seen with Bloomberg's Tom Keene and Paul Sweeney

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Jeffrey Curry joins US, Professor of price theory at the University of Chicago, acts a small firm downtown. Great interview yesterday John Farrell with mister Solomon. It was like, you know, it was like piercing its like wherever you know, I mean, I mean, you know Curry Curry lit Versailles with his Energy Now Jeff Curry joins US now energy Pathways like the Carlisle Groupie roots for the Baltimore Orioles. Jeff Copper, I got a rip up the script here. We're not doing oil, We're doing copper. Twenty eleven, twenty twenty two, and now another surge way out over three standard deviations. What's different this time with a surging copper.

One the investors have finally bought into the view that China is not the only game in town for copper. That's the main thing is people have finally wrapped their heads around, yes, the property in China can sync and you can still be long copper, and positioning is full force right now. And I think that if you look at what's different now, it's the willingness of the investor to embrace this market despite the fact that there's a weak property market, and that's what happened in twenty twenty one, in those other time periods that you were talking about, as people started buying into it, then all of a sudden, the property market weakened.

They got too scared and pulled out of the position.

I think there's a couple things that make this different. It's one, they've now seen that copper demand can rise in the face of a declining property market. It's up six percent right now in a very weak property market. But also they've seen that the government's willing to spend infrastructure on green gampbacks. So there's a lot different.

Is there a utility overlay As we see utility surge because of electricity buildout, does copper go up with the AI enthusiasm One?

Yeah, And you know, I'd like to say, you know AIS, you know chips and copper. You need the chips, but then you need the electrical wiring to be able to power those chips. In one of those chips, the video chips, the GPUs consume as much power as the average American household, So you're gonna need a lot of grid connection to be able to accommodate that.

Type of growth. And you know what is the bottleneck for that? It's copper.

So all roads lead to copper, whether if it's military, spin AI, data centers, green Capex, they all.

Point to copper.

I mean, you couldn't have copper in a million years. I would have guessed it. So what do I know?

But so there's the demand side of the equation. Jeff, you just highlighted a number of sources in demand. Can you explain to us kind of the supply side of copper. I don't know anything about this. Where does copper come from? And how's the supply?

It's one of the last of the good old fashioned commodities.

You got to dig out of the ground.

You know, think about oil, with shale manufacturing, aluminum manufacturing. You know, you got to go out to very remotely located, geographically restricted places like Chile, Peru, the DRC, Mongolia. It's only located in a few places around the world, throwing Zombia in that, and a lot of those places are incredibly difficult to get into.

Then you got to dig and dig deep.

Your or grades have come down. It can be anywhere from twelve you know, you take. You know, ivan Ho's big mine in the DRC.

It took twenty six years to bring online.

So you know, there is a big commitment to be able to get the supply online. And you have strong demand. And everybody's been sleep walking into this, even though they've been told about it. You know, we started calling copper the new oil back in twenty twenty one, and it rang on deaf ears.

You know, now it's finally people are perking up to the story. But it's going to take years to bring this.

Paul, ask one more question, and then I got to do microeconomics with Professor Kurr.

All right, so while we have you, Jeff here, it talked to us about oil here.

I mean, I'm looking at I like to quote WTI crew to oil. I'm an American.

I love the guys down in Texas and Oklahoma and all those crazy people seventy nine dollars a barrel here.

What's driving oil these days? Is it supply? Is it demand? What are you focusing on?

You know, all the commodities are being driven by the same demand.

For us, it's late cycle.

Business cycle in the sense that you can think of twenty twenty two and twenty twenty three as being your classic mid cycle pause where your raise rates, higher energy prices, the system slowed down, a regathered scheme consolidated around the higher rates, and now we're chugging back off into the second half of the business cycle.

That's when you want to own oil and commodities.

And it's about the level of demand stressing the inability to supply. That's why all of these markets are going up. You know, the vast majority of are in backwardation. You know, it's all your typical, you know, indocycle type of bullish structure that's playing out here. And I don't see this oil being any different than copper or some of the base models.

And now folks Drivetime America early in the morning, your microeconomics segment, Jeff Curry. We just were honored to have Richard portis a giant of English economics in London business school in our and you know, he was kind enough to give us a story about studying under John Hicks a few years ago. I want to talk about going back to copper into China and all the emotion. Jeff Curry, is this a shift in demand along the curve or an outright shift of the curve that has a permanence.

The outright shift in the curve is permanence.

And think about how much of that's occurred since twenty twenty one military the military spent, you know, whether if it is munitions in the US to the two to ninety five billion dollars one hundred billion dollars in places like Germany, and then you throw in the AI data centers on top of that. That's on all an outward shift in the demand curve. So you know that's going to lead to structurally higher prices. And I think the question is why will it lead to structurally higher prices? Because somebody's going to have to be crowded out here. There's not enough supply to go around to everyone, and so we're going to find out where demand destruction actually occurs.

Jeff Curry, thank you so much. That segment of microeconomics with Bloomberg Surveillance brought to you by the George Stiegler Foundation, Chicago. Jeff Curry, thank you so much. With Carlisle there

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