Copper and nickel are being stockpiled by China, Europe, and others, and no, it’s not because demand is drying up
I’ve been reading a lot lately about how the Chinese are stockpiling copper and how the Europeans are stockpiling nickel, and about how because of this the people out there who are big on these two metals shouldn’t be quite so bullish. Everywhere I look, I see so-called “analysts” and “experts” saying that the stockpiling of these metals versus, say, the purchasing of them on the open market by end-users such as smelters, cathode makers, and battery producers, is a sign that demand for them is dropping, or at least stagnant.
Well, I’m here to tell you that that is bulls***, and that anyone who would say such a thing not only knows nothing about supply and demand, but also has zero common sense.
SQUIRRELS DON’T STOCKPILE NUTS FOR NOTHING
You see, when individuals or entities stockpile things, it’s not because no one wants those things, which is what the “analysts” and “experts” out there (who are probably net-short these metals, by the way) apparently believe or want you to believe; it’s because those things, assuming they are not yet in high demand, are expected to be in high demand very soon.
Take, for example, bottled water, in the days prior to a hurricane making landfall.
When people run out to raid their local Wal-Mart and grab whatever they can get their hands on, sometimes just hours before the storm hits, with the intent of stockpiling it in their pantries or basements for in the event that the lights go out or they find themselves unable to leave their homes, it’s not because no one else wants or needs that water—it’s because they know that many other people will also want or need that water, and that if they wait too long to go get some, then by the time they reach the store, all the water will already be gone.
Now, maybe these people will need this water or maybe they won’t, but in any event, it pays to be prepared, because the last thing anyone wants is to end up stuck in their home or somewhere else during a hurricane, with no food, no water, no medical supplies, etc. Similarly, no one who is involved in or associated with the smelting of copper or nickel, the production of cathode materials for lithium-ion batteries, or the production of said batteries themselves wants to be caught without the raw materials they need, when they need them the most.
And guess what? Right now, those smelters, cathode producers, and battery manufacturers I just mentioned all need not only copper and nickel, but lithium, cobalt, manganese, and graphite as well, because they know a storm is coming, albeit it one that promises not hundred-mile-per-hour winds, torrential rain, and billions of dollars in damage, but rather millions of electric vehicles, EV charging stations on countless corners, and billions of dollars’ worth of battery storage projects, all around the world.
METAL PRICES SHOULD BE RISING, NOT FALLING
Having said all that, the prices of copper and nickel should be rising, rather than falling (which is what they’ve been doing for a while now), regardless of whether that metal is being bought or stored in warehouses somewhere, but they’re not, and the reason they’re not has far less to do with the value of or need for these metals than the stupidity or the shortsightedness of the people betting against them.
You see, right now, there are a lot of people who fancy themselves to very smart who are net-short copper, nickel, and a number of other metals that are needed for the manufacturing of not only electric vehicles, but the batteries that go into them and the charging stations they depend upon. And if you ask me, these people are a special kind of stupid, because assuming they read the same news I do every day, and assuming they see how popular both electric vehicles and solar-plus-storage and wind-plus-storage systems are becoming around the world, they have to be aware that they are on the wrong side of history with their bets.
Either that, or they listen exclusively to the “experts” at investment banks like Morgan Stanley who, in February of 2018, made the ridiculous call that lithium prices are actually going to plummet in the next few years, as opposed to rise, due to some mythical oversupply situation they’ve envisioned as inevitable due to over-production by South American brine producers (a situation which, I can assure you, will never come to fruition, if for no other reason than the fact that major producers of anything will never produce so much of their product that they cause their own prices to crater—with an exception being OPEC, which attempted to drive American shale producers out of business a few years ago by intentionally overproducing their own oil).
ONLY AN IDIOT WOULD BET AGAINST BATTERY METALS RIGHT NOW
In any event, anyone who is shorting copper, nickel, or any other battery metal right now is a complete idiot, because the writing has been on every wall in every investment bank and brokerage for years now—and that writing clearly states that Big Oil’s days are numbered, the future is electric, and that electric vehicles and battery storage are the next big thing. Accordingly, anyone with half a brain should be able to comprehend that the reason battery metals are being stockpiled has nothing to do with a lack of demand for them and everything to do with the fact that in just a few years, our entire lives will literally depend upon them.
If the entities that need these metals for their batteries or their vehicles (or for selling to their customers who produce these things) were to not be stockpiling them right now, I’d have no choice but to consider them even dumber than the people are shorting them, because if they were to stupidly wait until the last minute to get what they need, like many residents of coastal areas do, every time a hurricane comes, then they’d deserve the pain that’s coming to them.
Right now, China is leading the world in terms of electric vehicle production and production targets, as well as in the production of high-quality chemicals such as the lithium hydroxide, cobalt sulfate, and nickel sulfate needed for EV batteries, and the Western world, most notably Europe and the United States, are playing catch-up, with some countries, such as Germany, tripping over themselves in an attempt to set up their own battery production plants before they are rendered entirely dependent upon China. As such, it shouldn’t be a surprise to anyone that these countries are stockpiling metal left and right. Yet here the “analysts” and “experts” are, completely stumped as to why anyone would do such a thing.
NOT EVERYTHING IS ABOUT EVS
On that note, forget about the need for these metals for the commercial production of electric vehicles and batteries for a moment, and let’s focus on another reason for why stockpiling is so important right now, which no one seems to want to talk about: National security.
Simply put, fighter jets need metal, tanks need metal, battleships and submarines need metal, and missiles need metal—and lots of it—hence why the U.S. Department of the Interior published a list of 35 metals critical to U.S. national security back in May, hence why President Donald Trump wrote the Executive Order that spawned said list back in December of 2017, and hence why the U.S. Department of Defense published a report entitled “Assessing and Strengthening the Manufacturing and Defense Industrial Base and Supply Chain Resiliency of the United States” just last month, which encourages U.S.-based production of such things as lithium batteries for marine applications.
For these reasons alone, countries like the U.S., China, and members of the European Union should have a major desire to stockpile copper and nickel, especially whereas trade tensions and the situation in and around the South China Sea and Taiwan are really starting to come to a head and could spark an actual war at some point in the very near future.
Western countries know that they cannot depend upon China for their domestic needs, and they understand very well that they cannot do so for their military needs, because if World War 3 every does break out, it will likely be them versus some combination of China, Russia, and various other communist or dictatorial regimes. Likewise, China has an interest in cutting off the Western world from as much copper, nickel, cobalt, lithium, etc. as it can get away with, for in the event of a situation where its sales of such metals to the U.S. and its allies would constitute the aiding and abetting of its enemies.
KEEP YOUR ENEMIES CLOSE…BUT AWAY FROM YOUR COPPER
Make no mistake about it, despite the niceties exchanged between Chinese and Western businesses on a daily basis, China is not a friend to the Western world. If anything, it is its mortal enemy, representing the antithesis of everything democratic societies stand for. Accordingly, any Western countries that are currently stockpiling copper, nickel, etc. are not only prudent, but exceedingly smart, especially when compared to the morons who think that the stockpiling of these metals means that nobody wants them or the idiots who think that shorting them is a great way to get rich.
The bottom line? Copper and nickel prices—not to mention the prices of lithium, cobalt, graphite, etc.—are all going to head skyward in due time, and when they do—whether it’s because of EV and battery makers or the U.S. and European militaries (or both) buying every ounce of metal in sight—the shorts are going to get absolutely crushed. And when they do, I will be laughing all the way to the bank.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from/through New Energy Narrative, which I am the founder and owner of).