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The metals supercycle argument holds that long-term spending on decarbonization, electrification, renewable energy, and AI infrastructure will boost end demand for miners, even as supply constraints remain real and constant.
While this presents opportunities for rare earth companies likeMP Materials(NYSE: MP) and copper miners likeFreeport-McMoRan(NYSE: FCX), there's a key difference in their risk/reward calculations that favors the latter.
If you believe in the metals supercycle argument, loosely sketched out above, then it makes sense to invest in a stock that best manifests that view, rather than one that contains risks over and above that view.
In this context, I think Freeport-McMoRan is a better investment than MP Materials on a risk/reward basis formetals supercycleinvestors.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again.In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia.Continue » MP Materials is afine and worthy stock, but investors need to carry the execution risk inherent in its construction of a rare-earth magnet manufacturing facility in Northlake, Texas, known as "10X." On top of that its partnership with the U.S.
Department of Defense (DoD) is not without controversy, not least as the DoD has invested in the company and provided it with a 10-year pricing floor guarantee, and, according to the press release, "DoD has agreed to ensure that 100% of the magnets produced at the 10X Facility will be purchased by defense and commercial customers." Meanwhile, recent export controls imposed by China will make it harder for the company to acquire rare-earth processing technology.
On the demand side, copper looks like a safe bet.
It's used extensively in data centers, and the electrification needed to support it.
In addition, electric vehicles use multiple times as muchcopperas internal combustion engines, and copper is also a core part of charging networks and indispensable for connecting renewable energy to the grid.
In short, copper lies at the heart of the electrification of everything trend.
On the other hand, ongoing supply constraints linked to long development lead times (more than 15 years from discovery to production), increasing political inflexibility in approving new mines, and declining ore grades are challenging supply growth.
Rising demand and curtailed supply growth point to higher prices down the line, and the good news is Freeport-McMoRan is well placed to benefit from them.
| Product | Price | Change |
|---|---|---|
| Brent Crude | $102.14/bbl | +0.34% |
| WTI Crude | $96.90/bbl | +0.21% |
| EN590 Diesel | $846/MT | +0.18% |
| Jet Fuel A-1 | $1090/MT | +0.55% |
| Mazut M100 | $450/MT | -0.15% |
| Bitumen 60/70 | $470/MT | +0.08% |
| Sulphur Gran 99.5% | $470/MT | -0.44% |
| Urea 46% Gran | $650/MT | +1.12% |
| NPK 16-16-16 | $460/MT | -0.28% |
| Nat Gas TTF | $15.42/MMBtu | +0.92% |
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