WEBVTT - Jeff Currie Talks Aluminum and Copper Prices

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>Carlisle, chief strategy Officer of Energy Pathways, Jeff Curry, let's

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<v Speaker 2>go to alex right now. Hey, Paul, thanks lot, really

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<v Speaker 2>appreciate it. Jeff, I've been asking CEOs for the last

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<v Speaker 2>day and a half, what do you do with twenty

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<v Speaker 2>five percent tariffs? And now it's going to be what

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<v Speaker 2>do you do with fifty percent tariffs?

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<v Speaker 1>What's going to.

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<v Speaker 2>Happen to the market.

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<v Speaker 3>Well, it's pricing it in, you know, cut coppers, you know,

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<v Speaker 3>heading towards five dollars a pound right now. But I

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<v Speaker 3>think aluminum is the one to really watch because the

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<v Speaker 3>question is can you on shore aluminum production and the

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<v Speaker 3>answer is absolutely not.

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<v Speaker 1>You know, if you think data centers and.

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<v Speaker 3>AI are power intensive, aluminum smelting is in a whole

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<v Speaker 3>different world. It's six times more power intensive per dollar

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<v Speaker 3>revenue than AI data centers.

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<v Speaker 1>So if you're already power constrained, there's.

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<v Speaker 3>No possible way you're going to bring all of this

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<v Speaker 3>aluminum smelting into the United States.

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<v Speaker 2>So where do we get most of our aluminum and

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<v Speaker 2>steel that the refined products, Well, a.

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<v Speaker 3>Lot of it comes from the hydro electric power up

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<v Speaker 3>in Quebec, so it comes down into the US from that.

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<v Speaker 1>So shutting down that cheap source.

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<v Speaker 3>Of aluminum supply and trying to replace it with really

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<v Speaker 3>expensive produced, domestically produced supply, I think it's going to

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<v Speaker 3>be a tall ordered ask.

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<v Speaker 2>It's been a tough commodity road in the last couple

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<v Speaker 2>of weeks. And we did with this molatility right oil

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<v Speaker 2>was it a six month low? That's on recession fears,

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<v Speaker 2>tear fears, growth fears, et cetera. What kind of cycle

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<v Speaker 2>are we in right now?

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<v Speaker 3>Well, I think what we're going through is a huge

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<v Speaker 3>shift in the global order around security. And I think,

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<v Speaker 3>you know, what is the response that probably Ontario is

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<v Speaker 3>going to do to these tariffs. They're probably going to

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<v Speaker 3>cut power. The governor's already threatened he's going to do it.

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<v Speaker 3>He cuts power into the US. Energy security is top

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<v Speaker 3>of mind, and I think that's what's going on right now,

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<v Speaker 3>whether it's in Germany. Actually Germany, the Norwegians threatened to

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<v Speaker 3>cut power into Germany back in December when a crisis

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<v Speaker 3>occurred there. So I think energy security is top of

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<v Speaker 3>mind for every around the world right now.

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<v Speaker 2>Okay, so what does that look like? Because what's so

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<v Speaker 2>interesting about commodities is it will always clear it a price, right,

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<v Speaker 2>you'll always buy something, It just depends on what price

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<v Speaker 2>you'll buy it.

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<v Speaker 1>Is that still true? Absolutely?

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<v Speaker 3>And I think what we're going to start to see

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<v Speaker 3>is that's what's going on with aluminum and copper today.

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<v Speaker 3>Is there going to price in a security premium to

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<v Speaker 3>make sure you have that supply in your country domestically protected,

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<v Speaker 3>in duty paid. You're seeing it in gold, and you're

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<v Speaker 3>seeing it across the metal space and then particularly an energy.

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<v Speaker 3>We're beginning to see that and I think that that

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<v Speaker 3>is going to be the primary driver of the you know,

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<v Speaker 3>let's call it the new cycle and commodities.

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<v Speaker 2>So it's not geopolitical risk, it's not a green premium,

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<v Speaker 2>it's a security premium. Correct, you're going to pay up

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<v Speaker 2>to produce this.

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<v Speaker 1>Stuff at home? Yep, exactly.

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<v Speaker 2>That that's a humongous shift.

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<v Speaker 3>It was huge, huge, and it's going to be really

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<v Speaker 3>difficult to do, you know, whether or not.

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<v Speaker 1>And I think the argument we take.

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<v Speaker 3>Is it's going to be a diversified set of energies.

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<v Speaker 3>That's why we call it the new jewel Order, is

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<v Speaker 3>because you're gonna want oil and gas. You're gonna want renewables, nuclear,

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<v Speaker 3>You're gonna want everything. And you want to diversify yourself

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<v Speaker 3>because if you lose one of those supplies, you want

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<v Speaker 3>to be diversified so that you can deal with that

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<v Speaker 3>that disruption. And I think the key point here is

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<v Speaker 3>when we think about fossil fuels, why do we like

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<v Speaker 3>fossil fuels so much, is because they're tradable, they're portable,

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<v Speaker 3>they're stortable, and they have high energy density, which is

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<v Speaker 3>why we move them around the world. Those same reasons

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<v Speaker 3>we like them, it's the same reasons they're so dangerous

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<v Speaker 3>because somebody can just take them from you. And so

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<v Speaker 3>when we think about what's driving I think this new

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<v Speaker 3>environment we're living in, let's call it peak trade instead

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<v Speaker 3>of you know peak Actually, look at the.

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<v Speaker 1>Evolution of peak oil.

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<v Speaker 3>It started out peak supply, we're gonna run out of supply,

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<v Speaker 3>and then peak demand. We got too much of the stuff,

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<v Speaker 3>so we need to reduce you know, the emissions.

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<v Speaker 1>And now it's peak trade, meaning I can't get my

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<v Speaker 1>hands on it.

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<v Speaker 2>So it's gonna be really interesting then is if we

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<v Speaker 2>get a piece in the Ukraine War, what happens with

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<v Speaker 2>Germ in Europe and buying Russian.

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<v Speaker 3>Gas, they're going to be hesitant. They'll probably take a

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<v Speaker 3>little bit. Yeah, they're still buying it, but they're going

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<v Speaker 3>to diversify their sources. And I think that's the key

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<v Speaker 3>message here is diversify your sources so you're not so

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<v Speaker 3>dependent on one supplier one type of energy. And I

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<v Speaker 3>like to point out what is the best selling car

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<v Speaker 3>out there, a PHEV, a plug in hybrid. Why because

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<v Speaker 3>it operates off oil, gas, solar, wind, nuclear, the entire

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<v Speaker 3>gambit of.

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<v Speaker 1>All the energy sources.

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<v Speaker 3>And I think that that type of diversity is going

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<v Speaker 3>to be key in this new jewel order.

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<v Speaker 2>Okay, so if I'm looking at prices in general, like

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<v Speaker 2>does the band move up prices become more volatile? Do

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<v Speaker 2>they move down? Like if I'm looking at say oil

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<v Speaker 2>or copper, what's my trading band.

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<v Speaker 3>I think that the volatility is going to explode across

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<v Speaker 3>all these markets. You're already seeing it in power and

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<v Speaker 3>the metals and across the space. That's going to lead

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<v Speaker 3>to a higher average price. By the way, the volatility

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<v Speaker 3>then discourages the ms MA.

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<v Speaker 1>I don't want to invest in this thing is too volatile.

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<v Speaker 3>Lower investment creates more volatility, and it just feeds off

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<v Speaker 3>of itself.

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<v Speaker 2>You're one of the first to invent the word supercycle, right,

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<v Speaker 2>I mean, have big supercycles. There's big ups, there's big downs,

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<v Speaker 2>and there's an investment cycle that goes with it.

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<v Speaker 1>Are we no longer in that, you know? I think

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<v Speaker 1>that's a great question. And those supercycles.

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<v Speaker 3>Before were created by demand pull creating big shortages, created

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<v Speaker 3>these big trends that created that supercycle.

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<v Speaker 1>This one's a malinvestment cycle.

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<v Speaker 3>It's industrial policy push, which creates pockets of imbalances. I

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<v Speaker 3>like to call that cyc a bubbling cauldron, a little

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<v Speaker 3>mini supercycles everywhere, and you get these high volatility and

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<v Speaker 3>that's what we're seeing.

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<v Speaker 1>By the way, the opportunity for investors in this environment

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<v Speaker 1>is phenomenal.

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<v Speaker 3>In fact, one of the themes going around here in

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<v Speaker 3>Seer Week is the oil market. These markets are micro bullish,

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<v Speaker 3>but macro bearish, so that micro creates these little opportunities

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<v Speaker 3>inside there that you can take advantage of.

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<v Speaker 1>But you don't get that big upward trend.

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<v Speaker 3>And I think this bubbling cauldron of a little supply

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<v Speaker 3>and demand imbalance is probably the best way to descrive

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<v Speaker 3>change the.

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<v Speaker 2>Time horizon for investments or the return for those investments.

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<v Speaker 3>When we think about long term investments, it's going to

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<v Speaker 3>provide a very similar return, but you got to manage

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<v Speaker 3>that risk. And I think that that's the real the

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<v Speaker 3>message here we think about you know, the focus before

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<v Speaker 3>was on levelized cost of energy, get.

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<v Speaker 1>The l c OE down. We got it down, but

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<v Speaker 1>we were unable to deliver the jewels. So you think

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<v Speaker 1>about Germany.

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<v Speaker 3>It got it's levelized cost down, but it could only

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<v Speaker 3>produce the power when the wind blew or the sunshine.

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<v Speaker 3>Now the focus is on that delivered jewel. You can

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<v Speaker 3>think about Now the focus is on Roe instead of

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<v Speaker 3>l c OE. And so our other way to say

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<v Speaker 3>it is dispatched power that goes to the consumers opposed

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<v Speaker 3>to a centralized production of power.

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<v Speaker 2>Okay, fascinating. One more quick question, because you're you and

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<v Speaker 2>it's an oil conference. What's the lowest price of oil

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<v Speaker 2>you think we're going to see this year and what's

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<v Speaker 2>the highest?

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<v Speaker 1>Totally any bad question.

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<v Speaker 3>I think that's a great question because about this drill,

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<v Speaker 3>baby drill, we're sitting on the bottom of the cost structure.

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<v Speaker 3>You already see it drillings coming off. You know, you

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<v Speaker 3>know all the OPEC countries are under pressure. Yeah, maybe

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<v Speaker 3>you can get down into the low sixties or something

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<v Speaker 3>like that.

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<v Speaker 1>I would argue, you know, the markets to the upside,

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<v Speaker 1>you know, looking at the amount of investment out there.

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<v Speaker 3>Inventories are low, by the way, and now you put

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<v Speaker 3>the security premium, people are going to be scrambling to

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<v Speaker 3>get the barrels bringing in and I think that that's

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<v Speaker 3>going to be going to be the key message.

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<v Speaker 2>Jeff, always a pleasure love chatting with you is always

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<v Speaker 2>going to count w at Sarah as well. Jeff Curray Carlisle,

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<v Speaker 2>Chief Strategy Officer of Energy Pathways