Goldman says copper demand is about to surge. Here are the stocks it expects to benefit

Published Mon, Sep 19 20229:03 PM EDT

Copper demand is set to surge, Goldman Sachs says — and supply is unlikely to keep up. The investment bank has named a number of metal stocks it says will shine in a copper deficit scenario. Along with the "green transition" driving a surge in demand for copper, Goldman noted that new supply from approved projects will peak in 2024. After this, there are no significant copper projects planned until 2027 or 2028, it added. "While supply growth appears muted from 2024, demand is likely to accelerate given the push towards a low-carbon economy and growing green copper demand," Goldman analysts wrote in a Sept. 13 report. Copper is a critical component in electric vehicles, used in batteries, wiring, charging points and more. It's also used in batteries for energy storage, as well as in generating wind and solar power. Goldman also pointed out another challenge for the metal: it's getting increasingly hard for companies to obtain social and environmental licenses to construct and operate new mines. "Given growing wariness among environmental and indigenous groups of potential negative impacts of mining on water, land, biodiversity and emissions, governments are increasingly withholding/withdrawing licenses for mining operations," the bank wrote. It said that's set to cause progressively larger deficits in key base metals — including copper — heading into the middle of this decade. Some firms are set to stand out against this backdrop, according to Goldman's analysis. These metal mining companies, over a five-year horizon, "hold some of the strongest growth projects that are highly profitable and could materially lift their future cashflows and production." They include: First Quantum , Teck Resources , Anglo and Oz Minerals . A S & P Global report from earlier this year also forecast spiking demand for the red metal, with copper needed for EVs, wind, solar and batteries tripling by the middle of the next decade. A new copper mine takes 16 years, on average, to get off the ground, according to the International Energy Agency. Battery stock pick Separately, Goldman in the same report said it has upgraded Freyr Battery to a buy. The bank said the stock is set to be a key beneficiary of the recent U.S. Inflation Reduction Act . The act has a vast reach in the renewable energy sector, providing $369 billion for energy security and clean energy provisions. Goldman added that Freyr Battery's upcoming gigafactory, set to start production in 2025, may enjoy a potential capital expenditure reduction by around 60% as a result of the Inflation Reduction Act.