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Ronnie
Hey, everybody, welcome back to the Barclays Brief. It's Ronnie. I left snowy, icy, frigid New York for predictably rainy London, but it's really nice to be here. It's especially nice to be here in our studio with our European metals and mining analyst, Amos Fletcher. Amos, welcome to the pod, everybody.

Amos
Great to be here. Welcome to rainy London.
The mining sector is running pretty hot, so I'm very happy to be here to discuss it.

Ronnie
Totally. I mean, this is a sector that most people, myself included, described as somewhat boring for, I guess, most of my career. And that feels like it's changing now for a variety of reasons. Perfect time for you to do your first appearance on the pod. So why the sudden rush of interest in this metal space from the investor community?

Amos
Yeah, it's a variety of factors. I'd say key ones are fed rate cut expectations through 2026, at a time when other central banks are pricing out cuts. So investors are going to be looking for hedges against dollar weakness. We've also got the reality of inflation upside risks into the midterms.
Commodities obviously a big hedge against that. So the fundamentals also looking pretty supportive on a supply demand basis. Sectors under Owens is a tiny component of the indices. The evaluations are pretty supportive. And geopolitics is increasingly in play as well, with the US and China starting to kind of bifurcate in terms of the commodity supply chains.

Ronnie
So copper is a buzzword now. Copper is a commodity that really matters for this. I keep hearing about the copper supercycle. In fact, our head of equities Tactical strategies, Alex Altman, was on the pod just a few weeks ago spending some time on it as well. Is this copper supercycle a real thing? And if so, what are the drivers?

Amos
Yeah, well, I was around for the original China industrialization supercycle in the early 2000.
Do I think it's a supercycle now? I'm not sure we're quite there yet. I'd be hesitant to use the word supercycle today, but we've definitely got a very favourable set of macro settings for this year and above trend demand growth.
On the demand side, fundamentals are really being driven by electrification. That's picking up globally, partly driven by AI, but that's really a quite small contributor at the moment, but growing rapidly.
Really the bigger drivers of the shift to EV, that's 15% of copper demand and renewables, which also require significant grid investment, and that's 30% of copper demand. So we're seeing overall an acceleration in the electricity intensity of GDP growth versus previous decades. And then on the supply side, we've seen record supply disruptions in 2025. If those continue in 2026 we could see zero supply growth despite the copper price being at all time highs. And then we've also seen a 200% increase in the cost of building a new copper mine versus pre-COVID levels.
So we think mining companies need to see prices sustain well above $5 a pound for a number of years before they start justifying building new copper mines.

Ronnie
Alright. I mean, that's a lot to take in. So supercycle or no supercycle, it's clear that demand for copper is going up while supply feels like it's constrained or could become even more constrained.
What does that mean for the price of copper? What's your bull case in terms of the price of copper this year and beyond?

Amos
Yeah. Well, we wrote a piece earlier this year laying out potential for a blue-sky scenario, and I'd say drivers would be additional inventory flows into the US ahead of a possible copper tariff by mid-2026.
And that's staffing the US copper market a physical copper and could see potentially parabolic price appreciation. If you get x us copper inventories going close to zero. And if we see a repeat of that 7% mine supply loss we saw last year in 2026, as I mentioned, you could see zero supply growth this year.
And then on the demand side in China it's pretty solid. We think it grows 1.5%. But the government could resort to stimulus to support growth if external demand is weaker. And then the final factor is speculative flows. Those have really picked up in a big way this year. And they could drive the price, you know, to record levels, if the fundamentals justify.

Ronnie
Interesting.
So, let's move from the commodity lens to the corporate lens for a minute in the space. What is all that you just laid out mean for corporate activity? And what should we be on the lookout for?

Amos
Yeah. So typically, when prices are high, companies are more optimistic that typically drives more dealmaking. And in terms of history, we're not quite at a peak of sexy activity yet, but it's definitely picking up and will be an important driver for the sector.
We've seen a particularly big step up in activity at the large cap end of town. You've had BHP making two unsuccessful offers for Anglo American. Anglo itself turned around and is in the process of acquiring Teck, and Rio Tinto is potentially looking to make an offer for Glencore.
When I speak to investors, they tend to look at mining companies on some of the parts basis, and I'd say the M&A activity is being driven by the corporates kind of recognising that the best way to find cheap copper assets is by buying diversified miners with big copper businesses, but trading at a discount to their some of the parts.

So, I say overall, yeah, good to see the pickup in M&A volumes. But we're still not at that elevated a level versus prior peaks. And that's likely to be supportive of the sector's performance going forward.

Ronnie
Historically, China has been the main driver or lever when you think about copper prices. You were recently there visiting companies. What from your trip is important for listeners to know about? Was there anything that surprised you?

Amos
Yeah. So, you're right, Ronnie. I mean, China is the be all and end all of commodity demands. We go to China three or four times a year. We've been doing that for the last seven years or so. And it's always interesting to see, you know, inflection points happening on the ground from this type of primary research.
And as always, there's some bullish aspects, some bearish aspects. I'd say this time around; we were surprised on the bearish side with our meetings with the auto players in particular. Q1 is going to be a very difficult period because of the roll off of subsidies, which came to an end at the end of last year. And so, our base case is for auto sales in China to fall 3% this year.
And property is also stuck in a relatively difficult position due to inventory overhangs, which could take until the end of this decade to get worked off. So those two factors, I guess, were slightly more negative.
On the positive side, though, grid spend remains a positive driver for commodity demand. That's 40% of China's demands. And we heard from state Grid they expect over the next five years to spend 40% more CapEx than they spent over the last five years. And then overall, China, from a policy point of view, is aiming to double its renewable capacity by 2035 from current levels.
The one thing also that emerged, you know, out of nowhere, I would say on this trip were energy stationary stores. So, you know, the Tesla battery walls, that's emerged to be 1% of global aluminium demand and 25% of lithium demand but is growing 100% year over year.
And we bent some of China's biggest s battery producers who are sold out for this year.

Ronnie
Okay, I can't have our metals and mining analyst on the pod without asking about everyone's new fixation. The price of gold, how sustainable is it all?

Amos
Well, overnight we just published a note with our colleagues in FX and Equity Strategy discussing this exact question. And the gold price fell 10% on Friday in reaction to the new fed chair nomination - who's seen as potentially the most hawkish amongst the candidates. And we're recording this at 11a.m. on Monday, the second of February. And spot gold prices are down again today. But for some bigger picture context for listeners, I think the driver of the upside gains are the fact that I'd mentioned earlier in the pod, which is a combination of rate cuts to come from the fed at a time when all of the central banks are pricing out cuts, US dollar weakness, the economy being run super hot into the midterms with fiscal you've got the fed reversing cut.
CapEx is booming and limited labor supply. And we think all of those factors are going to drive investors to seek upside inflation hedges. And then in addition you've got central bank buying remaining robust and structural trends of global central banks diversifying away from US treasuries. And then finally, the stablecoin issuer Tether has emerged as one of the biggest buyers of physical gold in 2025, ahead of most global central banks.

And they're using gold to hedge their currency exposures. So, in conclusion, we've gone from 4000 to 5600 in 3 months and then back down to 4500 today. But we see these structural drivers remaining in place for the year ahead at least.

Ronnie
So, look, admittedly, I'm a little bit sore about all of this. I've been sceptical, haven’t participated in this gold rally.

Amos
Well, if I was a listener, I’d go back to the second episode of The Barclays Brief with Ajay, where he talks about the distrust of fiat regimes. And I think that's an important structural driver. Dollarization is another big driver is China. It's nationalized is the RMB that reduces demand for dollars. As we know, gold has overtaken treasuries as the biggest holdings of central banks globally. And I think all these factors are likely to remain in place, at least for this year. And if we look back at the bigger picture, history shows global markets can run longer and higher than expected.

If we go back to look at the last three since the 1970s, that saw gold peak between 200% and 400% above the starting level, and the rally is running for up to four years. And so far this time around, gold's up 170% from the start of this bull market in October 2023. And so we think the combination of today's set up of rate cuts, fiscal expansion, the debasement dollarization is likely to keep investment demand firm in the long term.

But in the short term, obviously we aren't surprised to see the short-term pullback.

Ronnie
Amos, this has been great. I learned a lot. It's clearly going to be an interesting year in your space and the markets in general. And I only ask that we can have you back the next time. Makes sense to cover this again and see how it's all evolving. Thanks for joining us.

Amos
Great to see you again, Ronnie. And I'm sure we'll be talking more about the space in 2026.

Ronnie
As I said at the start of the pod, I've never seen this much investor interest in this space in my entire career.
Amos helped illuminate why we may be on the verge of a metal supercycle, with clear visibility into increasing demand and constrained supply. One thing I know for sure, this is no longer a space that investors can overlook. Thanks to our listeners for joining. Please hit the subscribe button wherever you're listening to. Be alerted when new episodes come out.
And for those with access to Barclays Live, there's a lot more from Amos on the topic for you all to dig into.