Why copper is now more attractive than diamond

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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On the same day, the world’s largest mining company BHP Group offered to buy British peer Anglo American for $39 billion, sources told the Wall Street Journal that the London-based company may sell its stake in De Beers.

Anglo American Group owns 85% stake in De Beers, a company that was once infamous for its diamond monopoly. It’s still one of the world’s biggest producers and distributors of diamonds.

There are at least two obvious reasons why BHP may not be interested in diamonds. First, it had its own diamond mining business, which it sold off in 2013.

Second, diamonds aren’t as hot any more. It has become unaffordable for many due to the economic downturn and rising inflation. Moreover, lab-grown diamonds have become popular because they are way cheaper than mined diamonds and it’s tough for most people to tell the two apart.

Anglo American’s revenue from diamonds in 2023 fell by over $2.3 billion compared to a year earlier. The diamond price index has come down sharply from the peak in 2022.

On the other hand, copper prices have gained 40% since July 2022 and are now at nearly $10,000 a tonne, the highest price in nearly two years.

Anglo American’s group revenue from copper went up by $1.7 billion to $7.3 billion in 2023.

Some estimates, like the one from Blackrock, see the price of copper at $12,000 due to a supply crunch this year due to suspension of mining in Panama and production cuts in China while the demand continues to grow.

Copper has become 15% more expensive in just the last one month. “We are a long way from large new copper supply coming to market and inventories are low,” Matthew Langsford, portfolio manager at Sydney-based Terra Capital, told Bloomberg.

The increasing global rush for electrification, production of semiconductor chips, electric vehicles and artificial intelligence make copper a more attractive bet than diamonds.

At a time like this, BHP will get to control a tenth of the world’s copper supply by buying Anglo American.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow