Thanks for this, it’s great to see an in-depth dialogue where the company also provides its perspective.
It is surprising how little the Finnish investment scene discusses the material enablers of the AI and data economy, of which copper is one of the most central. This is especially noteworthy considering that one of the leading players, Metso, is Finnish. In recent years, geopolitics has also become intertwined with this; we seem to have lost sight of where the materials for the AI economy come from, how dependent and simultaneously vulnerable we are regarding these materials, and who actually controls these value chains. Metso undoubtedly plays a very interesting role in both aspects.
Investors often overlook the true nature of the copper value chain in relation to geopolitics. Only about 3% of the world’s copper reserves are in Chinese soil, yet they have gradually managed to capture about half of the world’s copper smelting capacity (the most demanding stage). This means that even if the mining takes place in, for example, Chile or Congo, the copper concentrate often travels to China for smelting before it becomes material suitable for applications like electrification.
This is where Metso enters the picture. China’s dominance does not revolve around their own technology; it has been built precisely with Finnish flash smelting, which Metso’s IR also referred to in their response to the “Rookie’s” (Alokas) set of questions. Metso sells the “picks and shovels” without which it is impossible for China (or anyone else) to produce pure copper energy-efficiently, let alone while meeting environmental standards.
From an investment perspective, Metso is a near-perfect stock for this geopolitical struggle. Personally, I believe that as Western countries look to reduce their dependence on China and build their own smelters in Europe or the United States, they will essentially have to queue at Metso’s door to order the equipment. Thus, Metso wins either way (although there is always a risk with China that they have quietly learned and copied the best expertise). For now, however, Metso’s technological lead and massive patent portfolio have kept the moat intact. When you add Metso’s service business, which runs for decades after the equipment is installed, Metso is, in my opinion, one of the best long-term papers on our exchange.
I strongly believe that in the very near future, we will see a significant phase shift where the importance of materials will be emphasized. Materials and their value chains are dangerously concentrated.