Mixed Forecasts for 2023 Copper Price Levels (2024)

While many analysts are tipping increased demand and pricing for copper in 2023, the actual size of the price growth remains uncertain.

American multinational investment bank and financial services company Goldman Sachs has forecast that copper prices will reach record high prices of US$11,000/t.

Goldman Sachs recently presented a bullish forecast for the copper market for 2023-24, with its analysts expecting the price will jump from current US$8500/t to $11,000/t this year, increasing to US$12,000/t.

The company pointed to soft numbers from Chile, the world’s leading copper producer. Goldman Sachs analyst Nick Snowdon said another deficit in the market this year will take fundamental conditions to an unprecedented extreme in terms of tightness.

“The sequential increase in policy targets and commitments to a green transition, alongside a minimal supply response so far … have resulted in earlier and larger open-ended deficit conditions that essentially are already here, not beginning at some point in the future,” he wrote in a commodities report.

Fitch Ratings

According to a recent Fitch Ratings report, global primary copper demand is predicted to rise by approximately 2% in 2023, like 2022, while copper mine production is expected to rise by around 4%.

Fitch said its unchanged copper assumptions reflect softer market sentiment linked to the global economic slowdown in 2023, offset by supportive short and medium-term supply-demand drivers.

The company predicts that a tightly balanced market and minimal global copper stocks (less than two weeks’ consumption) will sustain prices in 2023, and that copper’s longer-term prospects are supported by demand from the energy transition.

The Australian government’s latest Resources and Energy Quarterly reported that copper prices are estimated to fall by 5.7% to below US$8,800/t in 2022, as weak growth and high energy prices weigh on demand.

It also suggested that prices may fall to US$7,900/t in 2024 as mine production grows and a weak global economic outlook threatens to affect copper growth.

The Quarterly assessment said global inflation continues to plague major economies. Central banks in most developed nations continue to tighten monetary policy, which is likely to affect economic growth – and copper demand – over the outlook period.

The report said that while many US macroeconomic indicators remain strong, signs of weak demand are beginning to show. Weak growth is more apparent in Europe, given its exposure to impacts of the Russian invasion of Ukraine.

“China is an outlier, however, with low inflation allowing greater flexibility for economic stimulus. In November 2022, 16 new measures were announced to support its property sector, including extending developer loans and lowering deposit requirements and mortgage rates.

“New construction starts continue to increase (though remain half of December 2021 levels), which will eventually flow through to construction completions (where copper is used in higher intensity) over the outlook period.

“Copper consumption is expected to increase by 2.9% in 2023 and by 3.0% in 2024, when it is expected to reach over 27Mt,” the report said.

Prices decline from record levels in first half of 2022

The December Resources and Energy Quarterly said that copper prices were at record highs at the beginning of 2022, peaking at US$10,730/t in March, and averaged almost US$10,000/t in the March quarter 2022.

“Since then, demand weakness and soft property markets in China, a strengthening US dollar, and high energy prices in Europe have all weighed on copper prices. Prices fell 19% to average around US$7,700/t in the September quarter 2022, with the December quarter average estimated at US$7,900/t.

“Copper is expected to average US$8,800/t in 2022 – down 5.7% from 2021. Little recovery in prices is forecast over the outlook period, averaging US$8,100/t in 2023 and US$7,900/t in 2024.”

Wood Mackenzie

Global research and consultancy group, Wood Mackenzie, recently suggested a net-zero global emissions scenario will require 9.7Mt of new copper supply to be added over the next decade.

This would mean US$23B investment per year will be needed over 30 years to deliver new copper projects to reach zero-carbon targets.

Supply challenge

Wood Mackenzie said approximately 17Mt of annual copper production is in the project pipeline – nearly double the volume required to limit warming to 1.5°C. But some of these projects have not been developed because of poor economics, and even those that can offer an attractive return on investment have other hurdles to overcome prior to development.

“In theory, higher prices should encourage project sanctioning and more supply. However, the conditions for delivering projects are challenging, with political, social, and environmental hurdles higher than ever,” said Eleni Joannides, research director at Wood Mackenzie.

“For example, social and environmental licences to operate are proving elusive in major producing countries, including Chile and Peru,” she added.

More than US$23B a year will be needed over 30 years to deliver new projects under an accelerated energy transition scenario

Investment required

Wood Mackenzie said that assuming an average capital intensity of the project pipeline and accounting for the volume of copper required to achieve climate targets, it estimates that more than US$23B a year will be needed over 30 years to deliver new projects under an accelerated energy transition scenario. This is a level of investment only previously seen for a limited period from 2012 to 2016, following the China-induced commodity super-cycle.

Nick Pickens, research director of copper markets at Wood Mackenzie, said, “Cost pressures and the larger volumes required for an accelerated energy transition have implications for the industry incentive price.”

Under this scenario, the copper price needed to meet demand rises substantially to US$9,370/t (US$4.25/lb) in constant 2022 US dollar terms, compared to US$7,716/t (US$3.50/lb) under the base-case. In theory, this price increase would be sufficient to close the supply gap and maintain market equilibrium.

Role of scrap copper

“Under Wood Mackenzie’s AET-1.5 scenario, there is a larger role for scrap to help meet future demand, but it won’t solve the overall supply challenge,” noted Bhavya Laul, principal analyst at Wood Mackenzie.

Copper already relies substantially on the circular economy, with over a third of consumption derived from secondary sources. Wood Mackenzie estimates that by 2050 this could rise to 45% and with higher recycling rates, the contribution could be even more.

Uptake of EVs and renewable power

Wood Makenzie says low-carbon copper demand over the next 20 years is the equivalent to 60% of the current market size. The uptake of electric vehicles (EVs) accounts for 55% of this demand – the largest single sector contributing to the rise in copper demand.

The offshore wind segment will grow sevenfold by 2040 under Wood Mackenzie’s AET-1.5 scenario, with wind power generation rising by an additional 1.0Mt of copper a year.
Solar power will also see an increase in copper demand, with additional consumption of 1.1Mt a year expected over the next 20 years under a net-zero pathway.