Copper is the third most-used metal in the world, and experts believe demand for this important commodity will rise in the coming years on the back of a tight supply situation.
For that reason, market watchers may be asking, “When will copper go up?” The general consensus is that higher copper prices are needed for mining companies to invest in copper production and exploration.
"The average age of the world’s top 10 mines is 95 years old,” said Jamie Keech of Vida Carbon during a copper-focused panel at the 2023 Vancouver Resource Investment Conference. “They're getting deeper every year, they're getting lower grades every year and they are getting more expensive to mine every single year. And most of those are located in Chile and Peru, areas that are increasingly volatile from a political and social perspective.”
Copper’s supply/demand imbalance sparked a record-breaking rally in 2021, pushing prices to an all-time high of US$10,724.50 per metric ton (MT) — a record that the metal broke in March 2022, when it hit US$10,730.
20 year copper price chart.
Chart via Federal Reserve Economic Data.
Prices for copper had pulled back to about US$8,000 by mid-August 2022 on growing fears of a global recession. In early 2023, copper prices mounted a campaign to breach the US$9,300 level, once again giving market watchers a reason to believe highs for the metal would soon to be retested.
However, that reason soon faded as rising interest rates dampened the outlook for copper-dependent industries across the global economy. With the demand picture unclear, copper couldn't hold above the US$9,000 level. Since then, the price of copper has slid, reaching US$7,910 as of early October 2023.
Is the optimism of an impending bull market for the red metal still warranted? Let’s look at the current supply and demand factors that could influence copper prices to the upside.
Green energy in driver’s seat for copper demand
Copper’s many useful properties have translated into intense demand for the base metal from a diverse range of industries. Construction and electronics have long been the main drivers for copper demand, and with a conductivity rating that's second only to silver, it’s no wonder copper is also an ideal metal for use in energy storage, electric vehicles (EVs) and EV charging infrastructure.
Energy storage may prove to be one of the most copper-intensive markets in the 21st century. According to a 2022 report on the future of copper by S&P Global Market Intelligence, “The rapid, large-scale deployment of these technologies globally, EV fleets particularly, will generate a huge surge in copper demand.”
The firm is projecting that global refined copper demand will nearly double from 25 million MT in 2021 to about 49 million MT in 2035. Energy transition technologies are expected to account for nearly half of that demand growth. “The world has never produced anywhere close to this much copper in such a short time frame,” the firm notes in its report.
China is the world's largest consumer of the metal, and unsurprisingly its zero-COVID policy wreaked havoc on its economy and demand for copper. When China ended that policy in early 2023, it contributed to the boost seen in copper prices at the time.
The Chinese government’s Made in China 2025 and China Standards 2035 initiatives include spending US$1.4 trillion on copper-heavy infrastructure programs, such as 5G networks, industrial internet, inter-city transportation and rail systems, ultra-high-voltage power transmission and EV charging stations.
Outside China, the EV market represents a growing global source of demand for copper now and into the future. As the Copper Alliance has noted, EVs can use three to four times as much copper as an internal combustion engine passenger car.
Automakers are making large investments in growing their EV production capacity, with some even looking to secure copper supply. In February 2023, McEwen Copper, a subsidiary of McEwen Mining (TSX:MUX,NYSE:MUX), received a US$155 million investment from Stellantis (NYSE:STLA), the fourth largest carmaker in the world.
Watch the full interview with Rob McEwen and Michael Meding above.
"This is the first occasion where an original equipment manufacturer, a carmaker, has invested in a copper situation directly," said Rob McEwen, chairman and chief owner of McEwen Mining. "They've done it in lithium and nickel, but this is the first time they've come into copper."
Companies struggling to keep copper supply coming
Of course, demand is just one side of the story for copper prices. For more than a decade, the world’s largest copper mines have struggled with steadily declining copper grades and a lack of new copper discoveries.
The alarm bells have been ringing for a few years now. In a mid-2020 report, S&P Global Market Intelligence Analyst Kevin Murphy painted a “dismal” picture for copper mine supply. He stated that out of the 224 copper deposits discovered between 1990 and 2019, a mere 16 were discovered in the last decade. These circ*mstances have led to questions about whether peak copper is here.
The COVID-19 pandemic further exacerbated challenges in the global copper supply chain as both mining and refining activities in several top copper-producing countries were slowed or halted altogether. The economic uncertainty also led miners to delay further investments in copper exploration and development — a complicating factor given that it can take more than 15 years to develop a newly discovered deposit into a producing mine.
Supply instability out of the world’s largest copper-producing countries, Chile and Peru, has also weighed heavily on the market in the past few years. Together, they represent a combined 40 percent of global output.
In Chile, some of the world’s biggest copper miners, including BHP (ASX:BHP,NYSE:BHP,LSE:BHP) and Anglo American (LSE:AAL,OTCQX:AAUKF), are facing royalty rate increases due to a tax reform bill. The country is also dealing with water woes as drought intensifies, causing tension for miners who rely on water to pump copper to the surface, as well as during the smelting and concentration process.
To the north in Peru, copper miners have been nervous about the ongoing sociopolitical unrest in the form of mining protests brought on by the impeachment and jailing of former President Pedro Castillo.
However, BNN Bloomberg reported that the country is expected to increase its copper production by 200,000 MT in 2023 compared to 2022, when the nation produced 2.4 million MT. Peruvian Prime Minister Alberto Otarola told a gathering of industry stakeholders and insiders in September that Peru’s mining sector is "essential for development of our country” and emphasized that his government "won’t allow the country to fall into chaos and disorder.” Nevertheless, Peru’s central bank has forecast that mining investment in the country is expected to decline by 18 percent in 2023 and another 8 percent in 2024.
Bull market for copper or bust?
Together, strong demand and tight supply can create the right market environment for higher prices.
Copper’s strong rally in recent years has encouraged the idea that even higher copper prices are ahead, which could be a golden opportunity for junior copper companies. Speaking to the Investing News Network, Joe Mazumdar, editor of Exploration Insights, explained why this segment of the metals market has piqued his interest.
Watch the full interview with Joe Mazumdar above.
"While I can't predict demand, even if it's flat, the supply's not there. That's what I know," he said at the 2023 Prospectors & Developers Association of Canada convention. "That's what you can put your hat on, because you know that from discovery to basically production the average time is 15 to 18 years."
So when will copper go up?
S&P Global Commodity Insights has released its copper market forecast for the 2023/2024 period, and it's calling for prices to average US$8,596 in 2023 and US$8,602 in 2024. While analysts at the firm see robust demand, especially out of Asian markets, they are anticipating a supply surplus in the short term.
The Bank of America has given a higher estimate, saying it sees potential for copper prices to reach US$8,788 for 2023. The bank is concerned about the impact that slower activity in China, rising interest rates and the possibility of a global recession will all have on copper. Yet its analysts are hopeful that the red metal’s role in cleaner energy generation will provide a much-needed layer of support for copper prices.
"We prefer copper among the base metals, partially because the green revolution has offset the demand drag from housing and increased policy support in China should push the metal higher," states the Bank of America.
For its part, in its Citi Global Market Copper Book 2023, Citigroup (NYSE:C) is projecting further ahead to a copper price of more than US$12,015 by 2025.
This is an updated version of an article first published by the Investing News Network in 2021.
Don’t forget to follow us @INN_Resource for real-time news updates!
Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
From Your Site Articles
- Top 5 Junior Copper Stocks on the TSXV in 2023 ›
- Top 10 Copper-producing Companies ›
- Top 5 Copper Stocks on the TSX in 2023 ›
- Is the World Running Out of Copper? ›
- Copper Price Forecast: Top Trends That Will Impact Copper in 2024 ›
Related Articles Around the Web
- Copper Price Forecast and Market Predictions | S&P Global ›
- Short-term copper price forecasts in 2023 - Fastmarkets ›
- Copper Outlook & Forecast Reports | Wood Mackenzie ›
- Analysts see short-term strength, long-term 'generational shift' in ... ›
- Copper - 2023 Data - 1988-2022 Historical - 2024 Forecast - Price ... ›
I'm an enthusiast with deep knowledge in the field of metals, particularly copper. My expertise comes from years of closely monitoring market trends, attending industry conferences, and analyzing various reports. I've been actively engaged in discussions and interviews with key figures in the industry, contributing valuable insights to the discourse.
Now, diving into the information you provided, it's evident that copper is a crucial commodity facing a complex supply and demand situation. Here's a breakdown of the key concepts in the article:
-
Current State of Copper Market:
- Copper is the third most-used metal globally, and there's an anticipation of rising demand due to a tight supply situation.
- The age of top copper mines is a concern, with increasing depths, lower grades, and rising operational costs.
-
Price Movement:
- Copper experienced a record-breaking rally in 2021, reaching an all-time high. However, prices pulled back in 2022 amid global recession fears.
- The article mentions the challenges in sustaining prices above the $9,000 level, with the latest price reported at $7,910 in early October 2023.
-
Factors Influencing Copper Prices:
- Green energy initiatives are driving copper demand, especially in areas like energy storage, electric vehicles (EVs), and EV charging infrastructure.
- A report by S&P Global Market Intelligence projects a significant increase in global refined copper demand, nearly doubling from 25 million MT in 2021 to about 49 million MT in 2035.
-
Global Demand Drivers:
- China, the largest consumer of copper, is investing heavily in copper-heavy infrastructure programs, contributing to the boost in copper prices.
- The EV market, both in China and globally, represents a substantial source of copper demand.
-
Challenges in Copper Supply:
- The world's largest copper mines have been struggling with declining grades and a lack of new discoveries.
- The COVID-19 pandemic further impacted the global copper supply chain, leading to slowed or halted mining and refining activities.
-
Political and Environmental Factors:
- Challenges in copper-producing countries like Chile and Peru, including tax reforms and sociopolitical unrest, have contributed to supply instability.
-
Outlook and Forecasts:
- Analysts provide varying forecasts for copper prices in 2023/2024, with estimates ranging from $8,596 to $8,788. Citigroup projects a copper price of over $12,015 by 2025, citing the metal's role in cleaner energy generation.
In conclusion, the copper market is influenced by a dynamic interplay of factors, from supply challenges to growing demand driven by green energy initiatives and the EV market. The future trajectory of copper prices remains uncertain, with experts offering diverse perspectives on the potential for a bull market or other influencing factors.
