On the heels of record highs in Iron Ore and Steel earlier this week, as commodity demand soars on the back of economies emerging from COVID lockdowns (demand) and various supply chain/operational issues (supply); copper prices surged to an all-time high this morning as Chinese investors unleashed fresh demand following a five-day holiday.
Bloomberg Intelligence strategist Mike McGlone said that “the reaction of copper to $10,000-a-ton resistance may set the inflation vs. deflation tone for years”
As Mining.com reports, the reopening of major industrial economies is sparking a surge across commodities markets from corn to lumber, with tin climbing above $30,000 a tonne for the first time since 2011 also on Thursday.
Copper has gained 28.1% since the end of last year and is up 114.9% from its 2020 low, hit in March of that year amid the global economic fallout as countries locked down their populations to contain the spread of covid-19.
“The long-term prospects for metals prices are ‘too good’ and point to higher prices in the next few years,” Commerzbank AG analyst Daniel Briesemann told Bloomberg.
“The decarbonization trends in many countries — which include switching to electric vehicles and expanding wind and solar power — are likely to generate additional demand for metals.”
Trading house Trafigura Group, Goldman Sachs, and Bank of America also expect copper to extend gains.
“Copper could spike to $13,000 a tonne in coming months, partially over low inventories,” Bank of America said.
“Copper prices will remain strong as a continued rebound in global PMIs bolstered investors’ bullish sentiment,” Citic Futures Co. said in a note.
On the supply side, Peru reported a 19% jump in March copper output, potentially offering some relief to tight global supplies, but a bill to dramatically increase taxes in Chile, the biggest copper-producing nation, threatens to curtail future output and supercharged the metal’s rally even further.
And as OilPrice.com's Tsvetana Paraskova notes, surging demand and insufficient supply of new copper projects could result in copper prices jumping to $20,000 per metric ton in a few years, double the current price of around $10,000 per ton which is the highest in a decade, analysts say.
Soaring demand for critical minerals to support the energy transition, including copper, has already made copper one of the hottest metals this year, with prices jumping to $10,000 per ton, double from the pre-pandemic levels due to the global push toward decarbonization and government support for electric vehicles (EVs) and renewable electricity generation.
Copper will be the key metal in the energy transition. But expected supply from existing mines and projects under construction is estimated to meet around 80 percent of the copper the world will need by 2030 in a scenario consistent with climate goals, the International Energy Agency (IEA) said in its new report ‘The Role of Critical Minerals in Clean Energy Transitions’ this week.
“Electricity networks need a huge amount of copper and aluminium, with copper being a cornerstone for all electricity-related technologies,” the IEA said.
However, the copper projects are seeing a decline in resource quality over time. For example, the IEA says, the average copper ore grade in Chile declined by 30 percent over the past 15 years. Investments in copper projects are also lagging behind the expected surge in demand.
That’s why it’s no surprise that David Neuhauser, founder and managing director of U.S. hedge fund Livermore Partners, told CNBC this week that “copper is the new oil.”
“I think copper is the new oil and I think copper, for the next five to 10 years, is going to look tremendous with the potential for $20,000 per metric ton,” Neuhauser told CNBC.
A few days ago, Bank of America said in a research note that if inventories of copper deplete, the price of the key energy transition metal could hit $20,000 per ton as early as 2025.