World Could Be At The "Foothills Of The Next Copper Cycle" 

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by Tyler Durden
Thursday, Dec 14, 2023 - 11:55 AM

The world is sliding into a copper deficit over the next couple of years as one of the world's largest copper mines was forced to shutter operations while demand for the refined metal remains elevated due to renewable energy infrastructure and electric vehicles demand. 

Warnings of a copper squeeze come as the Panamanian government recently closed First Quantum Minerals Ltd.'s $10 billion Cobre Panama copper mine, which produces 400,000 tons of copper annually and is considered one of the largest copper mines in the world. This decision emerged after protests and political disputes, culminating in the nation's Supreme Court canceling the mine's operating license. 

The supply forecast faced further complications with unexpected news from Anglo American Plc last Friday. The miner downgraded copper production forecasts for its operations in South America for the next two years. 

Anglo slashed its copper production target for 2024 by 200,000 tons. The forecast noted production levels will drop through 2025. The decline in production is equivalent to a large mine going offline. 

Bloomberg pointed out the unexpected removal of 600,000 tons of copper production from First Quantum and Anglo American "would move the market from a large expected surplus into balance, or even a deficit," adding, It's also a major warning for the future: copper is an essential metal needed to decarbonize the global economy, which means mining companies will play a key role in facilitating the shift to green energy." 

In June, billionaire mining investor Robert Friedland explained to Bloomberg TV in an interview that copper prices are set to soar because the mining industry is failing to increase supply ahead of 'accelerating demand.' He warned

"We're heading for a train wreck here." 

Friedland is the founder of Ivanhoe Mines Ltd. He continued, "My fear is that when push finally comes to shove," copper prices might explode ten times. 

BMO Capital Markets told clients the refined copper market will likely experience a small deficit next year. Clients of Goldman Sachs have been presented with bullish ideas on the refined metal due to tightening supplies.

"The supply cuts reinforce our view that the copper market is entering a period of much clearer tightening," Goldman's Nicholas Snowdon said.

Also, Jefferies' commodity desk is another expecting a deficit next year. 

"Disruptions have significantly increased, and a market deficit is now increasingly likely," said Jefferies. "We could be at the foothills of the next copper cycle."

Just a few months ago, the International Copper Study Group forecasted a 467,000-ton glut in global copper markets next year. 

Shortage fears come even as China is locked in a vicious property market downturn. Demand for the refined metal continues as the energy reset transition is expected to accelerate.