This year, copper could break its price records.
The latest research from Trafigura, a commodity trader, suggests that we’re in for a historic copper rally.
The two main catalysts are…
China’s Reopening Makes Copper Demand Soar
China is the world’s second-largest economy. It’s also one of the biggest consumers of commodities in the world.
And this year, its economy has been growing at a fast pace.
In February, copper demand in China rose 13% year-over-year.
In fact, if China’s economy continues consuming copper at this pace, the world will run out of copper inventories by the end of the year, according to Goldman Sachs.
Goldman Sachs also predicts that copper prices could rise up to $15,000 per tonne by 2025.
This is almost 68% higher than the current level.
Tight Supply-Demand Balance Creates an Opportunity
The bank’s economists compare the copper deficit of the 2020s to the oil deficit of the 2000s.
Back then, a 5% demand-supply shortfall drove the price of oil from $20 to almost $150.
And for copper… well, over the next several years, the deficit could be three times as high, at 15%.
This is why the bank’s analysts are so optimistic.
Copper stockpiles are already low, and they are declining as the world consumes more and more of the metal.
It’s needed everywhere, from electric vehicles to solar installations, wires, and electronics.
This is why it has been the best-performing industrial metal this year.
And, if supply and demand projections are correct, the copper market will continue growing.
In 2021, the world consumed about 25 million tonnes of copper. By 2030, it will need about 40 million tonnes per year, or 60% higher.
Mining companies will not be likely to catch up with this soaring demand.
In fact, mining executives already describe the situation as a supply-demand “train wreck.”
For example, Peru, which is the world’s second-largest copper producer, saw anti-government protests in the country disrupt its copper production.
Production losses in Peru will likely continue, according to analysts and executives.
The Antapaccay mine, which produces about 170,000 tonnes of copper per year, temporarily suspended operations in January.
The Las Bambas mine, which is responsible for 2% of the global copper output, also paused its production because of transportation disruptions.
Issues like these drove Peru’s copper disruption rate (the difference between lost supply and forecasts) to 12% in 2022. Globally the disruption rate was about 6.3% vs. 4%–5% projected.
In other words, the global copper supply is more volatile than analysts predict.
Copper “Train Wreck” Is a Catalyst for Copper Miners
Even though volatile supply is a problem for copper consumers, the producers could see a surge in prices and profits as the copper rally continues.
This is why here at the Financial Star, we see copper and other “new economy” materials such as lithium, uranium, nickel, cobalt, and hydrogen as part of a long-term megatrend.
By the end of this year, copper could be one of the best-performing metals.
The resurgent demand from China, low stockpiles, and supply disruptions play should benefit investors exposed to copper.
The biggest megatrends developing right now in the clean energy and decarbonization spaces provide these commodity markets with an extra boost.
Thank you for your loyal readership,
The Financial Star team