IWCC: COVID-19 to Increase Copper Oversupply in 2020

The coronavirus outbreak has put pressure on supply and demand for copper in 2020, intensifying market oversupply, according to the International Wrought Copper Council (IWCC).

In 2020, the IWCC is expecting copper to be in a surplus of 285,000 tonnes as a result of the pandemic, with that amount increasing to 675,000 tonnes next year.

“These are unprecedented times and the copper industry is not immune from the impact of the COVID-19 pandemic,” states a report from the group. “The economic disruption and its impact on the copper industry has resulted in greater uncertainty in the factors affecting the supply and demand for copper.”

Refined copper demand could reach 22.625 million tonnes in 2020 — a decline of 5.4 percent compared to 2019. However, in 2021, demand might jump by 4.4 percent to 23.625 million tonnes.

Construction is the largest application for copper worldwide, with nearly half of all copper used by the construction industry, although demand from new segments such as electric vehicles is on the rise.

The impact of the coronavirus pandemic has increased fears of a slower-than-expected recovery in the global economy, with copper prices hitting multi-year lows during the first half of the year. Even though countries are now easing lockdowns, investors are still waiting to see how the rest of 2020 will play out.

Analyzing each region, the IWCC report shows North America could have the deepest decline this year, with total demand for refined copper down 6.9 percent to 2.223 million tonnes. A 5.3 percent recovery is expected in 2021.

On the other side of the world, Europe is forecast to see a decline in demand of 6.4 percent, but in 2021, refined copper demand might increase by 5.4 percent to 2.927 million tonnes.

The forecast for top consumer China is negative as well, according to the IWCC, with reported refined copper demand estimated to be down by 2.8 percent to 11.87 million tonnes. For 2021, reported demand is expected to increase to 12.175 million tonnes.

Mine supply for the red metal, which is reported by the International Copper Study Group, is expected to reach 19.65 million tonnes this year, a decline of 4 percent compared to the 20.46 million tonnes hit last year. Refined copper is also forecast to decline to 22.91 million tonnes compared to 23.47 million tonnes reached a year earlier.

Next year, things are looking a bit better for supply, with mine supply expected to increase 6.7 percent and refined copper supply estimated to potentially reach 24.3 million tonnes.

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.