When Will Copper Go Up? (Updated 2023)
Copper’s strong fundamentals are pointing toward a bull market. But when will the price of copper rise further?
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 this year's 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.
Copper's 25 year price performance.
Chart via Trading Economics.
Prices for copper had pulled back to about US$8,000 by mid-August 2022 on growing fears of a global recession. In 2023, copper prices have mounted a campaign to breach the US$9,300 level, once again giving market watchers a reason to believe highs for the metal are soon to be retested.
Is the optimism of an impending bull market for the red metal still warranted? Let’s look at the current supply and demand factors influencing 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 mid-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.”
S&P 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. However, in a boon for copper prices, China ended that policy in early 2023.
The Chinese government’s Made in China 2025 and China Standards 2035 initiatives include spending US$1.4 trillion on copper-heavy infrastructure programs, including 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 research firm Wood Mackenzie has noted, “EVs can use up to three and a half times as much copper when compared to 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 of this year, 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.
In a mid-2020 report, S&P Global Market Intelligence analyst Kevin Murphy paints a “dismal” picture for copper mine supply. He states that out of the 224 copper deposits discovered between 1990 and 2019, a mere 16 were discovered in the last decade. These circumstances 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 this resource 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, Reuters reported that the country is still expected to increase its copper production by 15 percent year-over-year in 2023. Energy and Mines Minister Oscar Vera said in April that Peru’s mining industry is “working as normal,” adding that the government plans to dramatically reduce project approval times from two years to about six months.
Although his firm anticipates a small copper surplus of less than 150,000 MT in 2023, CRU Group analyst Robert Edwards said China's refined copper usage is expected to grow by 1.9 percent this year, while worldwide consumption will rise by 2.4 percent.
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 2021 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 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?
One of copper’s biggest backers, Goldman Sachs (NYSE:GS), has described the metal as key in powering the green energy revolution. The bank recently put forth its copper market forecast for the 2023/2024 period, calling for prices to hit US$11,000 this year, with that amount increasing to US$12,000 in 2024.
The Bank of America has given a similar estimate, saying it sees potential for copper prices to reach US$12,000 in 2023's third quarter. That’s if the US Federal Reserve takes the foot of the gas in regards to its monetary policy, and if the transition to clean energy continues to expedite demand for the red metal.
“Notwithstanding the macro headwinds, physical markets have remained tight, highlighting the lack of spare copper units available at present,” notes Bank of America commodity strategist Michael Widmer in a metals outlook report.
Speaking at the Financial Times Commodity Global Summit this past March, Kostas Bintas, co-head of metals and minerals at Trafigura, said that his firm projects that copper prices may breach their current all-time high, possibly moving as high as US$12,000 in the near future. “I think it’s very likely in the next 12 months that we will see a new high,” he said. “What’s the price of something the whole world needs but we don’t have any of?”
This is an updated version of an article first published by the Investing News Network in 2021.
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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.
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