Experts have long warned that copper stocks are running dangerously low. And now with a rebound in Chinese demand and the metal’s crucial role in the move toward decarbonization, the world is running the risk of depleting copper stockpiles very soon.
According to Goldman Sachs, Chinese copper demand grew 13% last month compared to the year before. If this trend continues, the world could run out of visible copper inventories by the third quarter of this year.
The commodity is used across industries, primarily in electronics, construction, industrial machinery and equipment, and transportation, with China’s reopening and the West’s accelerated transition to electric vehicles and green energy further heating up demand.
S&P Global expects global demand to double by 2035 to 50 million tonnes from 25 million tonnes in 2021. In its recent “Future of Copper” report, the firm estimates a shortfall of between 1.6 to 9.9 million tonnes in 2035.
Trafigura, in its metals and minerals 2022 performance review, sees “increasingly large supply deficits,” even as several new mines come online this year. “A tight market [will] become the new normal for copper.”
The supply crunch signals that prices will potentially soar and reach new record highs.
The benchmark three-month copper contract is trading at $9,000 a tonne, up from a 10-year average of $6,750. Goldman Sachs sees the metal hitting $10,500 per tonne in the near-term and as high as $15,000 by 2025.
Trafigura, the world’s largest private metals trader, sees a similar trend. Kostas Bintas, co-head of metals and minerals, sees prices going beyond the $10,845 per tonne peak hit in March 2022, and thinks it could approach $12,000 a tonne.
“I think it’s very likely in the next 12 months that we will see a new high,” he said at the FT Commodity Global Summit in Lausanne, Switzerland. “What’s the price of something the whole world needs but we don’t have any of?”
Copper is up 6%, outperforming all industrial metals this year so far.
Information for this briefing was found via Twitter, Financial Times, Trafigura, S&P Global, and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.