Copper, known as the “red metal,” is a crucial component in various industries. From construction to electronics, this versatile metal plays a significant role in shaping modern society. Therefore, copper prices’ movements have significant implications for various industries and economies worldwide. In this blog post, we will examine the past, present, and future outlook for physical copper prices and discuss the supply and demand dynamics that will influence them.
Past Trends in Copper Prices
The copper market experienced a significant price surge in 2020, rising to a seven-year high due to various factors. The first was the COVID-19 pandemic, which disrupted global supply chains and caused shortages in copper supply. This disruption led to an increase in demand for copper as governments around the world implemented stimulus programs to revive their economies.
Additionally, copper supply was limited due to operational disruptions at major copper mines in Chile, Peru, and Zambia. This supply shortage, coupled with growing demand, led to copper prices reaching a peak of over $10,000 per MT (“Metric Tonne”) in May 2021.
Current Copper Price Trends
As of March 2023, the copper market is experiencing a slight dip in prices, with the metal trading at around $8,500 per MT. The decline in prices can be attributed to a slowdown in demand from China, which is the world’s largest copper consumer. Additionally, there has been an increase in copper production as mines that experienced operational disruptions in 2020 resumed operations.
Future Outlook for Copper Prices
Looking ahead, the copper market is expected to experience stable growth over the next two years, especially in markets such as China and India. Demand for copper is expected to increase from today’s global copper demand of 25 million MT, driven by renewable energy projects, electric vehicle production, and 5G network infrastructure. The supply side of the market is also expected to improve as new copper mines come online.
The demand for copper in renewable energy projects, such as wind turbines and solar panels, is expected to grow as countries continue to shift towards sustainable energy sources. Electric vehicle production is also a key driver of copper demand. An electric vehicle contains four times more copper than a conventional vehicle due to the metal’s conductive properties.
Finally, the implementation of 5G network infrastructure is expected to increase demand for copper as the technology requires more copper wiring than previous networks.
On the supply side, copper production has been impacted by labor disputes, political instability, and regulatory challenges. In recent years, there have been supply disruptions due to the COVID-19 pandemic, which has further constrained supply. Additionally, there have been concerns about declining ore grades, which could also impact supply. Most copper miners can process ore with a copper content of down to 1%, but new technology in the future may allow processing ore of lower grades.
Based on the demand and supply factors, the outlook for copper prices in 2023 and 2024 looks positive. The International Copper Study Group (ICSG) has projected that demand for copper will continue to grow at a moderate rate, driven by the global green energy transformation, while supply remains constrained.
“The only way we’ll meet copper demand by 2030 is if prices top US$13,000.”
Goldman Sachs
Goldman Sachs is forecasting a global supple shortage of copper in 2023 and expects prices to rebound from today’s $8,500 per MT to $10,000 per MT in 2023 and $13,000 per MT in 2030.
New mines are in development, but they take a long time to develop and face regulatory challenges on the way, not to mention the very large upfront investments needed.
It might be a bumpy ride to get there, but due to increase in demand and supple shortages copper prices is sure to increase from here.
