In the Autumn of 2023, the International Copper Study Group (ICSG) forecast that the copper market was likely to experience a significant surplus of the metal in 2024 after several companies worldwide ramped up their operations in response to the growing global demand. However, by the end of the year, updated forecasts suggested that copper prices would skyrocket in 2024, as the world faces deficits of the critical metal driven by more ambitious climate pledges from various countries around the globe. So, what can we expect for copper in the coming year?
In October, the ICSG predicted that the copper market would experience a major supply surplus in 2024, following a supply-demand balance last year. Production was expected to exceed usage by 467,000 metric tonnes in 2024, a significant increase from the 297,000 metric tonne surplus predicted for 2024 in April. However, the group made it clear that the forecast was based on the existing global project pipeline for supply and demand, which is rapidly changing as the green transition accelerates worldwide.
This updated forecast reflected a weak Western demand coupled with the strong Chinese copper output. By October, copper usage outside of China was expected to contract by one percent from the 2022 level “mainly impacted by declines in refined usage in EU countries and North America”, according to the ICSG. Meanwhile, China’s copper usage was expected to grow by 4.3 percent in 2023, based on the information the ICSG had available about the Chinese market. The growing demand in China has been driven by its power and electric vehicle sectors, which have remained strong despite a dip in manufacturing levels in 2023.
The ICSG stated, “An expected improvement in manufacturing activity, the ongoing energy transition and the development of new (semi-manufactured product) capacity in various countries should support higher growth in world refined usage in 2024.” Copper is viewed as a critical metal, vital for the construction of electric vehicles, power grids and wind turbines.
However, by the end of 2023, a report from the BMI Fitch Solutions research unit suggested that copper prices were expected to rise dramatically over the next two years owing to mining supply disruptions and higher demand. The report stated that it expects copper prices to rise by more than 75 percent over the next two years, driven by the acceleration of the global green transition. Prices could also be higher as the value of the dollar declines later in the year if the U.S. Federal Reserve cuts rates this year.
This updated prediction reflects several pledges made at the recent COP28 climate summit, where over 60 countries supported a plan to triple the global renewable energy capacity by 2030. Achieving this aim will require huge levels of copper to be produced in the coming years. In fact, higher renewable energy targets could push the global copper demand up by an additional 4.2 million tonnes by 2030. Based on this expectation, copper prices could rise to $15,000 a tonne in 2025, far higher than the previous record peak of $10,730 per tonne record last March.
Goldman Sachs has stated that it predicts a deficit of over half a million tonnes of copper in 2024 due to mining disruptions. In November, production was paused at the Cobre PanamÃ¡ mine due to a Supreme Court ruling and widespread protests because of environmental concerns. Meanwhile, the copper producer Anglo American stated that it planned to reduce its output in 2024 and 2025 to cut costs. Goldman analysts wrote, “The supply cuts reinforce our view that the copper market is entering a period of much clearer tightening.” The group believes that copper prices could hit $10,000 a tonne by the end of 2024, before rising even higher the following year.
Emerging green energy markets are expected to benefit substantially from the rising demand for critical minerals and metals, including the South American countries Chile and Peru. Rising demand for copper is expected to spur greater investment in mining in the two countries, as well as drive export demand. Chile is home to around 21 percent of the world’s copper reserves. Chile is also experiencing high levels of success in its lithium industry, which is gaining greater international investment as demand rises. It forms part of the lithium triangle, alongside Argentina and Bolivia, which, together, hold more than 75 percent of the world’slithium supply.
Despite a less-than-optimistic forecast for the copper market earlier in 2023, several end-of-year outlooks predict a far higher global demand for copper between now and 2030, driving up copper prices. This rising demand could lead to copper deficits unless governments and private companies invest heavily in mining activities to ensure that the output meets demand in support of an accelerated green transition.
By Felicity Bradstock for Oilprice.com