Posted on 01/24/2022 7:57:56 AM PST by Diana in Wisconsin
Copper is coming off a historic year during which its prices broke records on not just one, but two, separate occasions, peaking at $4.76/lb or $10,476/t in mid-October.
During the first half of 2021, copper rallied off the back of a sharp recovery in economic activity across the world, led by top consumer China. Also pushing prices higher was the belief that pandemic-related stimulus, plus the global push for decarbonization, will further lift demand for the industrial metal.
That saw copper prices break the $10,000/t level towards the end of April, the first time that has happened in a decade, and eventually surge to a new high the week after.
Then in the second half, copper received yet another boost amid an energy crisis that affected several major producers and threatened global supply. In October, a surge in metal orders from warehouses in Europe saw the LME inventories plunge by as much as 89%, to its lowest in 47 years.
All these events factored into copper’s record-breaking year, though many believe that the red-colored metal is just getting started. Is another copper rally on the cards in 2022 and beyond? We’ll explore in detail below.
Copper in 2022
Analysts tend to agree that copper market volatility is likely to persist for much of 2022 and several conflicting forces are in play. However, copper prices will still be supported by stronger demand, even should the economic slowdown in China and complications with its real estate sector have a material effect on the global market.
This is because investments in clean energy and associated infrastructure will continue outweighing the headwinds.
Eoin Dinsmore, research manager of base metals at CRU, recently told Investing News Network that the “growth in electric vehicles and renewable energy will result in copper demand in China and globally in 2022.”
CitiBank wrote in its November outlook that “decarbonization will drive consumption”, and “higher prices will be needed to draw in enough copper scrap to meet longer-term demand.”
Against the backdrop of the green energy transition, analysts including Fastmarkets’ Boris Mikanikrezai still expect copper prices to remain in an uptrend in 2022, though the upward path could be less steep compared to last year.
Karen Norton of Refinitiv told INN that she is anticipating further strength and the possibility of multi-year highs, but not necessarily new record highs, this year, as the energy transition narrative has grabbed the market’s imagination earlier than perhaps expected.
Panelists recently polled by FocusEconomics have presented diverging views on the price outlook for 2022. The minimum forecast for Q4 2022 came from Euromonitor at $6,642/t, while the maximum forecast was Goldman Sachs’ $12,250/t.
Bank of America recently said it expects copper demand to hold firm this year and only sees a surplus in 2023. The bank forecasts copper prices to average $9,813/t during 2022.
Long-Term Outlook
Beyond 2022, those around the industry are mostly upbeat on copper, given the multitude of positive long-term forces that will be increasingly felt towards the end of the decade:
Clean Energy Transition
For the next 3-5 years, the general consensus is that copper will be a clear winner of the “clean energy” investment theme.
The cost-effective metal possesses several physical attributes, one of them being an excellent conductor of heat and electricity. Other properties include corrosion resistance, ductility, malleability, and the ability to work in a range of electrical networks.
Because of its industrial advantages, copper has been used by human civilizations for thousands of years and is now a key building block in electric applications, transportation systems and civil infrastructure. So, of course, it has a major role to play in the global shift away from fossil fuels and towards renewables.
In fact, analysts at Goldman Sachs are calling copper “the new oil”, as the metal is a key part of sustainable technologies, including electric vehicle batteries and deriving clean energy.
“Copper will be crucial in achieving decarbonization and replacing oil with renewable energy sources, and right now, the market is facing a supply crunch that could boost the price by more than 60% in four years,” Goldman Sachs wrote in a report May 2021.
Goldman analysts, led by Jeff Currie, also said that more copper will be needed to create the new infrastructure systems required for clean energy to replace oil and gas, but there has not been enough of a focus on this.
The Goldman team estimates that copper demand will therefore significantly increase by up to 8.7 million tonnes by 2030, if green technologies are to be adopted en masse.
Supply Shortage
Positive long-term outlook for copper also stems from the market dynamics that, as the energy transition moves forward, could distort the demand-supply balance of the metal.
By even the most conservative of estimates, diverging growths in copper consumption and mine supply would create a market deficit for years and even decades.
In 20 years, BloombergNEF says copper miners need to double the amount of global copper production, just to meet the demand for a 30% penetration rate of electric vehicles — from the current 20Mt a year to 40Mt.
Copper consumption by green energy sectors globally is expected to jump five-fold in the 10 years to 2030, data from consultancy CRU Group shows.
A study by energy consultancy Wood Mackenzie ahead of last year’s COP26 conference estimates that, in order to limit the rise in global temperatures since pre-industrial times to 2°C, roughly 19Mt of copper will be needed to feed the energy transition over the next 20 years.
Meanwhile, S&P Global Market Intelligence predicts that due to a shortage of projects, copper supply will lag demand starting in the long term, putting our climate goals in serious doubt.
While the New York-based analytics firm expects mined copper production to rise to 21.87Mt and 26.14Mt in 2021 and 2025, respectively, from 21.16Mt in 2020, that would not prevent a supply gap in the post-2025 years.
Production from existing copper mines, including concentrate and solvent extraction-electrowinning, is expected to increase at a CAGR of 1.0% in 2021-25 but fall at a CAGR of 4.7% in 2026-30, driven by declining ore grades and mine closures.
These mines include Glencore’s 33.75%-owned Antamina (BHP 33.75%, Teck Resources 22.5%, Mitsubishi 10%), Codelco‘s Radomiro Tomic and Teck’s Highland Valley.
As a result, production from existing operating mines — not considering those assets that are starting up, project expansions or mine restarts — is projected to fall to 15.90Mt in 2030 from 20.53Mt in 2021.
Diminishing supply from currently operating mines, combined with the projected increase in demand for copper concentrate over 2021-2030, would result in a 3.85Mt production shortfall in 2025, S&P Global estimates.
The refined copper market will also move into a 279,000-tonne deficit by 2025, from a 142,000-tonne surplus in 2020, S&P Global adds.
From 2026 to 2030, the copper industry will be unable to meet a growing demand for concentrate, even when including uncommitted development-stage projects that could potentially move forward and start up during this period, S&P Global says.
Vivek Dhar from Commonwealth Bank of Australia predicts that if copper demand increases 3.5% annually over the next five years, the market could see a supply shortage “very, very quickly.”
Depleted Mine Reserves
Higher copper prices would also reflect years of underinvestment within the mining industry dating back to the 2000s, leading to a lack of new projects and a stagnant metal supply.
Dwindling copper reserves and lower ore grades at some of the world’s largest mines also mean that a new deposit would just be replacing the existing output, thus even if a new project comes online, it may not contribute to the supply growth at all.
Without new capital investments, CRU predicts global copper mined production will drop from the current 20 million tonnes to below 12Mt by 2034, leading to a supply shortfall of more than 15Mt.
MORE AT LINK.
Global hunt
- - -
Watch out for the Meth Freak thieves.
They will search anywhere.
So, if the Greenies get their way. they will be hogging up all the copper for ‘clean energy.’ However, at lease in MY state, they REFUSE to let us mine for copper, LOL! We have TONS of copper in northern Wisconsin. Some of the rivers are YELLOW because of the content of copper in the rocks and the soil! Of course, they want to pillage and plunder OTHER parts of the world, which they always shut up about.
“’Copper will be crucial in achieving decarbonization and replacing oil with renewable energy sources, and right now, the market is facing a supply crunch that could boost the price by more than 60% in four years,’ Goldman Sachs wrote in a report May 2021.
Goldman analysts, led by Jeff Currie, also said that more copper will be needed to create the new infrastructure systems required for clean energy to replace oil and gas, but there has not been enough of a focus on this.
The Goldman team estimates that copper demand will therefore significantly increase by up to 8.7 million tonnes by 2030, if green technologies are to be adopted en masse.”
That’s a lot of strip mining.
Looks like new home construction sites will be needing armed security. Most plumbing is no longer copper but the electrical..... Hard to conduct power using PVC.
And the 1970s experiment with Aluminum household wiring didn't fare so well...
The Lake Superior area has always been a center for copper mining. About 20 years ago a multi ton copper boulder was recovered from the Lake waters. Almost pure native copper. So there has to be lot more yet where that came from.
Time to go back to wiring houses with aluminum cable.
And the costs for wiring continue to climb.
Trying to pump up a bubble...
Lol...I see you remembered the aluminum wire debacle also.
Vast reserves of copper in Alaska. Unfortunately the environmentalists are blocking any new mines.
Ya hay dere - Lot of copper in Tomahawk & Lady Smith - My neighbor has a place in Long Lake - he said during WW II we were mining copper 24/7 in the area.
Copper mining is being blocked by the State DNY in Madison.
Had a house in Bay St Louis many years ago that was wired with aluminum. You could feel the heat in the wiring. Not sure if they retrofitted them or not.
Too bad we didn’t follow through on the copper mining plan for Afghanistan. Like the oil in the middle east, we left it for the natives, after all our billions of dollars worth of military and humanitarian assistance was a “gift” from the American People.
“Copper mining is being blocked by the State DNY in Madison.”
Yep.
Maddening, isn’t it? Grrrr!
I was in Kabul in 2002. The government buildings for one ministry were just shells. All the windows, doors, molding was gone, used for firewood. Even the copper electric wires were ripped out of all the walls.
If we made meth legal it would make the price much lower and they would not have to steal so much copper. They would also be able to afford rudimentary housing with trash service instead of living in tents surrounded by garbage. I went for a bike ride along the river yesterday and it was like a linear refugee camp. Coleman tents, tarps, cardboard boxes and pallets and huge piles of garbage with shopping carts and bicycle parts mixed in. A lot of that trash will go into the river and become ocean pollution.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.