Copper

Copper has become a long-term critical metal as the world upgrades its energy infrastructure and transitions to green renewable energy.

It’s also a key component of Electric Vehicles (EV’s) — used in the electric motor, batteries, and wiring, as well as in charging stations — and there are no substitutes for its use in EVs, or in wind and solar energy.

We expect that with copper being a key green metal, demand will only improve amid the accelerated move into renewables and EVs, supporting higher prices long term.

In the shorter term, and following a volatile year in 2022, there’s some uncertainty around the base metal with it caught between a global recession, the ongoing green energy transition, and growing demand for electric vehicles.

Copper prices did hit record highs above $10,000 a tonne on the Londong Metals Exchange early last year, but that was short lived giving way to a sharp downtrend caused by growing recession fears that pushed copper to a nearly two-year low below $7,000 per tonne.

Who else likes it

Goldman Sachs

Copper prices are tipped to “rocket to record levels” over the coming 12 months, according to Goldman Sachs. The Investment Bank has expects prices to average around $9,750 per tonne in 2023, with the average jumping to $12,000 per tonne by 2024.

Bank of America

Bank of America has a slightly more optimistic take, expecting copper prices to recover in the second half of the year after a disappointing start, pushing above $12,000 per tonne as soon as this year.

Glencore’s Gary Nagle

Glencore, one of the world’s largest copper producers, says that the copper market is facing an imminent supply shortage. CEO Gary Nagle explained, “there’s a huge deficit coming in copper, and as much as people write about it, the price is not yet reflecting it”.

What about the bear case?

Like most other battery materials, the look term outlook for copper is overwhelmingly positive. However, many commodity analysts expect copper prices to remain subdued at least for the first half of this year as forecast economic weakness, rising interest rates, and weak demand out of China take their toll on market and consumer sentiment.

In its 2023 outlook report, ING said, "Recession fears, China's slowdown due to its Covid-19 restrictions, and the Fed's interest rate hiking path will continue to drive copper's short-term price outlook, however tightening supply should maintain the red metal's price support above $7,500/t throughout 2023”.

Senior commodity analyst at Bloomberg Intelligence, Mike McGlone, is particularly pessimistic around copper, at least in the short term, saying that industrial metals will not be able to withstand the impending slowdown in economic activity.

Prior to global recession fears, and in the lead up to record high copper prices last year, there were only two major copper mines brought on stream globally between 2017-2021, according to the International Copper Study Group (ICSG).

However, after years of low or no growth a wave of copper mine supply is now coming online with four major sources of copper arriving almost simultaneously. This too will likely keep a lid of prices. That could be only in the short term, with Glencore warning of a 50-million-tonne supply shortfall by 2030.