Prices of copper reach significantly high levels over the past two years.
Copper's Sizzling Surge:
By the closing bell on Comex, May 13, the July copper futures soared a whopping 2.2% to a mouthwatering $4,766 per pound—a level last seen on April 18, 2022, as per Dow Jones Market Data. As of 12:40 PM Moscow time on May 14, the futures were sizzling above the $4,800 mark.
The record high, set on March 4, 2022, stands at $4,9375 per pound. Over the past two months, copper has been on a rollercoaster ride, gaining an impressive 28%, according to MarketWatch.
On the London Metal Exchange (LME), Monday, May 13, saw three-month copper futures closing at an appetizing $10,185 per ton. The price even flirted with $10,200 during the session.
The copper craze is fueled by investor speculation that global ore supplies might struggle to keep up with the growing demand. Commodity traders are forecasting a rise in copper demand by 1 million tons by 2030, driven by AI development and data center expansion. Meanwhile, a 35,000-ton deficit is anticipated in 2024, with global demand at 26 million tons, and the deficit projected to balloon to 100,000 tons by 2025.
The Wall Street Journal points out that the copper fever, along with the record-breaking gold prices, signals broad expectations for sustained economic growth and potential inflationary pressures. Copper is regarded as an economic bellwether due to its use in construction and electronics production.
Analysts at Pave Finance attribute the copper price surge to optimism about the resumption of global economic growth, led by the US, and hope for a recovery in China's economy. They also emphasize that demand is being driven by those seeking to capitalize on consistent inflationary pressure.
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The Skinny on Future Demands:
By 2040, demand for copper is predicted to skyrocket by 40%, fueled by the green energy transition and digital expansion. The International Energy Agency's aggressive clean energy scenario forecasts a possible gap of 4.5 million metric tons by 2030. Meeting global battery demand alone by 2030 would require a significant boost in copper supplies.
Production challenges include limitations in annual growth ( approximately 3%), declining ore grades in major producing countries like Chile and Peru, and geopolitical issues affecting other producers such as Russia. Meeting projected needs would necessitate the development of around 80 new mines and a $250 billion investment by 2030.
The anticipated deficit can be attributed to insufficient new mines, geopolitical and operational issues, rapidly increasing demand, and limited impact from recycling efforts. These factors suggest that copper supply might fall short of demand by 2030, potentially impacting global economic and environmental objectives.
The surge in copper's price suggests optimism in the finance industry, particularly for the energy sector, as analysts at Pave Finance attribute it to anticipated resumption of global economic growth, led by the US, and recovery in China's economy. In the long run, the finance industry is keeping a close eye on future copper demands, with predictions of a 40% increase by 2040 due to the green energy transition and digital expansion. However, potential challenges in meeting the expected demand, such as insufficient new mines, geopolitical issues, and limited impact from recycling efforts, may cause a deficit in copper supply, impacting both global economic and environmental objectives.
