CHARTS: The coming critical minerals trade war is BRICS short of a load
"While a large number of countries around the world continue to talk about securing raw material supply, China is actually doing something about it."
Higher supplies and softer demand are expected to cool copper prices next year after a dizzying climb to record highs this year, but the metal’s central role in the energy transition will keep sentiment positive.
As top consumer China staged an economic rebound and exchange inventories fell to multi-year lows, benchmark prices on the London Metal Exchange shot to an all-time high of $10,747.50 a tonne in May.
Prices have since fallen back to around $9,600.
Expectations of slower demand growth in China and rising supplies from operations such as Anglo American’s Quellaveco mine in Peru are likely to keep prices subdued next year.
“Long-term prospects for copper remain bullish, but the market looks set to be on pause next year compared to this year,” said Karen Norton, senior base metals analyst at Refinitiv, which expects a modest copper surplus next year.
Others such as Goldman Sachs see fears of China’s property slowdown as overblown, saying gains from EVs, renewables and electrical network investment outweigh the policy-moderated drag from property and machinery.
Mine supply is expected to rise 3.9% to nearly 22 million tonnes next year, according to the International Copper Study Group, which expects a surplus of 328,000 tonnes in the refined market.
Mine supply will be supplemented by scrap, which typically accounts for about one-third of global refined metal supplies, keeping prices subdued.
Bank of America expects demand to hold firm next year and only sees a surplus in 2023. It forecasts prices to average $9,813 a tonne next year and $8,375 a tonne in 2023.
Demand for copper from efforts to decarbonise will intensify, with JPMorgan forecasting it will account for more than 40% of overall demand growth next year in the 25-million-tonne market.
Copper is a material for the green revolution which includes electric vehicles and charging stations and renewable energy sources such as wind and solar.
JPMorgan forecasts total copper demand from energy transition rising from 1.8 million tonnes this year, to more than 3 million tonnes by 2025.
However, mining companies have not invested in enough copper production capacity to meet demand, analysts say, ushering in a period of deficits in the longer term.
“Miners can’t just flip a switch overnight and start production, it takes time. Both electric vehicles and wind power are quite copper-intensive,” said Wood Mackenzie analyst Jonathan Barnes.
(By Zandi Shabalala; Editing by Pratima Desai and David Evans)
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