On the threshold of the “copper boom”

Copper prices reached a two-year high, driven by a weakening dollar and growing concerns about the metal's supply in global markets. In London, on the LME, prices surpassed the key resistance level of $10,000 per metric ton. The June copper contract on the Shanghai Futures Exchange is currently valued at 80,920 yuan ($11,213.35) per tonne, representing a slight increase from its previous record high of 82,460 yuan.

It is important to note that copper supply issues do exist. Cobre Panama, the world's largest open-pit copper mine, was temporarily suspended due to a power outage in Zambia, which affected the country's key mines. Supply difficulties and lower margins for smelters in China have led to a potential 10% cut in production this year. However, last month saw the announcement of subsidies for recycling old cars in exchange for new ones, with the aim of boosting sales, especially of electric vehicles. This will also boost demand for the red metal.

Finally, the high costs of developing new mines have forced industry players to consider mergers and acquisitions with competitors rather than starting new projects, as evidenced by BHP's recent attempt to buy Anglo American.

On the demand side, strong buying interest in copper due to its role in electrification also supports an optimistic outlook for metal prices over the long term.
Against this background, experts and market participants anticipate a further confident rise in prices for the “red metal”. Daniel Sullivan, head of global natural resources at Janus Henderson Investors, is preparing for a copper boom. He told Dow Jones, “Let's face it. This is the highlight of the year.” He is more bullish on the metal than other commodities because of its role in electrification. The expert has stated that over 15% of his fund's assets are invested directly in copper, with additional investments made through the shares of diversified miners such as BHP and Rio Tinto. This share may grow further.
"There is no better alternative to copper," Sullivan said, pointing out that he is not concerned about the risk of manufacturers replacing it with aluminium if prices get too high. However, any path to higher prices could be bumpy, he adds. "It won't be a one-way street," and concerns about supply shortages do not "imply that the price can't fall before doubling."
Nikolai Vavilov, a specialist in the strategic research department at Total Research, has indicated that exchange prices for copper are poised to reach new highs. At the beginning of this year, he recalls, the world's leading rating agencies, such as Fitch, predicted the annual price of copper at around $8,400 per ton on the largest metal exchange in London (LME), increasing their last year's forecast from $8,300 per ton.

The expert attributes the increase in the price forecast to disruptions from major copper producers such as Rio Tinto and Anglo American, as well as the suspension of work at the Cobre copper mine in Panama, which accounts for approximately 1.5% of global copper production. This, coupled with a recovery in demand for the asset in China, could result in a significant shortage of refined copper. On 30 April, the price of copper on the London LME Exchange reached $10,200 per ton, a new two-year high. It is thought that this is not the limit yet.

Copper is widely regarded by the world's leading analysts as a leading indicator of economic growth due to its extensive use in a range of industries, including construction, medicine, electronics and aerospace. Copper prices are anticipated to reach new heights over the next two years, with an increase of over 75% from current levels. This is due to supply constraints and rising demand for the metal from China's real estate and other renewable energy sectors.
The forecasted deficit of refined copper for this year is approximately 500,000 tons, which represents a significant shift from last year's 182,000 tons. On 12 April, the US and UK authorities imposed sanctions on Russian suppliers of non-ferrous metals, including copper concentrate. This prohibited any transactions with this exchange asset on the London Metal Exchange (LME) and the Chicago Mercantile Exchange (CME), which became an additional factor pushing up global quotations.

The only obstacle to reaching $11,000 per ton, a new historical high, may be a sudden tightening of monetary policy by the US Federal Reserve, which will lead to a strengthening of the US dollar on world exchanges and complicate access to loans for the construction industry in the US or China. However, if the US Federal Reserve's key rate is lowered by the end of the year, this will help reduce the financial burden on copper producers and companies in the construction sector through more affordable lending, which is likely to push copper prices to new heights.

In the medium and long term, Nikolai Vavilov is confident that global demand for copper will remain high, driven by increased production of electric vehicles and the development of renewable energy sources. This metal is considered a key element in the transition to green energy.
Copper prices have been in an upward trend since October 2023, the rise has accelerated since February 2024, reflecting market shortages, optimism about the prospects for the Chinese economy and expectations of an easing of monetary policy by the Federal Reserve, confirms, in turn, stock market expert BCS World of Investments » Dmitry Puchkarev. According to him, the supply of metal on the market is limited due to the lack of new large projects, which pushes the price up. Also, quotes are supported by restrictions on metal supplies from Russia as part of the recent sanctions package.

One of the key points for the metal in the medium term will be macrostatistics from China, says Dmitry Puchkarev. The acceleration of economic growth and the digestion of problems in the construction sector will be the drivers for a further rise in prices to $10,500–$10,900 per ton, the expert expects.