Copper plays a critical role in electric vehicles (EVs), electrical grids, renewable energy infrastructure, and energy storage due to its superior conductivity. With governments directing substantial funds into these projects, demand for copper is set to remain strong. However, current mining capacity is constrained, limiting the available supply. Copper prices will likely stay elevated without significant changes in mining capabilities or alternative materials being developed.
How did copper prices fare in 2021?
In 2021, copper prices saw significant increases, driven by supply shortages, low inventories, and strong global economic recovery from the pandemic. In April 2021, copper topped $10,000 a metric tonne for the first time in a decade. Prior to this, copper’s all-time-high came in February 2011 when it hit $10,190.
Early in 2021, copper futures on the London Metal Exchange (LME) began to rise sharply, peaking at $10,747.5 per ton in May, a new all-time high. Prices fluctuated throughout the year, mostly stabilizing between $9,000 and $10,000 per ton after May before another peak in October. The Shanghai Futures Exchange (SHFE) enjoyed a boost in copper contracts, as did COMEX in New York.
The main factors influencing copper prices included disruptions in copper mine production, rapid demand recovery, and declining inventories. Global copper production grew slightly, but demand remained high, contributing to tight supply. By the end of the year, LME inventories had fallen significantly, further supporting high prices.
In China, Shanghai Copper prices mirrored the LME, reaching an all-time high of 78,270 yuan per ton in May, and maintaining elevated levels through the year. Despite a brief decline, prices ended 2021 up by over 20%.
Was there volatility in copper prices in 2022?
Copper prices in 2022 were marked by significant volatility, influenced by geopolitical events, economic uncertainties, and fluctuating supply-demand dynamics. The year started with a gradual price rise as inflationary pressures and potential interest rate hikes loomed. Prices spiked briefly in March due to political shifts in Chile and U.S. interest rate adjustments.
In the second quarter, China’s strict zero-COVID policy reduced domestic demand, contributing to copper's bearish trend. Copper prices dropped in June, particularly after another rate hike by the Federal Reserve. By July, copper reached its lowest point since 2020 as China faced additional COVID disruptions, further tightening supply.
Prices recovered somewhat in the third quarter, driven by short-term bullish indicators, but overall price movements remained moderate. In September, copper showed limited gains as Chile's rejection of a new constitution added to market uncertainty.
In the fourth quarter, prices fell in October but rebounded strongly in November and December. The weakening U.S. dollar and the easing of Fed rate hikes supported copper prices in this period, though political unrest in Peru raised concerns about supply entering 2023. Overall, copper prices remained supported by tight supply and macroeconomic factors but faced uncertainty heading into the new year.
What were the trends in copper prices in 2023?
In 2023, copper prices fluctuated due to various global factors, ending the year with gains. SHFE copper prices rose by 4.23%, LME copper prices increased by 2.27%, and Shanghai Metals Market (SMM), a key benchmark in China's metals industry, 1# copper cathode gained 4.6%. The key drivers of these price movements included foreign exchange fluctuations, supply disruptions, and significant economic developments, particularly in the U.S. and China.
The collapse of Silicon Valley Bank and the U.S. banking crisis at the beginning of the year created uncertainty, which contributed to copper price volatility, along with interest rate changes from the Federal Reserve and the European Central Bank. Despite recession concerns in Europe and the U.S., Chinese macroeconomic policies, especially in the home appliance and new energy sectors, boosted copper consumption and helped support prices.
Copper production in China saw its largest annual increase in recent years, with total output reaching 11.44 million metric tons, an 11.26% rise year-on-year. Inventory levels also played a crucial role, with Chinese copper inventories remaining low throughout the year, which supported demand.
Supply issues, such as operational challenges at Panama's Cobre copper mine and disruptions at other major mines like Teck's QB2 project in Chile, further impacted the global copper market. However, new production capacities, such as those from Zijin Mining and Anglo American, helped balance the market.
How did copper prices perform in 2024?
Heading into 2024, the market faced continued uncertainty, especially with potential rate cuts in the U.S. and ongoing geopolitical issues. However, prices surged between February and May due to supply constraints and strong demand, primarily driven by the energy sector.
On May 20, 2024, copper hit a record high of US$11,104.50 on the London Metal Exchange (LME) and US$11,464 on the COMEX, but prices pulled back to US$9,418 by the end of Q2 2024.
The growing demand for renewable energy, especially from solar and wind sectors, has greatly increased copper consumption. Additionally, global electric vehicle (EV) sales rose by 20% in the first half of 2024, further boosting copper demand. However, global production challenges have created tight market conditions, raising concerns about future copper supply.
Entering Autumn 2024, Goldman Sachs significantly reduced its 2025 copper price forecast from $15,000 to $10,100 per tonne, citing declining Chinese demand, especially due to the property market downturn. This delay in the expected copper rally has affected the profit outlook for major miners. Increased global copper inventories have also worsened the market outlook, with other banks forecasting copper price declines and market surpluses through 2025.
Copper Price Consensus Varies
Copper prices have been above $10k per m/t on a few notable occasions in recent years. Will that record be broken again this year?
It’s possible. But analysts don’t all agree on the anticipated price level. While some believe copper is in a supercycle that will lead to higher prices, others expect a drop due to reduced demand from China.
Is the global economy rebounding?
The global economy is seeing mixed trends, with some regions recovering while others face difficulties. The IMF predicts a gradual decrease in global inflation, to 4.5% in 2025. Advanced economies are expected to reach their inflation targets sooner than emerging markets and developing nations.
The reason for an increase in copper demand in recent years is driven by the surge in electrification, a push on decarbonization, and the overall green energy transition. Many major economies including the US, China, Japan and Europe are all on a mission to drastically reduce greenhouse emissions.
It’s not just copper that has recently enjoyed a bull run. Many other commodities have also seen notable price swings. It seems the rise of ESG investing is also contributing to this. As the push for electrification grows, copper remains essential, alongside other battery metals like lithium and nickel, in supporting energy storage and electric vehicle production.
With demand soaring, it seems strange that miners remain cautious about raising their investment in exploration.
Many gold miners automatically have exposure to copper, as the two often go hand in hand. Big names like Newmont Corp (NYSE: NEM) and Barrick Gold Corp (NYSE: GOLD), for instance, can benefit from higher copper prices.
Tom Palmer, CEO, Newmont Corp said:
“I’m pretty excited about having good exposure to copper at that time when the world is going through the energy transition, I think copper’s got a pretty good story in front of it. I think its day in the sun is more toward the end of this decade.”
Since the Covid crash, the copper price has remained elevated, and at over $10,000, nearly doubled, but whether it’s in a commodities supercycle set to continue remains to be seen.
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First Published: April 2021
Updated: September 2024