ASX 200

BHP sees tightening copper market on back of global decarbonisation efforts

Go to Colin Hay author's page
By Colin Hay - 
BHP copper market global decarbonisation Olympic Dam

Global mining giant BHP Group (ASX: BHP) has identified copper as being a critical commodity in the global drive to reduce carbon dioxide production.

Speaking on the company’s recent economic and commodity outlook, BHP’s vice president of market analysis & economics Dr Huw McKay also forecast a tightening of copper markets.

“What is common across the 100 or so Paris-aligned pathways we have studied is that they simply cannot occur without an enormous uplift in the supply of critical minerals such as copper and nickel,” Dr McKay said.

He also noted that, “copper ended calendar 2023 on the front foot, with the inflation-interest rate nexus having tilted in a pro-growth, pro-risk direction and supply challenges coming to the fore once again.”

“At the time of writing, the most pronounced shift in copper has been in a spectacular decline in treatment charges in the concentrate market, with base refined prices and premiums continuing to trade in a defined range.”

Dr McKay noted that with the calendar year underway, BHP has updated its expectations for short-term supply-demand balances.

“We now see refined copper in deficit and a very tight situation in copper concentrate (solid Chinese end–use demand, a reduced drag from the West, the abrupt closure of Cobre Panama and other operational shortfalls, new Chinese smelting capacity coming online), which is considerably better than expected six months ago when a moderate refined surplus seemed likely,” he said.

Local project highlighted

BHP chief executive officer Mike Henry also highlighted a local copper development when presenting at the Bank of America Securities 2024 Global Metals, Mining & Critical Minerals conference today in Miami.

He noted that BHP is consolidating a significant resource base in its Copper South Australia operations.

He told the audience the project has already delivered value ahead of further asset optimisation, including future growth via a potential two-stage smelter final investment decision in financial year 2026/2027.

BHP is also pursuing additional value on multiple fronts at Copper South Australia as it follows a potential pathway to around 500,000 tonnes per annum of production.

Current plans include unlocking potential through development drilling, while exploration efforts are progressing at Oak Dam and OD Deeps.

BMI tipping strong year

Meanwhile, Fitch Solutions subsidiary BMI is maintaining an average yearly copper price forecast of around US$8,800/t for this year.

This is higher than the 2023 average price and is supported by a decline in US dollar strength and supply constraints.

In the longer term, BMI expects the copper market to be in a sustained deficit as the green transition accelerates along with the demand for ‘green’ metals including copper.

This year, BMI expects copper prices to rise slightly from current levels owing to a weaker US dollar and growing supply concerns.

BMI expects global refined copper production to grow by 3.1% year-on-year in 2024, supported by Chinese expansion capacity.

However, it expects supply issues in Panama to hamper copper concentrate supply growth, leaving the market tight and putting pressure on refined copper supply.