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Copper price strengthens on back of China’s economic stimulus and ongoing supply disruptions

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By Colin Hay - 

Positive financial news out of China along with potential supply issues have helped strengthen the copper price overnight to close at US$8,562 (around A$13,000) per tonne.

Senior strategist Daniel Hynes reported that economic support measures in China have helped copper maintain its strong price position.

Mr Hynes said copper again led the base metals sector after Beijing unveiled a plan to boost liquidity in its banking sector.

Better-than-expected economic activity in the US also left the market more confident about the demand outlook.

This comes amid heightened concerns of disruptions across the metals sector, with copper continuing to have supply issues hanging over its market.

Geopolitical issues continue

Numerous geopolitical issues and a potential for supply not meeting demand both continue to support copper’s recent price run.

The issues include the Panama government’s decision to close First Quantum’s Cobre Panama mine, the looming US presidential elections, Russia’s invasion of Ukraine and growing tensions in the Middle East.

Fitch Solutions subsidiary BMI Research recently forecast that copper would maintain an average price of around US$8,800/t during 2024.

Copper price January 2024

The copper price has stabilised in the past week to sit at US$8,562.5.

The leading global research firm said copper’s price will be supported by a fall in the US dollar and supply constraints.

Clean energy demand

Growing use of copper as a critical metal in the switch to cleaner energy is also expected to see the metal impacted by a sustained deficit as the green transition accelerates.

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

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

The research firm forecast sees continued growth in refined copper production with output climbing from 27 million tonnes in 2023 to 36.3Mt by 2032, averaging 3.7% on an annual basis.

At the same time, BMI is predicting a 3.5% year-on-year rise in global consumption to 28Mt.

BMI is also forecasting an average 3.9% yearly increase in global copper demand over the next decade from 27Mt in 2023 to 38Mt in 2032.

Australian outlook positive

In its recently-released Resources and Energy Quarterly Report, Australia’s Department of Industry, Science and Resources estimated global copper consumption had grown by 7.3% in 2023 with China accounting for the bulk of this growth.

Australian copper export earnings were forecast to reach around $12.8 billion in 2023–24, while increasing local production and export volumes will see export earnings reach $13.4b in 2024–25.

The report predicts Australia’s mined production will grow to around 868,000t in 2024–25.

Australia’s refined copper production is also expected to grow by around 1.8% annually to around 471,000 tonnes in the same period.

The report suggested that the BHP (ASX: BHP) acquisition of OZ Minerals in May 2023 is expected to significantly increase refined copper output from the company’s South Australian operations, now known as Copper South Australia.

On a further positive note, Australian copper exploration expenditure rose to $183m in the September quarter 2023.

This was around 10% higher than the comparable quarter in 2022 and continues the general upward trend in place since 2017.