Copper prices on the rise as demand from China and EV sector grows
There have been mixed feelings over where the copper market is going, with some reports forecasting the key critical metal is ready to jump, while other estimates are tipping a slump on the back of increased production.
However, judging by current price movements and recent forecasts, the metal is on a bullish run.
According to the latest ANZ commodities wrap, written by senior commodity strategist Daniel Hynes, copper is particularly likely to benefit from the likelihood of further stimulus rise in China.
The Market Wrap reported that copper has hit a three-month high amid the prospect of increased Chinese demand.
The commodities wrap also noted that Codelco, the world’s largest producer, lowered its annual production guidance on the back of operational issues. Overall copper production in Chile fell 0.9% year-on-year in June.
Citigroup tips strong rise
American multinational investment bank Citigroup recently suggested that copper is set for a period of strong price growth thanks to rising demand for electric vehicles (EVs) and renewable energy.
In a note the company tipped the copper price could rise by up 46.5% by 2025.
However, Citi did suggest there is potential for copper prices to slide in the short term, but is likely to climb rapidly in the next six to 12 months, led by a potential significant imbalance between supply and demand.
Australian study forecasts price growth
The Australian government’s latest Resources and Energy Quarterly report has also forecast price growth in the second half of 2023 and highlighting electric vehicles.
Slow global manufacturing activity was attributed to leading to prices declining in the June quarter 2023, with copper estimated to have averaged $12,300 a tonne, down from $13,200 a tonne in the previous quarter.
The report also tipped improved Chinese circumstances may help prices rebound in the second half of 2023.
Across the whole year, the LME spot price are forecast to average $12,800 a tonne. The report said demand will be a stronger driver of price than supply over the year, with risks aligned to the downside if the Chinese recovery stalls, or major economies experience a hard landing.
It was also forecast that global refined copper consumption will grow to 26 million tonnes (Mt) in 2023 – an increase of 1.5% year-on-year.
China’s copper consumption is expected to be led by the energy sector, with substantial investment in the energy grid and renewable energy generation in the near term.
European EV uptake on the rise
The quarterly study noted a particular improvement in automotive production in Europe. An additional 400,000 passenger vehicle registrations were lodged in the EU in the March quarter 2023 compared to the corresponding quarter in 2022 – though registrations remain below 2019 levels.
The US has also seen stronger EV sales because of subsidy measures associated with the Inflation Reduction Act. Increasing total vehicle sales and the growing market shares of copper-intensive EVs will support copper consumption in the transport sector, though cost of living pressures remain a key risk for EV uptake.
Copper consumption is expected to grow by 2.8% in 2024 and by 3.5% in 2025, where it is forecast to reach 28 Mt, supported by growing demand from the power and EV sectors.
Copper critical to EV market
The Copper Development Association (CPA) says the metal is an essential material component of electric vehicles. It is used in the electric motors, batteries, inverters, wiring and in charging stations because of its durability, malleability, reliability and superior electrical conductivity.
The CPA recently applauded the release of the US Department of Energy (DOE) which included copper in its preliminary draft report of the Critical Materials Assessment .
“The Copper Development Association is pleased to see that for the first time a US federal agency is following the lead of the EU, Canada, Japan, India, China and others by characterising copper as critical through its inclusion on the official DOE Critical Materials List,” said Andrew Kireta, president and chief executive officer of the CDA.
The DOE is recommending a designation of ‘near-critical’ for copper in the medium term (2025-2035).
“While the DOE Critical Material list is focused only on the importance to energy technologies, we know copper is critical to overall US economic and national security. CDA will therefore continue to advocate for copper’s inclusion on the official USGS Critical Minerals list, an effort that has bipartisan support in congress and from governors across the country,” Mr Kireta said.