copper weekly
The copper market is where the green revolution runs into the reality of global scarcity.
If China managers to stay on track and demand for EVs, green power and infrastructure continue, then the copper market is headed for a supply deficit this decade that’s now irreversible.
It takes at least seven years to bring in global copper production and some projects coming online this year and next are the final gasp before the pipeline begins to dry out. It’s a topic that’s fairly well known but many bulls are waiting for prices to reflect a higher incentive price; or to get close to the tight +2026 period to make a move.
However this year, the shutdown of Panama’s Cobre Panama mine along with lower grades in Chile has left the market prematurely tight.
“The copper market this year is set to be in its tightest state since 2021, with an anticipated 428kt deficit set against just 260kt of current visible stock,” Goldman Sachs writes today.
The market has suffered a supply shock over the past quarter from a series of mine supply downgrades, reducing expected growth this year by 60% from expectations in mid-’23, which will in turn increasingly bind a previously unyielding refined supply dynamic. This will be set against a resilient, if unspectacular, global demand environment (GSe 2.4% in ’24 vs. +2.5% in ’23), as green channels ultimately exert more aggregate influence over a rate easing induced troughing in cyclical channels. Whilst the market still faces a period of seasonal surplus in Q1 (GSe 269kt surplus) before the deficit inflection from late March, the absence of visible inventory builds so far this year suggests that earlier tightening cannot be discounted. We continue to target copper to $10,000/t on a 12M basis.
Copper is currently trading at $8345 in London and $3.78lb in the US.
How soon the copper market goes into deficit relies largely on China, which consumes more than half of the world’s copper. If China’s economy continues to wilt, demand will fall short of estimates. If China turns on the growth taps, copper could significantly tighten.
Earlier this year I was listening now-retired Goldman Sachs commodities analyst Jeff Currie who was particularly bullish on copper.