Copper, a fundamental commodity for numerous industries, has consistently experienced market fluctuations due to its global supply and demand drivers. However, the overall market outlook suggests that copper prices will remain robust in the foreseeable future, driven by supply constraints and steady demand growth, particularly in the energy and technology sectors.
Supply Side
Copper Mine Supply Requires Longer Repair Periods
Copper mine production is facing long-term challenges, as disruptions in key mining regions persist. Political instability, environmental issues, and labor strikes in major copper-producing countries like Chile and Peru have slowed recovery efforts. The repair of supply chains in these regions will take considerable time, further tightening the global copper supply.
Refined Copper Shortages and Limited Capacity Expansion
Overseas smelters, particularly in Europe, Japan, and South Korea, are grappling with raw material shortages, increasing the likelihood of production cuts. As a result, the risk of reduced output from these regions is growing, adding to the supply squeeze.
On the other hand, while wet copper production is showing a mild recovery, this is not enough to offset the broader supply challenges. Furthermore, the release of new production capacities in countries like India and Indonesia is expected to be limited. The incremental capacity for 2024 is forecasted to be between 15,000 and 20,000 tons, with an estimate of less than 50,000 tons in 2025. Tight raw material supplies will hinder the full utilization of this new capacity, maintaining pressure on refined copper availability.
Demand Side
Overseas Demand: The U.S. and Europe Remain Resilient
Despite concerns about economic slowdowns, demand for copper in the U.S. and Europe remains resilient. The likelihood of a sharp decline in copper consumption is low, with both regions experiencing only mild demand reductions. In the U.S., copper consumption is bolstered by the real estate sector and durable goods industries, while Europe shows strength in electricity-related demand, even as consumer goods sectors remain temporarily weak.
The focus for investors should be on the potential recovery rhythms in Europe and whether the U.S. will enter a more severe recession. Structural changes are also important: the U.S. leans towards real estate and durable goods, while Europe’s demand is driven more by electricity and consumer products. These differences highlight the diversified nature of copper demand, which supports market resilience even in weaker economic environments.
New Energy Sectors: The Copper Boom
The global transition to new energy technologies is perhaps the most significant driver of copper demand. The new energy industry, which includes power generation equipment, energy storage, and electric vehicles (EVs), is accelerating copper consumption. Photovoltaic systems (solar power) have already experienced substantial growth, with 2023 being a record year, and additional demand is expected in 2024 and 2025.
Moreover, electric vehicles require significantly more copper than traditional vehicles, and as EV adoption increases globally, copper demand will surge. The expansion of power and distribution networks, coupled with investments in energy storage and new energy manufacturing, will further elevate copper consumption. Current estimates predict an additional 620,000 tons of copper demand in 2023, followed by 120,000 tons in 2024 and 370,000 tons in 2025.
| 2022 | 2023 | 2024F | 2025F |
Global new wind power installed capacity (GW) | 78 | 117 | 94 | 120 |
Estimated copper demand for wind power (million metal tons) | 31 | 50 | 42 | 54 |
Global photovoltaic new installed capacity (GW) | 230 | 370 | 405 | 450 |
Estimated photovoltaic copper demand (million metal tons) | 58 | 93 | 101 | 113 |
New energy vehicle production and sales (million vehicles) | 1019 | 1343 | 1650 | 2050 |
Estimated new energy vehicle copper demand (million metal tons) | 41 | 48 | 59 | 74 |
Subtotal copper demand (million metal tons) | 129 | 191 | 203 | 240 |
Marginal annual growth (million metal tons) | 25 | 62 | 12 | 37 |
Strong Fundamentals and Favorable Market Conditions
From a fundamental perspective, copper’s domestic and international markets are showing signs of improvement. Inventory levels are steadily decreasing, and smelter production cuts could contribute to even lower stock levels, potentially reaching historic lows. The reduction in inventories will create upward pressure on copper prices, especially as downstream industries replenish their stocks and adjust to refined copper shortages.
Additionally, macroeconomic factors play a significant role. In one scenario, if global recessions are synchronized and intensified, copper prices may see a temporary decline, expanding spot premiums. However, the more likely scenario is that bearish sentiment will weaken, leading to market recovery expectations, which would cause copper prices to rise in a restorative manner. In this case, spot premiums could expand initially but later shrink as the market stabilizes.
Copper Prices to Remain Strong
Given the combination of supply constraints and steadily growing demand, copper prices are well-positioned for sustained strength. The challenges in ramping up mine production, alongside the tightness in refined copper supply, create a solid foundation for continued upward price pressure. Meanwhile, resilient demand in the U.S. and Europe, strong growth in emerging markets, and the accelerating shift towards renewable energy and electric vehicles will ensure robust consumption levels for years to come. Investors should consider copper a valuable long-term asset in an era of increasing global demand and supply limitations.
