Posted on 02/28/2023 12:31:49 PM PST by Red Badger
KEY POINTS:
* A copper deficit is set to inundate global markets throughout 2023, fueled by increasingly challenged South American supply streams and higher demand pressures.
* Copper is a leading pulse check for economic health, and the red metal’s squeeze could be an indicator that global inflationary pressures could worsen, and subsequently compel central banks to maintain their hawkish stances for longer.
*****************************************************************************************
A copper deficit is set to inundate global markets throughout 2023 — and one analyst predicts the shortfall could potentially extend throughout the rest of the decade.
The world is currently facing a global copper shortage, fueled by increasingly challenging supply streams in South America and higher demand pressures.
Copper is a leading pulse check for economic health due to its incorporation in various uses such as electrical equipment and industrial machinery.
A copper squeeze could be an indicator that global inflationary pressures will worsen, and subsequently compel central banks to maintain their hawkish stance for longer.
“We’re already forecasting major deficits in copper to 2030,” said Wood Mackenzie’s Vice President of Metals and Mining, Robin Griffin. He attributed it largely to ongoing unrest in Peru and higher demand for copper in the energy transition industry.
“Anytime there’s political unrest it has a whole range of effects. And the obvious one … is the potential for mining sites to have to close,” he added.
Unrest in Peru
Peru has been rocked by protests since former President Pedro Castillo was ousted in December in an impeachment trial. The South American nation accounts for 10% of the global copper supply.
Glencore announced Jan. 20 it was suspending operations in its Antapaccay copper mine located in Peru, after protesters looted and set fire to its premises.
Additionally, Chile — the world’s largest copper producer which accounts for 27% of global supply — recorded a year-on-year decline of 7% in November.
‘Without a doubt our favorite mega cap’: Investor names the stock to buy for the next 10 years
“Overall we believe Chile will likely produce less copper from 2023 to 2025,” Goldman Sachs wrote in a separate note dated Jan 16.
However, one market watcher cautioned against getting too caught up in the headlines.
“It’s typical to see disruptions and I don’t think we’re necessarily seeing any more than normal,” said Timna Tanners, managing director at Wolfe Research, who forecasts that 2023 should see an increase in several new mines.
Copper futures settled at $4.035 per pound on Monday, according to CME data. The metal hit a low of $3.9930, its lowest level since Jan. 10 when it traded as low as $3.9875.
Coping with copper consumption
The reopening of China and growth in the automotive and energy transition industry have stoked demand for the red metal, putting further strain on copper resources.
“China’s reopening has a major impact on copper’s price as this improves [its] demand outlook and will push copper prices even higher due to the supply shortage, at the back of the clean energy transition which makes mining harder,” said Tina Teng, market analyst at CMC Markets.
Beijing’s rollback of stringent zero Covid policies are expected to quicken the country’s economic recovery, as well as pent-up Chinese demand. Commodity prices have seen strong gains since December when China announced plans to lift a slew of Covid measures.
“The deficit may last till a potential global economic recession caused by the current headwinds, by 2024 to 2025,” Teng added, forecasting that by then, copper prices might double.
However, Tanners from Wolfe Research said she’s not expecting a “huge spurt” of activity and consumption of copper as China hums back to life.
“Copper consumption in particular really didn’t slow down in 2022. Factories were still running, government stimulus and infrastructure was still chugging along,” she explained.
However, she added that the broader electrification phenomenon will likely be a bigger fundamental driver for copper demand.
“You can’t see electric vehicles take off before you get the charging infrastructure, and the electrification [which is] necessary, is actually much more copper intensive.”
Copper features heavily in electricity-related technologies, and by extension energy transition proposals.
Sales of electric cars in 2021 more than doubled to bring the total number of EVs in the world around 16.5 million, according to the International Energy Agency. That means the EV-charging ecosystem will have to be ramped up.
“There’s a longer term issue around the supply of copper in the energy transition [industry], because the growth in both the automotive and transmission is going to be huge,” said Wood Mackenzie’s Griffin.
There was a thread here a long time ago about people breaking into active electric transformers to steal the copper, usually with disastrous results.
bet they won’t do that again!...................
Here’s one of the stories
https://www.fox2detroit.com/news/men-electrocuted-with-24k-volts-trying-to-steal-copper-wire
I know of at least three major copper/zinc deposits in the United States which have never been developed, strictly for political reasons.
Crispy critters........................
Pinochet would know how to ensure the supply of essential commodities, unlike the idiot woke rulers currently in South America.
Are we gonna grow new copper in 2030?
It may be time to buy Southern Copper (SCCO) again.
If we had not debased our currency there would be plenty of already refined copper floating around.
No, by 2030, the entire world economy will have collapsed and there will be no need for new copper..................
Never speculate in copper. It is a tightly controlled market, and they do not want outsiders to make as much as one red cent from it.
An anecdote is whatever happened to the vast amount of copper cable that became obsolete with fiber optic cable replacing it. They didn’t just abandon it underground, but pulled it out and spooled it up. And then, it vanished.
At the time it was speculated that there was enough recovered copper to build half a dozen pure copper aircraft carriers. But the market price of copper didn’t fluctuate at all.
Here a Grift, there a Grift, everywhere a Grift-Grift
Old McGrifter had a Grift, best not step on his toes!
I think we are entering a commodities supercycle where the price of all metals will be heading up.
one red COPPER cent................which are now ZINC in a copper sheath....................
Fortunately, we will not need any additional copper to expand the electrical grid and manufacture batteries when everyone drives an EV.
(S)
One word: AMMO.........................
Hmm. Is the solution to this problem less freedom? Just asking.
Pennies, I can quit buying expensive anodes.
Just glue them to your boat motor..................
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.