Copper plates on railcars ready for shipment to the Mufulira refinery, operated by Mopani Copper Mines Plc, in Mufulira, Zambia, Friday, May 6, 2022.
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Soaring copper prices show no signs of slowing, analysts say, with the red metal’s rally fueled by supply risks and an improving demand outlook for energy transition metals.
Copper price with delivery in May traded at $4.323 per pound in New York on Wednesday morning, extending its gains after settling at its highest level since June 2022 in the previous session.
Copper briefly hit a high of $4.334 on Tuesday during intraday trading, reflecting its highest level since mid-January last year.
Three-month copper prices on the London Metal Exchange rose 0.6% to $9,477 per metric tonne.
Copper demand is widely considered an indicator of economic health. The base metal is critically important to the energy transition ecosystem and is an integral part of the manufacturing of electric vehicles, power grids and wind turbines.
Wall Street banks are optimistic about the outlook for copper prices through the end of the year.
Earlier this week, Citi analysts said they believe the second secular copper bull market of this century is now underway – about 20 years after the first such cycle.
Citi said Monday it expects copper prices to trend upward in the coming months, averaging $10,000 per ton by the end of the year and climbing to $12,000 in 2026, according to the bank’s base scenario.
“An explosive price rise is also possible over the next 2-3 years, if a strong cyclical recovery occurs at any point, with prices potentially rising by more than 2/3 to reach $15,000/t+ in this bullish scenario,” analysts at Citi said in a research note.
“Our base case of $12,000/t assumes only a slight increase in cyclical demand growth over the years 2025 and 2026,” they added.
“Commodity markets always resolve themselves”
Separately, Bank of America analysts raised their 2024 copper price target to $9,321 from $8,625 previously forecast.
The Wall Street bank said Monday that copper is “at the epicenter of the energy transition, meaning the lack of growth in mining supply is acutely felt.”
“Limited availability of concentrates is increasingly limiting production at Chinese smelters and refineries, which could push consumers of refined metals back into international markets,” Bank of America analysts said in a research note.
“At the same time, demand in the United States and Europe is expected to rebound as economies bottom out; this, combined with growing demand linked to the energy transition, will likely result in a deficit in the copper market this year “, they added.
Not everyone is convinced that copper prices will maintain projected gains this year.
“Commodity markets always resolve themselves,” Colin Hamilton, a commodities analyst at BMO Capital Markets, told CNBC’s “Street Signs Europe” on Tuesday.
“They always find ways to sweeten things. If we can’t solve the problem on the supply side, guess what, we’re going to hurt demand and that’s what inflation naturally does. “That’s why we underperformed for much of last year.” Hamilton said.
“So if the price of copper is say four times that of aluminum, you will tend to see a slight shift and substitution. I see very high copper price targets: we could achieve them temporarily , but then you would see demand adjust in key areas.
— CNBC’s Michael Bloom and Lee Ying Shan contributed to this report.
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