Copper Rate Trend and the Gap in the Market Supply
The price of copper has been on a rollercoaster ride in the last 20 years when it comes to historical trend copper prices.
From a bottom of US$0.73 per pound in June 2001 to a height of US$3.91 in April 2008, the rate of copper grew alongside worldwide economic development. Be that as it may, it took not a long time for the 2008 worldwide economic crisis to quickly bring down the copper market, which reduced the price of the metal to just US$1.29 at the year’s conclusion.
Copper historical rate trend
2011 saw the commencement of the global economic recovery, and by the beginning of the year, copper rates had reached a new historic level of US$4.58. This peak was temporary, though, since the price of copper started a 5-year decline that hit the lowest amount of US$1.95 in early 2016.
Throughout the subsequent four years, copper rates remained comparatively stable, hovering around $2.50 and $3. Afterward, the price of copper has mostly been rising since it hit a low of US$2.17 per pound in the middle of March 2020.
Recently, there has been an upward trend in copper trades too. But what is the highest record of copper price, and what is the reason behind it? Come along with us to dive further into everything there is to know about the copper rate trend and the gap in the market supply and demand.
Copper prices have recently reached record highs as a result of rising demand and impending supply problems. There is no shadow of a doubt that copper is the most binding base metal needed for industries with a vast array of use cases in almost every sector.
It has earned the nickname “Dr. Copper” since, for many years, the rate of copper has been a significant indication of the state of the world economy. Whereas major extremely long drops in copper rates are frequently an alarm of financial turmoil, soaring prices typically indicate a robust worldwide economy.
So far, one of the main drivers of copper prices has been its considerable demand. Copper is the 3rd most used metal worldwide due to its numerous daily applications, ranging from power grids and construction projects to technological gadgets and household appliances.
The building infrastructure sector favors copper because of its resistance to corrosion and excellent conductivity. As a matter of fact, the consumption of copper worldwide is almost entirely driven by the construction industry. In the long run, it is anticipated that the growing demand for brand-new buildings and house maintenance, either in Asian or Western countries, will boost copper rates.
As far as copper demand by the country is concerned, China pours the state’s treasury into new construction and development projects as an economic superpower. So increased demand from China has been closely linked to price surges in copper in the last years. The Asian country’s industrial output and infrastructure works have served as the driving craft of copper prices.
Thermal, hydro, wind, and solar power are just a few of the sustainable energy applications that are progressively looking to copper for its conductivity.
The demand for EVs and their charging stations and power storage uses is growing at a faster rate than other factors in the sustainable energy sector, making it the top consumer of the red metal.
Consumption from this sector is set to grow as countries venture toward the electrification of transport systems and adaptation of power storage projects as a strategy to combat climate change.
Europe’s need for copper is rising with the growth of its sustainable energy sector. More than 1.58 million battery EV units were sold in this region in 2022, 29 percent higher than in 2021, while experts anticipate that this pattern will remain so in the upcoming years.
Whereas internal combustion engine cars need just roughly 22 kg of red metal, hybrid EVs, plug-in hybrid EVs, battery EVs, and electric battery buses utilize 40, 55, 80, and 253 kg, respectively.
The volume of copper that Europe would need to supply expected EV demand relies on the kinds of EVs that grab consumer attention, according to Eleni Joannides, chief copper strategist at research group Wood Mackenzie, who spoke to INN in 2021.
A wider supply/demand imbalance has been linked to an increased copper price trend in 2023, 2022, and 2021. Shutdowns caused by COVID-19 exacerbated the vulnerable copper supply issue, and when the main economies of the globe appeared to be recovering from the pandemic, copper demand increased once more.
Simply put, the recovery in business growth needed to be faster for the copper mining and refining sector to maintain pace. As a result, at the beginning of 2022, copper prices rose to all-time highs.
On March 6, 2022, the value of copper got to the highest-ever hit of US $ 5.02 a pound. This was while the price of the metal at the beginning of the year was $4.52 US.
Concerns over shortages in the supply chain, record low inventories, and increased copper demand in 2022 all contributed to the price increases during the Q1 of the year.
Copper rates, though, began to decline in the middle of 2022 due to concerns that once more time COVID-19 lockdowns in China and escalating mortgage problems that slackened the pace of building and construction works in this country.
Economic pressure was also applied to the whole range of products, especially copper, by higher inflation and Fed interest rate increases. Afterward, in July 2022, the copper price had fallen to roughly $3.30 USD, a value that was unprecedented in almost two years.
Yet, in 2023, worries over low copper stockpiles are still present, while there are significant increases in demand from China, a growing presentiment that the US has achieved maximum inflation, and news of the shutdown of Peru’s Las Bambas mine, which contributes 2% of the world’s copper production.
The top producer of copper, Chile, had a fall in production in 2022, and the government there anticipates a similar trend this year.
Due to inflation and lower ore grades coming from existing mines, copper companies must invest more money. Furthermore, new resources are located in non-accessible areas, which discourages investment. ESG is putting further financial pressure on mining companies to reduce their environmental repercussions.
So far, you may have perceived that a serious supply gap is imminent with the transition to a greener economy in the upcoming ten years. To find out the solution, stay tuned until the end.
Closing the gap in the market supply
The recent surge in the copper rate has sparked optimism about future prices. Even in the long run, it is anticipated that the prospects for copper will tighten as demand from industries like EVs and power storage rises and as authorities throughout the globe strive to move towards a green economy.
With stockpiles currently trading at levels close to record lows, one more year of below-trend supply expansion with water scarcities, poorer ore grades, and other challenges impede output in the largest producers worldwide.
When it comes to the copper demand forecast, according to S&P Global Market Intelligence, the growing EV industry, wind and solar power sources, and other factors would generate a 50 million metric ton increase in copper demand up until 2035.
The greatest copper mines around the globe are struggling with the depletion of their high-grade copper reserves, and for the previous ten years or more, new discoveries have already become limited.
Given that around two decades is required to convert a mine from discovery to production, the pandemic deteriorated the troublesome issue, which resulted in shutdowns in several of the world’s top copper-producing nations and copper corporations suspending investments in additional discovery and development projects. Such investing disruptions will also affect copper availability in the longer run, to the point that by 2030, the gap between copper supply and demand would exceed 6 million metric tons, according to analysts at Rystad Energy.
Since there is now no alternative for copper in electronic use cases, such a substantive shortage will have significant effects on the power transition. To make up for the gap, copper mining has to make a huge investment.
So low copper storage inventories are alarming issues. Researchers predicted that there would be shortfalls in the supply of copper in the coming years, which could result in more price increases.
Green transition plus inadequate supply sources so far have led to the greater and earlier ultimate deficit that is actually here in place, not starting in the coming years, according to Goldman Sachs metals analyst Nicholas Snowdon. The company predicts that the copper shortage in 2023 would reach the amount of 178,000 metric tons.
This suggests that in order to bridge the supply gap, consumers would look to the metal scrap market. Reprocessed copper scrap, which is occasionally dubbed as “the world’s largest copper mine,” makes a considerable contribution to supporting and regulating the copper market, although that is by no means sufficient.
By 2031, electrification is anticipated to cause annual copper consumption to climb to 36.6 million metric tons. While existing supply predictions depend on restarts, operating or prospective projects, and recovered scrap, supply 30.1 million metric tons, a further 6.5 million metric tons of copper (an extra 20%), is required to be discovered.
Yet the implementation of new emerging technologies, such as coarse particle recovery and sulfide leaching, along with process optimization with machine learning, does have the capacity to narrow the gap substantially.
This is while there are significant barriers to commercialization and growing acceptance of such technologies. Yet, technological breakthroughs must be considered as a contributing factor inseparable from the development of new mines.
The metal supply gap would be significantly reduced if the sector effectively markets and embraces innovative technologies. To guarantee they are utilizing the greatest innovations from all over the sector, major miners might also keep looking for adaptable, robust methods to collaborate with newcomers or providers of services.
Such technologies also reinforce the significance of brownfield operations. The possibility of taking full advantage of the mines — with a smaller environmental impact and sustained employment for local residents is quite alluring.
Even areas that have completely stopped producing can once again produce financial benefits when commodity prices go up, and technology opens new heights.
The supply restrictions confronting the metals required for decarbonization may seem intimidating to purchasers of metals. However, new mineral-processing technologies are evidence that human creativity and the market system would come up with solutions in the end.
The need for investment
There will be a shortage of copper as the world becomes more electrified. On the other hand, there is optimism thanks to cutting-edge mining and processing technology.
Players from all corners of the industry, including mine operators, developers, and copper purchasers, can act right now to assist the adoption of such novel technologies and stimulate upcoming development. If they succeed in this, the vital resources mankind will require in the coming years may be made available. To attain zero-carbon ambitions, the mining sector must launch future projects at a volume and consistency of funding that has never been achieved before.
Under expedited power transition assumption, Wood Mackenzie expects that over US$23 billion annually would be considered necessary for the coming three decades to execute new projects. This figure assumes an ordinary capital intensity of a project pipeline and accounts for the amount of the red metal binding to satisfy climate change goals.
Such an amount of investment was only observed earlier, between 2012 and 2016, during the China-induced super-cycle in commodities.
Hence, for someone who is concerned about copper-mining companies, the gap in the supply and demand for copper also offers an investing potential.
Cryptal.global is a case in point that has cleverly blended the copper mining industry with staking pools of Blockchain technology to provide everyone across the globe with the equal golden opportunity of gaining lucrative profits out of the contribution to solve a major issue in the industry.
The bottom line is that this is not a call for passive optimism; rather, it’s a reminder that consumers should help the supply chain from wherever they are able to by supporting and endorsing technical advancements.
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