The price of copper is relatively stable in 2023, and this trend is expected to continue into 2024. However, the supply and demand for copper in the coming years will become increasingly tight. On one hand, there is significant pressure on the supply side, and on the demand side, the convergence of traditional industrial demand driven by economic recovery and new demand brought about by energy transformation will contribute to this tightening.
The continuous exacerbation of supply-demand imbalances, a long-term fundamental factor, is expected to support copper prices and create investment opportunities.
Industry experts generally believe that there is currently no shortage in the copper market, but this situation is likely to change. Among the world’s top ten copper mines, the resources of three mines will be exhausted in the next 15 to 20 years. In addition, ESG assessment standards will slow down the exploration and construction progress of new mines. Even if new mines are developed, the lack of high-quality copper assets is still a problem. Compared to 20 years ago, easily accessible copper mines have been nearly exhausted, and the grade has also decreased significantly, making prospecting much more difficult.
The supply and demand for copper in 2024 are expected to remain balanced, but by 2026, a shortage is anticipated, and this gap is expected to continue to widen over the next 10 years. As old mines gradually exit, the development and production of large new mines will require 20 or 30 years, and the investment scale is huge. The long investment period and capital intensity of copper mine development determine that primary mining companies cannot complete the entire process on their own and will require subsequent injection of funds from large mining companies.
Although primary mining companies have the potential to be acquired, investors still need to be cautious, and patience is crucial. Taking BHP Group’s（ASX:BHP,NYSE:BHP,LSE:BHP）Resolution copper development project in Arizona, USA as an example, the project has a 25-year term, which BHP estimates will be extended by an additional 5 to 7 years, bringing the term to 30 years.
The development cost of large copper mines is high, but the potential returns are also remarkable. For example, Teck Resources’（TSX:TECK.A,TECK.B,NYSE:TECK）Highland Valley mine in British Columbia, Canada, can create wealth for decades. Looking at large mines worldwide, many of those that can generate profits of $1 million to $2 million per day are copper mines, which is the charm of investing in copper.
The President and CEO of Rule Investment Media stated that, based on his investment experience, the median holding period for copper mining stocks is 6 years, and each stock has experienced a halving of its stock price before creating a 10-fold return on investment. Therefore, successful investment in the copper market is the result of patience and endurance, and many investments will not immediately bring returns to investors.
