Copper Market Is Facing a Critical Issue

Published on: Apr 19, 2024
Author: Amy Liu

On Thursday, April 18th, copper prices reached a 22-month high, hitting $9,739 per ton, marking a 13% increase since the beginning of the year. In the past few days, copper traders and executives from around the world gathered in Santiago for the annual Cesco Week. The main topic under discussion was: could this be a major problem?

Goldman Sachs strategist Nick Snowdon is one of the most optimistic voices in the market, believing that the latest developments in copper are just beginning. He predicts an astonishing average price of $15,000 per ton for copper next year.

Not everyone shares such optimism. Commodity strategist Alice Fox from Macquarie Group Limited stated, “Fundamentally, the indicators suggest that the price has gone too far.” She isn’t bearish on copper, but she believes that the current rebound “is a bit premature,” driven by bullish investors rather than metal shortages.

Many others agree with this viewpoint, including some of the world’s largest miners and traders privately acknowledging that the cautionary indicators from China, the biggest consumer of copper, are valid reasons.

Currently, there is a shortage of semi-processed copper ore (known as concentrate) in the market. This is a result of disappointing supply and a sharp expansion in global smelting capacity. The result is deals in which smelters and traders are paying roughly the same price for cargoes of copper ore as the copper contained in it will fetch when processed.

Roland Harings, CEO of European copper producer Aurubis AG, believes that this situation is unsustainable. Market participants anticipate that the tightness in concentrate supply will persist into next year, inevitably leading to the conclusion that at some point, this will result in smelter cutbacks and a tighter metal market.

A crucial point may arise at the end of 2024 when miners will negotiate smelter charges based on annual supply agreements.

Regardless of what happens this year, a group of six market participants at the CRU World Copper Conference in Santiago unanimously agreed on one thing: mid-term copper price is expected to rise.

Base Metals Copper Mining Personal Finance