After a strong rally from April to May, copper prices have seen a significant correction from late May to late June. Market participants generally believe the reasons for the decline in copper prices from their highs are the weak economic growth and rising inventories in China, the largest consumer of copper, along with uncertainties regarding U.S. interest rates. However, over a longer period, the upward trend in the copper market is not expected to end.
On Friday, the three-month copper price on the London Metal Exchange (LME) rose 0.5% to $9,558.50 per ton, but it fell 4.8% in June. If this trend continues, copper prices might see a six-week consecutive decline and the largest weekly drop since May 2023. On May 20, copper prices reached a historical high of $11,104.50 per ton but have since fallen by 14%.
However, just a month ago, voices bullish on copper were prevalent in the market. Citi claimed that a new long-term bull market for copper had begun and predicted prices could reach up to $12,000 by 2026, while Andurand Capital was even more optimistic, targeting copper prices as high as $40,000. Trafigura forecasted that AI and data centers would add another million tons of copper demand by 2030, further exacerbating the supply shortfall.
Doug Unwin, President and CEO of Geologica Resource Corp. , expressed his long-term optimistic outlook on copper prices during an interview with ‘METALS 100’. He emphasized that copper is an indispensable metal for global electrification but is currently in short supply. Unwin also introduced his company’s business and the potential of their Topley copper-gold project in central British Columbia, Canada. Geologica Resource is an exploration and development company focused on acquiring, exploring, and developing highly prospective mineral resources in North America.
Looking ahead, a new wave of price increases is building momentum.
First, future demand prospects are not pessimistic. On one hand, demand for copper in household appliances is growing rapidly, and on the other hand, the use of copper in new energy vehicles and charging stations is a major highlight. Analyzing from a longer-term perspective, energy transition, and the rapid development of emerging industries such as artificial intelligence and data centers drive electricity consumption, thus boosting copper consumption. On the supply side, it will be challenging for supply to continue expanding. With global copper mining companies’ capital expenditure remaining low and new production capacity being slowly introduced, the trend towards tight supply in the future remains unchanged.
Lastly, the Federal Reserve is expected to start cutting interest rates in the third quarter, which will bring back investment demand for copper, benefiting copper prices. As a typical recovery asset, copper prices essentially reflect inflation expectations, so when the Federal Reserve’s monetary easing occurs, copper prices are likely to see a cyclical and sustained rise. Once the U.S. dollar trends weaker, global trade cycles will strengthen, leading to a cyclical recovery in demand for commodities.
Citi had previously predicted that copper prices might experience a short-term correction, but given the strong end-use demand, bullish investors and consumers could consider buying if copper prices fall below $9,500.
