On Thursday, UBS predicted that the average copper prices on the London Metal Exchange (LME) will reach $10,500 and $11,000 per ton in 2025 and 2026, respectively. The forecast is based on growing demand driven by the energy transition and tightening supplies. UBS expects copper supplies to become increasingly tight in the next six to twelve months, potentially leading to a supply deficit exceeding 200,000 tons by 2025.
Sharon Ding, head of China Basic Materials at UBS, stated at a press briefing that while copper prices might face some short-term downward pressure from a positioning perspective, the outlook for the market over the next two years remains positive. The reason for this optimism is the strong demand from electric vehicles, solar and wind energy, and China’s grid investment, as well as benefits from high-growth sectors like AI data centers and defense needs.
The potential for copper price increases stems from two main aspects: the continued growth of the global economy providing solid support for base metals demand, and the burgeoning new energy sector driving additional demand.
In March 2024, Tim Coughlin, the President and CEO of Royal Road Minerals Limited (TSXV: RYR), was interviewed by METALS 100. He introduced the joint venture with MSB, one of Saudi Arabia’s largest diversified holding companies, and the copper project in Morocco. He also shared insights into market sentiments and the copper market. The company’s mission is to apply expert skills and innovative technologies in the process of discovering and developing copper and gold deposits, pioneering a new strategy for copper exploration.
In recent years, capital expenditure by copper mining companies has significantly declined, greatly limiting supply growth. There are virtually no major mines expected to come online after 2025. Meanwhile, the scope for additional demand is considerable. Some institutions predict that the net-zero targets could double annual copper demand by 2035. Under such supply and demand dynamics, the downside potential for copper prices is limited, suggesting a trend where prices are more likely to rise than fall over the long term.
Furthermore, consumption in Europe and the United States is likely to improve, as an easing monetary cycle will aid financing for traditional industries like construction, manufacturing, and consumer durables. This continuous demand growth offsets the downturn caused by the sluggish Chinese real estate market.
However, the Chinese market also presents some positive aspects. China is considering approving the issuance of over 10 trillion yuan in extra debt in the coming years to stimulate economic growth. Stimulated by China’s policies, market sentiment has recently improved significantly, with LME three-month copper prices once breaching the crucial psychological barrier of $10,000. As the world’s largest copper consumer, changes in China’s policies have a significant impact on copper prices.
