Copper prices broke through the early consolidation range in mid-March in 2024, under the expectation of the Federal Reserve’s interest rate cuts, tight supply and increased demand. LME copper prices hit the highest point of 11104.5 per ton in May 2024.
However, the overall global copper market is in a state of oversupply, resulting in strong momentum in copper prices in the second quarter fail to sustain.
On the last trading day of 2024, LME copper futures closed at $8,768 per tonne, recording a yearly gain of only 2.40%. The following are the top five stories that had the biggest impact on the copper market in 2024, with the intention to help investors figure out how to understand the copper market and what to expect in 2025.
In mid-July, two more important Chinese smelters, Daye Nonferrous and Baotou Huading Copper Development, were actively planning production cuts for next year as the imbalance between copper mine supply and smelting capacity persisted, leading to a severe squeeze on copper processing profits. According to insiders at Daye Nonferrous, the company plans to cut smelting production by 20 per cent next year, while Huading is expected to cut production by 40 per cent.
Demand for metals such as copper has been climbing in recent years as the global economy has grown and emerging markets have risen. Unfortunately, the progress of copper mining and the expansion of smelting capacity have not kept up with the pace of demand growth, resulting in an increasingly serious imbalance between supply and demand in the market. Although the production cut may have a certain impact on market supply in the short term, in the long run, it will help promote the healthy development of the market and the rational allocation of resources.
In its latest research report, mining giant BHP predicts that global copper demand will surge by 70% to more than 50 million tonnes by 2050, an increase of 22.1 million tonnes compared to 2021 levels. The three areas that will drive the net increase in demand are traditional economic growth, the energy transition and digital demand, primarily data centers.
BHP expects global data center electricity consumption to increase from about 2 percent today to 9 percent by 2050. Copper demand in data centers is expected to increase six-fold by 2050. At the same time, copper production from existing mines is expected to be about 15% less in 2035 than in 2024. Consider that the average grade of copper ore worldwide has declined by about 40% since 1991. BHP believes that 30-50% of global copper supply will face the challenge of declining grade and aging in the next decade.
3.IEF: 35-194 new copper mines needed by 2050 to meet massive demand
The International Energy Forum (IEF) outlined one of the key challenges of the global energy transition in a report in the second quarter. The report says governments need to incentivize and support new copper mining projects, otherwise the goal of 100 percent electric vehicle adoption will not be achieved.
Under a business-as-usual scenario, 260 million tonnes of copper will be needed, equivalent to 16.3 million tonnes of additional copper supply per year by 2050, or 35 new mines (the amount needed to meet demand by then). In the net zero scenario, 91.3 million tonnes of new copper supply would be required, and 194 new copper mines would be required by 2050, in which case six new copper mines would need to come online each year.
The IEF stressed that while there are significant reserves available, it is less certain that copper can be mined fast enough to enable global development and the electrification of vehicles. New copper mines that begin operations between 2019 and 2022 take an average of 23 years from discovery to approval, construction and commissioning, the report said.
The London Metal Exchange responded to new US and UK sanctions on April 12 this year by banning the delivery of any Russian metal produced after April 13. Affected by this news, on April 15, LME copper opened up more than 2%, LME nickel rose more than 7%, LME aluminum created the largest increase since at least 1987, and rose more than 10% during the day.
Russia is a major producer of aluminum, copper and nickel. Russia supplies about 6 per cent of the world’s aluminium, 5 per cent of nickel and 4 per cent of copper, according to consultancy CRU Group. On the London Metal Exchange, and especially in the Nickel market, Russia’s MMC Norilsk Nickel PJSC has long been the largest supplier of refined nickel.
Goldman Sachs said in September it had cut its copper price forecast for next year by nearly $5,000 a tonne. Goldman Sachs said in its report that the sharp decline in copper inventories will come much later than previously expected. Analysts cut its copper price forecast for next year to $10,100 a tonne and pushed back its previous forecast of $12,000 a tonne by the end of 2024 to beyond 2025.
Goldman Sachs analysts Samantha Dart and Daan Struyven noted that before the COVID-19 outbreak, China accounted for two-thirds of global copper demand growth. Against the backdrop of China’s slowing economy and sluggish real estate sector, it is difficult for the copper market to rally significantly in the short term. Goldman’s view is supported by a number of economists, who generally agree that the direction of the Chinese economy has a large influence on global copper prices.
