Copper Outlook
Published on - July 2024
Summary of Copper Outlook Report – July 2024
Global Copper Demand and Usage
- Growth in 2024: Preliminary data indicates a 4% increase in world refined copper usage in the first four months of 2024, driven primarily by a 6.5% increase in Chinese demand.
- 2024 Projections: World refined copper usage is expected to grow by 2% in 2024 and 2.5% in 2025, revised down from earlier estimates. Infrastructure developments and green energy transitions will continue to support long-term demand.
- Sectoral Growth: Electrical wiring and electronic equipment sectors, constituting around 65% of global demand, are projected to grow by 7.1% CAGR to $403.7 billion in 2024. Construction sector demand, making up 25% of global demand, is set to grow by 3.5% CAGR to $155.3 billion, while transportation sector demand, accounting for 5% of demand, is set to grow by 6.8% CAGR to $57.5 billion.
Global Copper Supply and Production
- Mine Production: World copper mine production increased by 4.9%, with significant recovery from Chile, Indonesia, Peru, and the USA.
- Refined Copper Production: Global refined copper production rose by 5.5%, with China and the DRC contributing 54% of the total. China’s refined production increased by 6%, while the DRC saw a 32% rise due to the ramp-up of electrowinning plants.
- 2024 Projections: World copper mine production is expected to grow by 0.5% in 2024 and 3.9% in 2025, with refined copper production forecast to rise by 2.8% in 2024 and 2.2% in 2025.
Economic Factors and Price Movements
- Chinese Market: Weak economic data from China, including slower industrial output growth and a deepening housing slump, has contributed to weak demand and rising inventories, affecting copper prices.
- Price Fluctuations: Copper prices surged to over $10,500 per ton due to supply constraints and market speculation but corrected to around $9,600 per ton as supply conditions improved and speculative momentum slowed.
- Fed Policy: The Federal Reserve signaled future rate cuts despite sticky inflation, which is expected to support copper demand by reducing borrowing costs for manufacturers and construction companies.
Market Outlook and Strategies
- Demand Outlook: Despite current weak demand, especially in China, overall consumption is expected to increase due to the growing demand for copper in green energy technologies, EVs, and semiconductor chips.
- Price Projections: The near-term outlook for LME 3-months copper price is $9,300/ton – $10,000/ton, with a medium-term outlook of $10,000/ton – $11,000/ton.
- Hedging & procurement Strategies: Various hedging strategies for copper buyers and sellers are outlined, with specific recommendations based on market conditions and price expectations.
Arbitrage Opportunities
- MCX/LME Arbitrage: Current analysis of the prices doesn’t allow for arbitrage opportunities
Hedging Regulations and processes
- Regulatory Framework: Hedging in international exchanges or OTC markets requires prior approval from AD I banks, adherence to exposure limits, and compliance with structured products’ eligibility criteria. Banks are required to validate the genuineness of exposures and manage margin requirements appropriately.
This summary captures key insights and projections from the “Copper Outlook Report June End”, highlighting demand trends, production forecasts, economic influences, price movements, market strategies, arbitrage opportunities, and regulatory considerations.
Details available in Hedgenius to help you manage Copper Exposure.