Copper Outlook
Published on - 30th March 2024
Navigating The Copper Landscape: Key Insights
Global demand forecasted to improve in 2024 over green energy transition and rate cuts – Global copper demand is set to rise by 2.6% in 2024, reaching 25.9 million tons, driven primarily by the green energy transition and a weakening US dollar. Chinese demand is expected to grow by 2% to 14 million tons, led by the green energy and electric vehicle sectors, while US and EU demand are forecasted to rebound by 0.9% and 2.7% respectively, attributed to expected Fed rate cuts and general economic recovery.
Industry-wise demand projections for 2024 – Around 95% of global copper demand stems from construction, transportation, and electronic equipment manufacturing. The electrical and electronic sector, making up about 65% of demand, is expected to grow to $403.7 billion in 2024 due to green and disruptive technologies like AI, IoT, etc. Construction and transportation sectors are projected to grow to $155.3 billion and $57.5 billion respectively by 2024, driven by electric vehicle adoption.
Mining disruptions, output cuts to tighten global supply – Global copper production is expected to drop by 2.5% in 2024 to 24.6 million tons, attributed to the closure of the Cobre Panama mine and anticipated output cuts in China. The permanent shutdown of First Quantum’s Cobre Panama mine will reduce global supply by 375,000 tons, affecting about 1.5% of the total supply, while Chinese smelters are likely to decrease output to mitigate losses. Additionally, Chilean production is forecasted to rise by 5.7% to 5.3 million tons, driven by projects like Teck’s Quebrada Blanca II.
Key Chinese copper smelters anticipated to implement output curbs – Copper prices surged after Chinese smelters agreed to cut production, reaching an 11-month high of $9,072/ton on March 15th, 2024, up 4.8% from the previous day. This led to speculation and increased demand, particularly from downstream buyers and fund houses, amid the metal’s growing usage in electric vehicles, suggesting a bullish trend in the short-to-medium term.
Fed signals future rate cuts despite sticky inflation – Fed Chairman Powell stated in the March 2024 FOMC meeting that benchmark interest rates would stay at 5.25-5.50%, despite anticipating three rate cuts in 2024 despite sticky inflation. This, along with supply concerns, led to a 10% increase in copper prices over the past six weeks, as reduced borrowing costs are expected to boost demand from manufacturers and construction companies, supported by the dovish stance of major central banks.
LME copper inventories decline over supply risks and increased demand – LME copper inventory fell by 10.3% from Feb 22nd to Mar 22nd, 2024, signaling increased demand after Chinese industrial activity resumed post-Lunar New Year. Supply constraints from operational challenges in key mines and anticipated production cuts by major Chinese smelters have further boosted downstream demand, likely pushing copper prices higher in the short term.
Outlook on Copper – Investment banks predict higher copper prices, attracting speculation. Rising demand, especially in green energy, EVs, and semiconductors, coupled with tight global supply due to disruptions and expected Chinese output cuts, supports this trend. Short-term LME copper price outlook: $8,700/ton – $9,200/ton, and medium-term: $9,000/ton – $10,000/ton, increasingly influenced by expectations of Fed rate cuts from mid-2024.
