Source: Streetwise Reports 05/28/2024
With copper prices soaring amid supply shortages and the green energy transition, four companies might benefit.
As copper continues to surge above US$11,000 per ton, some analysts say it is time to jump in the new copper market. As the prices for copper have soared due to financial investors betting on supply shortages and a massive squeeze in the New York market, pushing them to record highs this week, it many analysts are seeing bright things in its future.
"Comex's short squeeze is redirecting copper to the U.S., depleting inventories elsewhere" said Gong Ming, an analyst with Jinrui Futures Co. "The Chinese market is likely to see inventory withdrawals soon as exports rise." The demand for copper has surged due to its crucial role in the energy transition, with supply disruptions and sustained price rallies drawing more financial investors into the market.
The Catalyst: Copper's Vital Role in Energy Transition
Javier Blas of Bloomberg Opinion noted that copper is increasingly being viewed as the new oil in the context of climate change, essential for electrifying everything from vehicles to heating systems.
"In the climate-change era, copper is the new oil" Blas wrote, emphasizing the metal's critical role in the energy transition. Despite this, Blas cautioned against over-exuberance, highlighting that the physical copper market, particularly in China, remains weak with historically low premiums.
CRU Group, a metals market consultancy, presents a more nuanced view, projecting copper demand to reach 35 million tons by 2050, significantly lower than the most bullish forecasts. However, the supply side also presents challenges, as the easiest deposits have already been tapped, requiring new production from lower-grade ores and more difficult geographies.
In Pretriotates' Thoughts on May 19, the site explained the scarcity of copper, "The prices of the various maturities of futures show whether there is a shortage of supply in the spot market or not. If a higher price is paid over a longer term, there is sufficient copper in the exchange warehouse (contango). However, if stocks become scarce, a higher price is paid for futures with a shorter term — this is known as 'backwardation.' On the London Metals Exchange (LME), the situation has just changed from contango to backwardation. The copper stock is slowly running out."
On that same day, Richard Mills at Ahead of the Herd also called attention to the supply and demand situation for copper, writing, "That supply is locked up. It's been previously stated that we need to find 6 million more tonnes of copper, 1 million per year of new copper production if we want to alleviate the deficit — the equivalent production of one Escondida mine each year — but only one of the five mines, Kamoa, has the capability of producing close to that much copper. But Kamoa's production is going to China."
According to Mordor Intelligence, the copper market is significantly shaped by the growing demand in the electrical and electronics segment. Copper is extensively used in applications such as wires, cables, dynamos, transformers, motors, electromagnets, switches, communication cables, and residential electrical circuits due to its excellent conductive properties. The rise in ...