INTELLINEWS
Over the last several years, many analysts and mining experts have been forecasting a copper deficit as a result of the “energy transition”. The world’s largest economies have committed to reducing carbon emissions by cutting their reliance on fossil fuels. They are building solar panels, wind turbines and electric vehicles (EVs) with the aim of making renewables the primary source of energy. All of these ambitions, however, require significant volumes of copper, a metal whose electric conductivity makes it indispensable in producing green technologies, NEO reports.
Copper demand has come under pressure in 2022 amid political tensions, an economic slowdown in the US and Europe, and coronavirus lockdowns in China. The red metal now trades at about $8,300 per tonne, having declined in price more than 20% from this year’s peak in March. Still, the copper industry’s foundation remained solid – demand is set to rise in the mid-term, while supply may fail to catch up quickly. Goldman Sachs analysts expect the price of copper to reach $11,000 per tonne by the end of 2023.
Glencore, one of the world’s largest copper producers, has previously been sceptical about developing large greenfield projects, which may easily go over budget. Another concern has been that new mines may substantially increase copper supply, potentially having an adverse effect on prices. Ultimately, for a trader the price is often more important than volumes.
This approach has changed, however. Glencore is now looking at developing the giant El Pachon mine in Argentina from scratch. Glencore CEO Gary Nagle is forecasting a “huge deficit” of copper, which may reach a cumulative 50mn tonnes in 2022 up to 2030, echoing the predictions of bullish industry analysts. While copper supply quickly adjusted to demand growth in the past, “this time it is going to be a bit different”, Nagle said earlier this month.
Even now, despite concerns about a global recession, the balance of demand and supply remains tight. Copper inventories at international commodity exchanges hover at record low levels, equivalent to just a few days of global consumption.
