Industry analysts say copper prices are likely to continue to rise in 2021 because of low inventories and bullish demand, although growth will slow.
Copper prices have been supported by upcoming elections and labour negotiations between Chile and Peru, an expected global economic rebound, continued growth in industrial activity, strong demand for metals in China, the global COVID-19 vaccination launch and a weaker dollar.
"it provides a lot of confidence," said Casper burering, a senior analyst at ABN AMRO (ABN AMRO Group) Industrial Metals Market.
"as a result, the number of long positions is high, but it also raises the risk of falling prices, which increases the likelihood of speculators taking profits. Copper prices will rise further in 2021, but the growth rate will slow. "
Copper supplies in Chile and Peru tightened year-on-year as a result of the impact of the novel coronavirus epidemic on global supply chains and logistics, according to (Bank of America) global commodities research analysts at Bank of America.
"while we have taken into account the increase in copper production and scrap supply this year, these factors are unlikely to be sufficient to prevent the copper market from falling into supply shortages," BofA said. "
"in particular, we have raised our price forecast for copper, which is expected to average $9500 / tonne ($4.31 / lb) in the fourth quarter of 2021 and the market is likely to be in short supply because of low inventories."
* Market demand *
Mining analysts at Canaccord Genuity expect China's stimulus measures, coupled with a possible global economic recovery in 2021, to support copper demand.
"the average copper price in 2021 is expected to be $3.50 / lb ($7716 / tonne), up about 17 per cent from the previous forecast of $3.00 / lb ($6614 / tonne)," Canaccord said.
Stifel Financial analysts said that in terms of copper supply, there are two factors that limit supply: low copper grade and deep reserves, and market demand and project availability.
"based in part on capital costs, operating costs and the lowest acceptable return on investment, we expect current global major projects to require a minimum price of more than $3.20 / lb ($7055 / tonne) of copper."
* Sustainable energy *
The expected growth in copper demand is also the result of sustainable energy production and consumption as part of governments' efforts to promote green energy.
"of all the metals used for power generation, transmission, storage and consumption, copper is still the most common," Stifel said. Copper is needed for power generation, transmission infrastructure, energy storage and consumption. "
According to Stifel, the long-term demand for copper is supported by green energy and its drivers, "because the intensity of copper is significantly higher than that of traditional fossil fuel infrastructure. We are in the process of updating our long-term copper price forecast to $3.40 per pound ($7496 per tonne). We believe that short-term and long-term market support will have an impact on pricing. "
Bank of America expressed the same view. "given the increased focus on climate change, decarbonization is good for metals."
On January 18th, the price of copper was about $8012 per ton ($3.63 per pound). Afriforesight, a South African research firm, said copper prices had experienced a "volatile trend, falling last week on the strength of the dollar, and concerns about the novel coronavirus epidemic in China offset the outlook for the US stimulus package. Monday's rise was due to China's strong growth data. "
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