Over the next decade, the world is likely to face a huge shortage of copper, the most critical metal to the global economy.
It is estimated that by 2030, as the clean energy and transport industries take off, the copper industry will need to spend more than $100 billion to address a possible annual supply shortage of 4.7 million tons.
Commodities trader Trafigura Group said that without new mines, the potential copper shortfall could reach 10 million tonnes. Closing this gap will require new capacity equivalent to eight of the world's largest Escondida copper mines in Chile, owned by BHP Billiton.
LME copper futures have soared since February, breaking through the $9500 mark at one point and are now consolidating around $9000.
Copper may usher in a supercycle
Copper has a wide range of uses, from wiring and plumbing to batteries and motors.
Copper is not only a bellwether of the economy, but also a key factor in promoting the development of renewable energy and electric vehicles.
If producers fail to address supply shortages, copper prices will continue to rise and pose challenges to global climate change mitigation issues.
However, higher copper prices could lead to more recycling and the replacement of cheaper alternatives, such as aluminium, which could ease the shortage.
To be sure, a new copper project is under preparation. But producers are also concerned that the sharp rise and fall in copper prices could lead to potential losses.
Goldman Sachs raised its 12-month target for copper to $10500 in February.
Supply of copper is at its most tight and we expect to see the biggest shortage in a decade, Goldman warned.
Nicholas snowden, an analyst at the bank, said: we are going to have the biggest shortage of copper in 10 years. Inventories were at a very low starting point at the beginning of the year, but so far, anti-seasonal inventories have deteriorated further in the first quarter, with a scale of only once in recent history (2004). These trends suggest that the risk of copper shortages is high in the coming months. In this context, the fundamental outlook for copper is still very optimistic and there is no evidence that the current price level is weakening.
