Bank of America: the world faces the risk of "copper depletion". How high can the price of copper rise?

Copper is no longer just led by the Chinese market, says Clocktower Group's chief strategist.

Commodities strategists at Bank of America (Bank of America) said the world was at risk of "running out of copper" as demand for copper grew, paving the way for a surge in copper prices as the global economy reopened.

In a BofA global study released on April 30, strategists said that inventories in metric tons are now at the level of 15 years ago, "meaning that inventories can only meet 3.3 weeks of demand."

Strategists at the bank said copper prices could soar to $13000 a tonne ($5.89 a pound) in the coming months and expected shortages in the copper market as inventories fell further this year and 2022.

"the fundamental background is so worrying because the global economy is just beginning to open up and reflate," they said. "

"if the waste supply is not in place, the inventory will be exhausted by 2024."

Copper prices have risen this year as demand for copper is expected to rise as a result of the global push for a green economy. Copper is used in the production of electric cars.

Marko Papic, chief strategist at Clocktower Group, an alternative investment firm, likens the move to a "space race".

"everyone is speeding towards the future of electric cars," Papic said in a telephone interview on Monday. "the demand for copper is everywhere. It conducts electricity. "

Copper prices for July on the New York Mercantile Exchange rose nearly 1.4% on Monday to $4.53 a pound, the highest settlement price since February 2011, according to data.

Strategists at BofA said copper would face "greater price volatility" if smelter use of scrap metal did not increase as expected and inventories were depleted over the next three years.

In this case, the "red metal" could soar to more than $20,000 a tonne, or $9.07 a pound, according to their report.

Meanwhile, MarketWatch reported last month that President Biden's infrastructure plan, which still needs to be approved by Congress, could increase demand for copper and steel as the economy reopens.

Papic said the expected economic growth in the United States this year means that China is no longer the only source of strong global demand for copper.

"Copper is no longer led by the nose by China," he said. " "China is no longer the only competitor in terms of global growth."

Papic said concerns about low copper inventories would lead to an increase in mining capital expenditure.

"Capital expenditure has collapsed across the board since 2011," he said. " "We need to invest more in supply."

Papic says Africa is a region rich in copper. The metals needed for the "green revolution" are expected to spark geopolitical tensions. This includes nickel and cobalt, it said.

Although the United States has its own supply of copper, Papic explains that it is cheaper to import copper.

While copper is important for decarbonization, it accounts for a relatively small share of the global economy, according to the Bank of America report.

"this raises expectations that, from a macro point of view, copper prices may rise without affecting global economic growth," BofA strategists said. "