Since the beginning of this year, due to the rapid rebound of the global economy, rising inflation expectations, the advent of the decarbonization era and the launch of large-scale infrastructure projects in the United States, copper demand has risen sharply and copper prices have soared. With copper prices hovering near 10-year highs, analysts are bullish on the future direction of copper prices, reaching as high as $20,000.
The price of (LME) copper on the London Metal Exchange rose as high as $10028 a tonne on Thursday. Copper prices breached $10000 for the first time in a decade on April 29th, then fell back before returning to the $10000 mark on Wednesday, hitting $10040 a tonne, the highest level since February 2011.
(Bank of America), the US bank, said global copper stocks were at risk of being "exhausted" as the gap between supply and demand widened, with prices likely to reach $20, 000 a tonne by 2025.
Michael Widmer (Michael Widmer), commodities strategist at the bank, stressed in a report on Tuesday that as the global economy began to restart and reflate, copper inventories in tonne terms were at the levels of 15 years ago, meeting just over three weeks of demand.
"in view of this, we expect a gap in the copper market this year and next, and copper inventories will decline further," Widmer said. He pointed out that the spot premium in the copper market is likely to rise as LME copper inventories approach the tipping point where time spreads are likely to fluctuate wildly. Spot premium means that the spot price is higher than the futures price, which often occurs when supply exceeds demand.
Mr Widmer also stressed that the rise in volatility caused by falling inventories was not unprecedented, with LME nickel inventory shortages driving up nickel prices by more than 300 per cent in 2006 / 2007.
Given the fundamental environment and inventory depletion, Mr Widmer believes copper prices could soar to $13000 a tonne in the coming years after breaking above $10000 for the first time in a decade last week.
BofA expects the copper market to rebalance in 2023 and 2024 after shortages in 2021 and 2022, and then fall into shortages again from 2025.
"in our view, waste supply is critical, and our analysis shows that waste use in refineries is likely to increase from about 4200 tons in 2016 to 6700 tons by 2025." Widmer pointed out. "if our expectations for an increase in the supply of secondary materials (an opaque market) are not met, copper stocks could be depleted over the next three years, triggering more dramatic price fluctuations that could push copper prices above $20,000 a tonne."
Analysts are singing more and more.
The important role of copper in many fast-growing industries, such as electric car batteries and semiconductor wiring, has also boosted demand for copper as the overall economy recovers.
David Neuhauser, founder and managing director of Livermore Partners, a US hedge fund, said on Wednesday that copper prices were generally driven by a weaker dollar and increased green infrastructure construction. Copper is still the company's favorite commodity, he says. He believes that copper is a "new oil" and that the price will be very substantial in the next five to 10 years and has the potential to rise to US $20,000 per tonne.
Commodities analysts at HSBC (HSBC) stressed in a report on Wednesday that copper demand was supported by electrification investment as policy makers further introduced measures to support emissions reduction strategies.
(Trafigura Group), the world's largest copper trader, expects copper prices to exceed $10, 000 a tonne this year and $15000 a tonne over the next decade because of a severe market gap caused by global decarbonization demand.
Wall Street commodities standard-bearer Goldman Sachs (Goldman Sachs) said in a report last month that copper was crucial in decarbonization and the use of renewable energy, and that the market was facing a supply crunch, which could push copper prices up by more than 60 per cent in four years. The bank said increased demand for copper and possible supply shortages would push copper prices from about $9000 a tonne today to $15000 a tonne by 2025.
