Macquarie: energy transformation will boost copper and nickel demand in the next 10 years

On Oct. 7, Macquarie (Macquarie) analysts said at the metals conference on Oct. 7 that the energy transformation will have a significant structural impact on many metal markets, especially copper and nickel, in the next five to 10 years.

Alice Fox, deputy director of Macquarie and commodities strategist, said global copper demand was expected to grow at a compound annual growth rate of 2.4 per cent between 2019 and 2026, mainly supported by an energy shift that would lead to a structural shortfall of 579000 tonnes by 2026 unless new supplies were established.

Marcus Garvey, head of metals and commodities strategy at Macquarie, adds that copper demand in the industry is expected to double from 2.25 million tonnes to 4.5 million tonnes as the penetration of electric vehicles increases from the current 7 per cent to about 40 per cent by 2030.

The copper market is emerging from a period of fairly stable mine supply to a period of strong growth of about 5.8 per cent on average for projects that began development in 2018 and 2019, according to Fox.

The promised mine supply will peak around 2024 and then inevitably decline as a result of declining grades and the closure of some factories. We have joined some of the possible projects. If we compare it with mine supply that meets demand, we see a potential supply shortfall of about 5 million tons by 2030. "

However, she said it was worth noting that the project was approved again, approving about 750000 tonnes of new supply since December 2020 and expected to approve 700000 tonnes in the next six to 12 months.

"if all this happens, the supply gap we see around 2026 will basically be delayed for another year or so," Fox said.

She added: "We expect the market to remain quite tight [in 2022], and then as the supply of new mines increases, both concentrate and metals will enter a period of oversupply, then we will restore balance and then there will be shortages again."

In terms of copper price forecasts, Fox said strong medium-term growth in copper supply and weak end-user demand were expected to put pressure on copper prices in the coming years until further support was found around 2024-25.

"but. We are seeing very few copper stocks at the moment, so if there are any surprises on the supply or demand side, we could see a period of sharp price spikes, "Fox said.

Macquarie predicts that the average price of copper will reach $9149 / tonne in 2021, up from $7500 / tonne in 2020, but fall to $8563 / tonne in 2022 and $8000 / tonne in 2023, and then begin to rise again. $8250 / tonne in 2024, $8750 / tonne in 2025 and $9250 / tonne in 2026.

* Nickel will benefit from the battery industry *

Nickel demand is also expected to increase significantly due to growth in the battery and stainless steel industries, Garvey said.

Jim Lennon, senior commodities adviser at Macquarie, said the nickel market was expected to shift from a supply shortfall of 12.5-130000 tonnes in 2021 to a supply glut of more than 100000 tonnes in the next few years, meaning the overall price outlook was weaker.

"We have seen a correction from nearly $21000 a tonne to nearly $18000 a tonne, and we expect further weakness in the new year," Lennon said.

Macquarie expects nickel prices to rise from $17000 / tonne in 2020 to an average of $18195 / tonne in 2021, fall to $17750 / tonne in 2022, fall to $16500 / tonne in 2023, and then climb again to $18500 / tonne in 2025 and to $19500 / tonne in 2026.

On the demand side, demand has unexpectedly increased by 15 per cent, or 400000 tonnes, so far in 2021, mainly driven by stainless steel, but also by electric vehicles, Lennon said.

Global sales of plug-in light electric vehicles are expected to rise from 3.1 million in 2020 to 6 million in 2021, 12.5 million by 2026 and 21.7 million by 2030, according to S & P global Platts analysis.

Although stainless steel demand accounts for 70%, 10 times the demand for batteries in 2020, Lennon says batteries will be the main driving force over the next decade, and despite uncertainties in battery chemistry, nickel will be the main beneficiary of the electric vehicle revolution.

Overall, the decade will see "the highest growth so far in the nickel market, with new supply demand exceeding 2 million tonnes a year between 2020 and 2030," Lennon said.

To achieve this, Indonesia will increase supply through the dual expansion of nickel pig iron and high-pressure acid leaching in the battery industry, as well as some of the potential to convert ferronickel into battery-grade nickel.

Indonesia's supply increased by 300000 tonnes in 2021 alone, higher than the expected 200000 tonnes, Lennon said.

However, supply outside Indonesia has faced a series of disruptions, mainly due to underinvestment for a long time, including a strike in (Vale) in Vale Canada, flooding in Russian mines and massive disruptions in (New Caledonia) in New Caledonia.

Lennon said: "next year's growth is expected to be higher than this year, will exceed 400000 tons per year, an increase of more than 18%, which is almost entirely driven by expectations of a recovery in Indonesian and non-Indonesian supply."