This year's copper market has basically come to an end. After November, many price-influencing factors on both the macro and fundamentals sides may emerge, potentially opening a new chapter for the copper market next year, bringing a brand-new market performance. Overall, the logic for copper is bullish. So, under the influence of many price factors, when is the copper bull expected to arrive, and how long will it last?
On the macro front, after major world economies continuously adopted tight monetary policies to cope with overheated economic development, CPI, PPI, and PMI data all showed a continuous decline. Therefore, since the beginning of this year, major world economies have started to adopt relatively loose monetary policies to stimulate economic recovery. Major world economies, including China, the US, Japan, and the Eurozone, have continued their loose monetary policies, supporting commodity prices denominated in US dollars to fluctuate at highs.
The results of the 2024 US presidential election are expected to be announced on November 6, and the new president will take office early next year. The US Fed's subsequent monetary policy will also gradually become clear. Former US President and Republican presidential candidate Donald Trump reiterated at a town hall event in Lancaster, Pennsylvania, that if he is re-elected on November 5, he will significantly lower US interest rates. Although there are still many comments in the market suggesting that the US economy is on the brink of recession, with the probability of a US economic recession in the next 12 months remaining at a relatively high level, in reality, net speculative long positions in both COMEX and LME copper remain at relatively high levels.
On the supply side of the fundamentals, in the short term, the shortage of copper concentrates has become the main factor affecting the lower-than-expected production of copper cathode by smelters. Combining the interference rates on both the supply and demand sides, SMM has obtained the expected global copper concentrate supply-demand balance results for 2024-2028. SMM believes that this year's supply-demand balance result is already negative, but next year's supply-demand balance result will be severely imbalanced to -822,000 mt in metal content. After that, the negative value of the supply-demand balance result will gradually converge, which means that copper smelters, represented by those in Asia, may face capacity exit, mergers and acquisitions, or bankruptcy liquidation. Currently, it seems that only by liquidating some smelting capacity can the shortage of copper concentrates be reversed.
On the demand side of the fundamentals, SMM believes that copper consumption in various sectors in China may continue to maintain a high growth rate. From 2024 to 2030, the annual arithmetic average growth rate of China's copper cathode consumption is expected to remain at around 2.3%. In terms of specific sectors, State Grid investment will become the main driver of copper consumption growth in the power sector; export orders for white goods will become the growth engine for copper consumption in the home appliance sector; demand for NEVs in overseas markets will drive copper consumption growth in the transportation sector; growth in orders for overseas construction machinery, machinery equipment, and electronic products will drive copper consumption in the machinery and electronics sector; additionally, the development and improvement of sectors such as shipbuilding, infrastructure, real estate, and military industry will also drive copper consumption growth to varying degrees.
Furthermore, SMM expects that from 2026 to 2030, the global copper cathode supply-demand balance will show varying degrees of negative values. The results of the supply-demand balance calculations also indirectly confirm that the fundamentals support the continuous growth of copper prices. In summary, after the new US president takes office early next year, SMM believes that whether it is the subsequent loose monetary policies of major economies on the macro front or the raw material shortages and stable demand growth on the supply-demand fundamentals side, they will all call for the arrival of the copper bull. SMM expects that in the short term, the shortage of copper raw materials will stimulate copper price growth. In the medium term, the increase in imported and domestic copper scrap supply and the improvement of the copper concentrate supply-demand balance will return to the fundamentals logic. In the long term, the continued implementation of loose monetary policies by major economies will continue to push copper prices to relatively high levels.
