Eurasian Resources: rapid demand growth Copper Market will be in serious shortage in 2021

Benedikt Sobotka, CEO of Eurasian Resources Group, recently wrote that 2021 will be a year of severe shortage in the copper market due to higher-than-expected supply shortages supported by unprecedented "green" stimulus measures.

Benedikt expects growth in copper demand outside China to be the main driver this year. The pace of global industrial recovery has accelerated, with macro indicators from several major copper consuming countries showing strong strength. Recent manufacturing PMI readings in the United States, Europe, Japan, South Korea and India have begun to rise.

The US approved a $1.9 billion stimulus package and green stimulus measures across the EU, which will also stimulate demand for copper and effectively boost the green energy boom for several years.

Overall, it sees the current period as the beginning of a long period of above-average copper consumption growth, particularly in Europe and the US, where demand has been stagnant over the past decade.

In China, the economy will continue to recover strongly from the epidemic this year. China, the world's largest consumer of copper, recently unveiled its 14th five-year Plan, which is highly supportive of copper demand. The plan pays special attention to rural renewal, decarbonization and commitment to promoting infrastructure, transportation, electricity, green energy, digital development and technological innovation, which will support strong copper demand growth.

In addition, under China's "dual cycle" strategy, copper-intensive investment-led growth will remain a priority as Chinese manufacturers expand their supply chains upstream domestically.

At the same time, affected by the epidemic, the potential production of mining projects has been significantly reduced over the past year as producers have been forced to reduce capital expenditure, postpone maintenance and suspend project development.

These developments have prompted many mining companies to rethink their global supply networks, create alternative supply lines and re-evaluate their inventory strategies. At ERG, Eurasian Resources Group quickly protected its supply chain and implemented extensive business continuity plans, which enabled them to endure the recession caused by the coronavirus and experience a wave of recovery like many other peers.

At the same time, its Metalkol RTR business in the Democratic Republic of the Congo (DRC), one of the largest copper post-processing plants in the world, will continue to provide products to customers in this fast-growing market in 2021 and beyond.

In the copper concentrate market, the shortage of mine supply is the most obvious, with TC/RCs falling to a ten-year low. Transport delays are one of the reasons for the shortage of mines, particularly those from Chile and China's informal ban on imports of Australian concentrates.

Overall, the tight supply of concentrate is expected to continue into 2021, which may make China more dependent on imported cathode copper, such as cathode copper produced by Metalkol RTR.

In addition, scrap supply is expected to be lower than market expectations. Historically, although we have observed a strong positive correlation between copper prices and scrap supply, so far, the recovery of scrap supply has been very slow. To some extent, this can be attributed to the continuing impact of blockade restrictions and logistics bottlenecks associated with the coronavirus.

In addition, China's recent changes to scrap copper import regulations have disrupted global copper scrap flows and squeezed supply. It will take many years for the market to adapt to these new realities. The most important thing is that in the past decade, with the significant reduction of old waste inventory, the entire waste supply chain has gradually become scrap copper obtained from waste products.

Benedikt believes that a return to five-digit (overall) copper prices is not only reasonable, but may also be achieved in the near future.