Copper Prices are likely to Cross USD 9,000 per Tonne Due to Lower Supply

Copper will certainly enter a supply shortfall this year, and prices will likely rise beyond USD 10,000 per tonne by 2023, according to market experts.

On the demand side, analysts anticipate that a revival in mainland Chinese copper demand, along with a sinking currency, will drive up prices. On the supply side, they anticipate that operational challenges in Latin America will persist in 2023, with only minor increases in output.

Notwithstanding its pessimistic short-term prognosis, ING Think, the economic and financial analysis arm of the Netherlands multinational financial services group ING, believes copper will remain over USD 7,500 throughout 2023 owing to tightening supply.

Price Prognosis

According to Goldman Sachs, copper prices will average roughly USD 9,750 this year, rising to USD 12,000 by 2024. Copper is being quoted at USD 8,385 per tonne for a three-month supply contract and USD 8,362 for cash delivery.

Copper prices may gain from the Chinese resurgence and move into a supply deficit this year, according to IG Group's IG Bank. The red metal, which is used in wiring, plumbing, electric vehicles, and industrial gear, is expected to reach USD 9,500.

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Fitch Solutions raised its copper price forecast to USD 8,500 per tonne from USD 8,400 earlier, citing "increased demand amid a substantially worse supply picture.

According to IG Bank, the initial goal from copper's upward rise is USD 9,030, and shattering it may boost prices to USD 9,770.

According to Goldman Sachs, the sanctioned copper production projects in 2022 totaled only 2,63,000 tonnes, the lowest approval in the last 15 years. "Even the unusually high prices experienced earlier cannot generate sufficient capital inflows and, as a result, supply response to remedy long-term shortages," the report stated.

Demand for renewable energy

According to IG Bank, "China refilling its depleted inventories, paired with copper's rising demand through greener renewable energies, should bode favourably for prices in 2023.

ING Think, on the other hand, stated that demand for industrial metals has been harmed by an increase in coronavirus infections in China as a result of an abrupt exit from Beijing's zero-Covid policy.

According to Fitch Solutions, opposing supply and demand variables created significant volatility in the copper price in 2022. Prices rose to an all-time high of USD 10,674/tonne on March 4 due to supply shortages following Russia's invasion of Ukraine.

However, prices fell rapidly in late April as the global macroeconomic picture deteriorated and fears about future demand from mainland China intensified. According to the report, a higher dollar reduced demand for the commodity, which is traded in the currency on a global scale.

According to the research firm, a comeback in copper demand from Chinese customers has offered support to prices, drawn by reduced rates and the urgent need to meet inventory demands in preparation for the oncoming demand increase projected in 2023.

Long-term bullish

According to IG Bank, China's support for the property sector, as well as the lifting of Covid limitations, will raise demand for the commodity. "In the long run, we believe copper will gain the most from these policy changes due to its increasing utilisation in all sustainable energy technologies," Goldman Sachs stated.

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According to Fitch Solutions, "in the longer term, they expect the copper market to remain in deficit as the green transition accelerates, as does demand for 'green' metals such as copper.

Copper supply is considered to be very low in the global marketplace, according to IG Bank, with indications from the likes of Goldman Sachs, Bank of America, and Trafigura that the metal could trade in deficit area through 2023, possibly reaching new high territory this year. Fundamentally, analysts believe copper is becoming more optimistic.

As per Procurement Resource, according to market experts, copper will almost certainly experience a supply shortage this year, and prices will likely surge beyond USD 10,000 per tonne by 2023. On the demand side, analysts predict that a rebound in mainland Chinese copper demand, along with a weakening yuan, will drive up prices.

On the supply side, they estimate that operational issues in South America will endure in 2023, with only moderate increases in output. Notwithstanding its dismal short-term forecast, ING Think, the economic and financial analysis branch of the Dutch multinational financial services business ING, expects copper will remain over USD 7,500 until 2023 due to tightening supply.