The ebbs and flows of the global copper market

The copper price hit close to US$11,000/t (almost US$5/lb) this week for the first time in history, up around 20% since the start of the year and new highs are expected due to tight supply and growing demand in the medium and long term in the global electrical market.

Along with positioning the metal as a highly attractive product for investors, the upward trend could change the market and become a factor of uncertainty for manufacturers of electric vehicles and producers of renewable energy.

"The copper market is experiencing uncertainty regarding future supply, while, at the same time, copper stocks on the exchanges remain high, which shows that demand remains limited," Diego Mora, head of research at brokerage XTB Latam, tells BNamericas 

Although Mora attributes the price increases on the New York (Comex), London (LME) and Shanghai (SHFE) exchanges to short-term speculative transactions, "the long-term perspectives indicate that the price of copper could even double due to the increase in demand from new technologies and electric cars."

In this regard, Andrés González, head of the mining industry area at Chilean consultancy Plusmining, tells BNamericas that high prices over a long period could increase incentives "for the substitution or reduction of the use of metal in electromobility."

While lithium prices dropped to less than US$15,000/t from US$80,000/t in December 2022, copper should stay in the US$4.50-5.0/lb range until the end of June, Andrés Rioseco, market head at Mesadinero, tells BNamericas.

In April, the purchase of copper futures by speculative players such as commodity trading advisors and hedge funds – plus weak Chinese demand and the increase in stocks on the LME – caused a drop in the transaction volumes of futures contracts on the London market and the Comex, reflecting "demand led by speculative funds rather than actual purchasing by copper consumers," Rioseco says.

Production cuts at smelters in China, the main consumer and processor of copper worldwide, also had an effect.

"Chinese smelters are concerned because the treatment and refining charges for copper concentrates in the current market [TCRC spot] are at very low levels, reaching zero in April [for TC charges]. An unprecedented level that leads to some smelters operating at a loss. Given this, they suggested cutting production by around 5-10%, which would reduce the supply of refined copper and put upward pressure on the price of the metal," says Plusmining’s González.

Copper inventory on the LME has fallen by about 34% since the end of 2023, while in New York, it remains flat, and in Shanghai, it's reached the highest level in recent years, González says.

"This inventory buildup is constrained by declining production from current operations at the same time as there is a shortage of new large-scale projects," he adds.