Why it's not all rosy for the copper market in 2024

Chile’s state copper commission Cochilco foresees an average copper price of US$3.85/lb for this year, the same as it was in 2023, and US$3.90/lb in 2025, and expects the country to produce 5.63Mt of the metal in 2024, up 5.7% compared to last year.

As a result, Chile would maintain its leading position in world copper mine production with a 25% share, followed by the Democratic Republic of the Congo and Peru, Cochilco said in a report that can be seen in the documents box in the top right of the screen.

In 2025, Chilean copper output is forecast to reach 6Mt, pushing global production to 23.5Mt, up 3.1% from 22.8Mt this year, according to Cochilco.

The copper market looks favorable thanks to the sustained growth in the manufacturing of electric vehicles to combat climate change, China's attempts to return to its previous growth path, the normalization of monetary policy in the US and the booming market for clean energy technologies.

But the geopolitical panorama, marked by war tensions and a series of electoral processes, could lead to a downgrade in forecasts.

Andrés Rioseco, head of strategy at local brokerage Mesadinero, told BNamericas that the copper price could be lower than Cochilco's forecast for this year, averaging US$3.57/lb, or even less.

That would be a result of factors such as the fragile macroeconomic situation in the US.

“The Fed projections speak of GDP [growth] falling from 2.6% in 2023 to 1.4% in 2024, with a forecast range where the most pessimistic is 0.8% and the most optimistic is 2.5%. That’s a substantial change from 2023 when the range was between 2.5% and 2.7%. In addition, higher unemployment and lower inflation are forecast. When the US falls into a recession, whether mild or deep, copper prices tend to show negative returns,” Rioseco said.

On the other hand, the measures adopted by the Fed, such as cutting interest rates, usually have "a delay of at least six months to take effect in the real economy and finally translate into greater demand," he added.

The World Bank forecasts a third consecutive year of slowdown in global growth, from 2.6% in 2023 to 2.4% this year, lower than the average of the 2010s.

Added to the above, in the midst of China's attempts to boost its economy, is the geopolitical risk associated with the conflict with the US over Taiwan. While Beijing persists in its claim to sovereignty over the island, the US supports the territory militarily and commercially, which, following recent elections, will continue to be governed by politicians with a pro-independence stance.

“This brings tensions, sanctions and export restrictions that could affect China's attempts to become vibrant this year,” Rioseco warned.

Despite this, the demand for copper is predicted to remain stable thanks to the requirements of clean energy technology and associated infrastructure, including batteries for electric vehicles, wind turbines and electric power networks.

Global demand is forecast to grow 3.2% in 2024 to 26.1Mt, according to Cochilco.

On the supply side, the closure of Canadian company First Quantum’s Cobre Panamá mine is expected to have an impact.

“For this year, a deficit is expected in the market based on the closure of Cobre Panamá accounting for around 400,000t and Anglo American's lower production projection of 200,000t. If the reopening of Cobre Panamá is achieved after the Panamanian elections in May, the deficit would be smaller. This forecast is based on demand growth of 3.7% to 28Mt for this year, which is optimistic given the projections of lower growth in developed economies,” said Rioseco.

Other factors could also affect supply, such as the tense geopolitical scenario and trends towards protectionism, although these should be offset by persistent demand until 2030 due to the electrification of economies and changes in environmental policies, which will continue to encourage investors to see copper as a highly attractive mineral, according to Rioseco.