Asian economies — including China, Japan and Korea — are a driving force behind global economic growth.
The International Monetary Fund projects an economic growth rate of 6.6 percent in 2019 for the region, comparable with rates forecasted for 2017 and 2018. This steady growth creates a strong platform for base metals markets, particularly copper — the best electrical conductor of all the metals and a key material in a wide range of industrial applications.
While Asia accounts for more than 60 percent of global copper demand, the region is woefully lacking in domestic supplies and must import copper to meet that demand. China, the world’s largest copper consumer, imported 17.35 million tonnes of the red metal in 2017.
“Infrastructural development in major countries such as China and India will continue to sustain growth in copper demand,” says the International Copper Study Group, which forecasts that Chinese copper demand will grow at a rate of around 3 percent in 2018.
Copper supply low and new discoveries rare
Another pillar of copper’s strong fundamentals is the looming supply crunch brought on by low levels of current above ground supply, the dearth of new copper discoveries and the lack of new mines coming into production over the past decade.
This supply/demand imbalance has boosted copper prices significantly in the past year, pushing price levels to four-year highs at the end of 2017. Japan’s PPC expects copper prices to gain another 25 percent over the next two years on growing demand and weakening supply levels to average $7,280 a tonne in 2018 and $7,720 in 2019.
Strong copper prices are in turn incentivizing copper producers to allocate more dollars to their exploration budgets, including BHP Billiton (ASX:BHP,NYSE:BHP,LSE:BLT) whose management believes the electric car boom is at a “tipping point” for the copper market. Danny Malchuk, president of operations at BHP’s Minerals Americas division, said the company is looking to joint venture with junior explorers on large, long-life deposits. Such projects are now “not that easy to find,” said Anglo Pacific Group plc (LON:APF) and Audley Capital Managing Partner Julian Treger, speaking on a panel at Investing in African Mining Indaba, held in Cape Town, South Africa in February 2018.
