After dropping from a record high of $11,105 a tonne in May, copper prices are expected to rebound in the third quarter of 2024 due to anticipated US Federal Reserve rate cuts and increased demand from critical applications such as electric vehicles (EVs), wind power, and solar energy. Analysts are optimistic about the future of copper prices despite the recent decline.
Copper prices have been on a steady upward trend since the start of the year, reaching a historic high of $11,105 per tonne on May 20, 2024. According to research agency BMI, a unit of Fitch Solutions, various unique factors boosted copper prices in the first half of 2024. However, pessimism over the Chinese economy and a weak US dollar pulled prices down to $9,515 in June. Despite this, copper managed to climb back to $9,944 by July 5 and is currently quoted at $9,905 for the three-month contract on the London Metal Exchange, with the cash price at $9,696.
The Australian Office of the Chief Economist (AOCE) noted that copper prices have continued to trend higher in recent months, averaging about $9,700 a tonne in the June quarter, which is a 14% increase since the start of the year. This surge reflects strong global demand, expected to persist through the second half of 2024. The World Bank, in its Commodity Outlook, highlighted that copper prices reached a two-year peak in the first quarter due to supply concerns and increased global industrial production.
Investors have shown renewed interest in copper, with the latest commitment of traders report from ING Think indicating a boost in net bullish positions for copper by 9,156 lots for a second consecutive week, reaching 85,601 lots by July 5. This is the highest net long since May 31, 2024. A significant reason for this optimism is the upcoming four-day plenum of the Chinese Communist Party (CCP) starting on July 15, expected to focus on economic reforms and policies.
BMI reported that copper prices have regained some lost ground in July due to hopes for stimulus announcements from the CCP’s third plenum and expectations of a US Fed rate cut prompted by new economic data. Saish Sandeep Sawant Dessai, an analyst at Angel One, mentioned that the market eagerly awaits the CCP’s third plenum, which is anticipated to focus on economic policies and reforms. The market is also looking forward to data on China’s yuan loans and total social financing, which could offer insights into future demand.
The World Bank stated that global demand for copper, essential for construction and equipment manufacturing, is likely to see only modest growth this year due to subdued global GDP growth and ongoing challenges in China’s real estate sector. However, the increasing demand driven by energy transition technologies, particularly electricity grid infrastructure, EVs, and solar panels, is expected to continue.
BMI added that expectations of a US Fed rate cut, which has weakened the US dollar compared to the highs of 2022 and 2023, have boosted demand for copper priced in the greenback. Positive global growth indicators, especially in the US, have also contributed to positive sentiment towards copper demand. Chinese manufacturing PMI figures showed a mild recovery in March and April, boosting speculative holdings, while major Chinese copper smelters announced production cuts in March.
The AOCE projected that China and the US will drive the bulk of growth in copper demand, supported by rising manufacturing activity and significant investments in energy infrastructure. BMI expects Chinese copper demand to grow by 3.5% year-on-year (y-o-y) in 2024, compared to a 5% rise in 2023, as China’s construction sector remains sluggish. The Country Risk team at BMI believes that China’s housing downturn is likely to persist for years due to oversupply and declining speculative demand. Outside of China, the growth outlook remains subdued.
On the supply side, the copper market is expected to tip into deficit in 2024 due to a slowdown in refined copper production growth caused by copper concentrate supply constraints. BMI forecasts refined copper production to grow by 3.1% y-o-y in 2024, down from 6.5% growth in 2023. Global copper mine output in 2024 is anticipated to be driven by new mining projects and a rebound in output in countries that faced operational challenges in 2023. However, potential risks include the closure of First Quantum’s Cobre Panama mine, while the start of production at the Udokan project in Russia and expansions at the Kamoa-Kakula mine in the DRC and Quebrada Blanca in Chile could shift the balance of risks to the upside.
The World Bank projected that copper supply growth would be modest this year due to production stoppages and declining ore grades in major South American producers, with an expected pick-up in 2025. It forecasted a 5% y-o-y increase in copper prices this year.
The AOCE forecasted that LME copper prices would average about $9,500 a tonne in 2024, up from $8,700 in 2023, and rise to $9,970 in 2026. BMI raised its 2024 copper price forecast from $9,200 per tonne to $9,600, citing investor sentiment leaning towards a US Fed rate cut in Q3 2024.
Copper prices are poised to recover due to expected US Federal Reserve rate cuts and increased demand from key sectors such as electric vehicles, wind power, and solar energy. While global demand for copper remains strong, supply constraints and economic challenges in China present significant variables that will influence the market in the coming months.
Jubilee Metals Group plc (LON:JLP) is a diversified metal recovery business with a world-class portfolio of projects in South Africa and Zambia. The Company’s expanding multi-project portfolio across South Africa and Zambia provides exposure to a broad commodity basket including Platinum Group Metals, chrome, lead, zinc, vanadium, copper and cobalt.
