Prices of copper reach a two-year peak.
In a remarkable turn of events, the value of a three-month copper futures contract on the London Metal Exchange (LME) shot up by an impressive 2.7% on Friday, 12th April, hitting $9,590.50 per tonne. By 18:00 Moscow time, the price had dipped slightly to $9,496, still representing a healthy 1.64% increase.
On the New York Mercantile Exchange (NYMEX), the demand for copper futures was equally fervent. May copper futures jumped nearly 2% to $4.3622 per pound, before settling at $4.3240, still up 1.4%.
Factors Fueling the Rally
The copper rush is fueled by investor anticipation that global ore supplies will have a tough time matching the rising demand. Recent data backs this sentiment, with Chinese imports skyrocketing by 16% year-on-year to an impressive 474,000 tonnes in April, and exhibiting a robust 6.9% year-to-date increase. Additionally, optimism is bolstered by reports suggesting a surge in business activity within China's manufacturing sector, as reported by Bloomberg. The processing industry showed positive growth for the first time since September 2023.
The Future of Copper: Predicted Demand and Deficits
Commodity traders have forecast a staggering 1 million tonne increase in copper demand by 2030. This surge is primarily attributed to advancements in AI development and data center expansion. However, Industry experts predicted a 35,000-tonne deficit in 2024, as global demand is expected to hit 26 million tonnes. This deficit is expected to swell to a hefty 100,000 tonnes by 2025.
Long-Term Concerns: Copper Supply Gap
While specific details about projected deficits in 2024 and 2025 are scarce, there are signs pointing to a looming supply gap. Existing mines are expected to yield around 15% less copper by 2035 due to declining grades and aging infrastructure, indicating a potential supply shortage as early as 2025. Moreover, industry experts emphasize the need for approximately 80 new sizable copper mines by 2040 to meet demand projections. This underscores the long-term challenge of keeping up with copper demand, potentially impacting supply balances starting in the mid to late 2020s.
Broader Impact: The Economic Implications of Copper Prices
The Wall Street Journal notes that copper's rally, coupled with rising prices for other commodities like gold, signals broader expectations of sustained economic growth and potential inflationary pressures. Copper, being a vital resource in construction and electronics production, serves as a potent economic indicator.
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- The fervent demand for copper futures on the New York Mercantile Exchange (NYMEX) mirrors the surge seen on the London Metal Exchange (LME), with the industry anticipating a significant deficit in 2024 as global demand is expected to reach 26 million tonnes.
- The rising copper prices in 2024, alongside increasing prices of other commodities like gold, could signal sustained economic growth and potential inflationary pressures, as noted by The Wall Street Journal.
- Commodity traders are betting on a 1 million tonne increase in copper demand by 2030, primarily due to advancements in AI development and data center expansion, but warn of a looming supply gap as existing mines are anticipated to yield around 15% less copper due to declining grades and aging infrastructure by 2035.
- The copper industry is facing a long-term challenge in meeting demand projections, with reports suggesting the need for approximately 80 new sizable copper mines by 2040 to bridge the gap between supply and demand, potentially impacting supply balances starting in the mid to late 2020s.
