The unexpected deficit in global copper supplies through 2024 will be critical to maintaining the metal’s price increases through the year. As 2023 drew to a close, two major copper mines closed down and cut down expected copper supplies by a wide margin, plunging the global supply chain into an unexpected deficit that eventually caused a surge in copper prices.
This upward momentum pushed copper prices to such a high degree they almost reached the $10,000 per metric ton mark that is expected to be supported through the rest of the year by impending copper shortages. Increased expectations of a tight supply chain coupled with optimism about demand from green-energy technology such as electric cars and new technologies such as automation and artificial intelligence have also contributed to a recent rise in the red metal’s prices.
Copper’s upward momentum has also been supported by a spike in manufacturing activity, particularly in manufacturing hub China, where a significant portion of the world’s production occurs.
Polls of purchasing managers in China have found that expansion is beginning to contribute to copper enthusiasm as the metal recently reached a two-year peak of $9,988 per ton and saw a significant 25% gain since last October. Benchmark Mineral Intelligence analyst Piotr Ortonowski says the reality is that the global value chain has lost millions of tons of expected copper supply to major mine disruptions. These disruptions began in late 2023 when Canadian extraction company First Quantum announced the closure of the Cobre mine in Panama.
With the industrial cycle turning a corner amid the green-energy transition, Ortonowski says investment in new copper mine supply is still insufficient. On top of supply deficits, copper’s gains are partly attributed to a reversal of short positions that were taken when declining manufacturing activity in China indicated a gloomy outlook for copper.
According to a copper trader, the metal’s prices have spiked so quickly in recent weeks that a correction is in order. The metal is currently trading at $9,644 on the London Metal Exchange (LME) and has potential for growth in Europe, the United States and other markets, because of looming interest rate cuts.
Industry sources predict that the red metal’s tight supply will soon become apparent in draws in LME-approved and Shanghai Futures Exchange-monitored warehouses.
Valent Asset Management portfolio manager Jay Tatum notes that copper scarcity will be the key to determining if the metal’s prices remain at current levels and climb even higher.
Needless to say, major copper producers such as Southern Copper Corporation (NYSE: SCCO) will be watching the upward market movements of this commodity closely as any shifts could improve their margins and boost shareholder value.
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