The chief of Glencore, one of the largest mining companies in the word, has said overnight a “huge” copper shortage will impact global supply between now and 2030.
Speaking to Bloomberg, Glencore CEO Gary Nagle referenced estimates that global copper demand is expected to hit 50 million tonnes a year by 2030. In 2022, current world copper demand sits at around 25 million tonnes.
In short, Nagle believes that the combined forces of copper miners globally will not be enough to make up the shortfall soon enough to avoid an international copper supply deficit.
Nagle also mused that investors wholemeal are not yet pricing in the inevitable, “[even] as much as people write about it.”
Copper prices shot up across November by 11% on the London Metals Exchange on the news that China is easing its covid lockdown measures.
While there have been a few reports of that ilk in the last few weeks that were then denied by the Xi Jinping government, a narrative China will soon exit its zero covid policy continues to inform trader behaviour.
Regardless, even if China stays in lockdown for years to come, the reality is that the country will eventually need to re-open, and the uptick in rejuvenated demand will be a massive impact.
When, exactly, that will happen remains the looming question on most of the financial world’s mind. For now, the dragon still sleeps, but not without tremors.
Another hard-to-understate driver of increased copper demand is expected to come from EV battery makers, which Market Index has written on voluminously through this year.
The Australian Office of the Chief Economist (OCE) in April this year said up to 10% of global copper demand will come from manufacturers of EVs, batteries and chargers by 2030.
In July, the OCE posited copper prices will average US$9,100 a tonne (US$4.13/lb) in 2023 and US$9,000 (US$4.08/lb) in 2024.
In contrast, Goldman Sachs has today outdone the OCEs forecast for 2023, seeing copper prices up to $11,000 a tonne in 2023.
The bank expects 2023 to see a copper deficit of 178,000 tonnes. It previously forecast a surplus of nearly 170,000 tonnes.
The bank’s metals analyst Nicholas Snowdon pointed to the huge and rapid growth in green transition projects around the world.
Electrification initiatives require huge amounts of copper, covering power grid upgrades, green hydrogen electrolysers, big battery grid-scale energy storage plants, wind turbines, and EVs - both the cars themselves, and the batteries.
Given that Macquarie today highlighted a slowdown in the overall amount of drilling going on in the Australian mineral exploration space, it’s likely junior miners will be unable to benefit from higher copper prices at a fundamental level.
The cost of drilling one metre currently averages $356 here at home.
Those companies with the scale to pull it off, however, stand better poised. Here are some to keep an eye on:
BHP Group (ASX:BHP) is probably an obvious choice, given it has the scale and funds needed (especially post-merger with Woodside) to meaningfully ramp up supply on short time frames. The heavyweight owns mines in Australia, Chile, and the US.
(Fun fact: BHP's share price is 4% away from an all-time-high.)
Oz Minerals (ASX:OZL) is the largest copper miner by market-cap and despite performance troubles earlier this year remains among the best poised to benefit from a hike in the price of the commodity.
Sandfire Resources (ASX:SFR) is another $1bn+ market cap company with operating mines in both Australia and Spain, giving it potential exposure to European EV supply chain demand. Europe is by far the best-selling region for EVs anywhere on the planet.
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