Released March 02, 2023 | SUGAR LAND
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Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--Despite selling for the relatively high price of around $4 per pound, global supply of copper will exceed demand for the next few years, but around 2026 there will be a reversal and demand is expected to surge, exceeding global supply, Dave Sferra, a manager of market intelligence and commodity trading at Freeport-McMoRan Incorporated (NYSE:FCX) (Phoenix, Arizona), told the annual conference of the Colorado Mining Association (CMA) (Denver, Colorado) February 27.
He did not offer a price projection of what copper could sell for after 2026, when demand is expected to exceed supply. By 2032, Sferra added, there could be a six-million-ton annual shortfall in global copper supply.
The CMA conference was co-located with the annual conference of the Society for Mining, Metallurgy & Exploration (SME) (Englewood, Colorado). Both were held in Denver Feb. 27 through March 1.
"Price volatility is copper's new normal," Sferra told the CMA attendees. "Not long ago, when the price of copper changed 3¢ per pound, our chief financial officer was calling the traders what happened. Now, the price can shift 15¢ per pound in a day and traders no longer get those calls."
Global supply currently is about 24 million tons per year, but demand is expected to continue rising while mine's production capacity will start declining later this decade, he said. Looking out over the long term, Sferra said, "The mine supply is challenged. We will see some new production come online over the next few years, but towards the end of this decade that is expected to start declining."
Sferra listed several reasons why an over-supplied market could become an under-supplied one in a few years:
Further uncertainty hangs over the market due to political unrest in Chile, Peru and Zambia, which collectively provide more than one-third of the world's copper.
One new source of copper is from scrapyards. He said a significant portion of "new" copper supply could come from recycling, perhaps as much as 10 million tons per year by 2025. He said China stopped recycling copper, but noted that one new copper recycling project has come online in the U.S. last year, and four more are scheduled to open in the next few years.
Copper mine expansions and extensions is one reason why the global market is oversupplied right now, he said. Another reason is that demand in China, the world's largest consumer, fell sharply during the COVID-19 pandemic. Prior to the pandemic, China accounted for about half of global demand for copper.
Strong demand for copper continues to come from U.S. homebuilders, he said, but the energy transition is expected to drive a surge in new global demand. Electric vehicles use up to four times the amount of copper compared to conventional internal combustion engines, he said. Renewable energy power plants use four to five times the amount of copper as conventional power plants, he added. In the not-too-distant future, over 65% of the world's copper will be used in and around the electricity business.
Sferra estimated that U.S. annual demand for copper, currently around 200 kilotons, will surge to about 1.2 million tons by 2030. A good bit of that added demand is tied to decarbonization measures in the recently enacted Inflation Reduction Act (IRA).
As he summarized the forces driving the copper market, Sferra started with positive forces: supply chains are being restored to their pre-pandemic status and the energy transition is expected to drive a surge in new demand around the world, he told CMA conference attendees. Also, the world has avoided, for now, a global recession.
But other factors could counter these upside drivers, he continued: A deep European recession, triggered by Russia's invasion of Ukraine; the continued erosion of the real estate market; the Federal Reserve's inability to tame inflation through interest-rate increases; and ESG requirements that may become too cost-prohibitive.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
He did not offer a price projection of what copper could sell for after 2026, when demand is expected to exceed supply. By 2032, Sferra added, there could be a six-million-ton annual shortfall in global copper supply.
The CMA conference was co-located with the annual conference of the Society for Mining, Metallurgy & Exploration (SME) (Englewood, Colorado). Both were held in Denver Feb. 27 through March 1.
"Price volatility is copper's new normal," Sferra told the CMA attendees. "Not long ago, when the price of copper changed 3¢ per pound, our chief financial officer was calling the traders what happened. Now, the price can shift 15¢ per pound in a day and traders no longer get those calls."
Global supply currently is about 24 million tons per year, but demand is expected to continue rising while mine's production capacity will start declining later this decade, he said. Looking out over the long term, Sferra said, "The mine supply is challenged. We will see some new production come online over the next few years, but towards the end of this decade that is expected to start declining."
Sferra listed several reasons why an over-supplied market could become an under-supplied one in a few years:
- A shortage of skilled labor
- A surge in resource nationalism
- Rising concern among investors about environmental, social and governance (ESG) issues
- Long lead times to bring on a new mine
- Logistics and infrastructure challenges
Further uncertainty hangs over the market due to political unrest in Chile, Peru and Zambia, which collectively provide more than one-third of the world's copper.
One new source of copper is from scrapyards. He said a significant portion of "new" copper supply could come from recycling, perhaps as much as 10 million tons per year by 2025. He said China stopped recycling copper, but noted that one new copper recycling project has come online in the U.S. last year, and four more are scheduled to open in the next few years.
Copper mine expansions and extensions is one reason why the global market is oversupplied right now, he said. Another reason is that demand in China, the world's largest consumer, fell sharply during the COVID-19 pandemic. Prior to the pandemic, China accounted for about half of global demand for copper.
Strong demand for copper continues to come from U.S. homebuilders, he said, but the energy transition is expected to drive a surge in new global demand. Electric vehicles use up to four times the amount of copper compared to conventional internal combustion engines, he said. Renewable energy power plants use four to five times the amount of copper as conventional power plants, he added. In the not-too-distant future, over 65% of the world's copper will be used in and around the electricity business.
Sferra estimated that U.S. annual demand for copper, currently around 200 kilotons, will surge to about 1.2 million tons by 2030. A good bit of that added demand is tied to decarbonization measures in the recently enacted Inflation Reduction Act (IRA).
As he summarized the forces driving the copper market, Sferra started with positive forces: supply chains are being restored to their pre-pandemic status and the energy transition is expected to drive a surge in new demand around the world, he told CMA conference attendees. Also, the world has avoided, for now, a global recession.
But other factors could counter these upside drivers, he continued: A deep European recession, triggered by Russia's invasion of Ukraine; the continued erosion of the real estate market; the Federal Reserve's inability to tame inflation through interest-rate increases; and ESG requirements that may become too cost-prohibitive.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
