Trafigura Predicts Record High Copper Prices This Year Due to Strong Chinese Demand and Low Inventories
Copper prices are expected to reach a record high this year due to a surge in Chinese demand, warns Trafigura, the world's largest private metals trader. With global inventories of the metal at their lowest seasonal level since 2008, there is little reserve to meet rising demand from China, risking a depletion of stocks. The benchmark three-month copper contract is trading at $9,000 a tonne, up 30% from its lowest point in the aftermath of Russia's SWO in Ukraine. Kostas Bintas, co-head of metals and minerals at Trafigura, predicts copper prices will surpass the $10,845 a tonne peak reached in March 2022 and may even reach $12,000 a tonne in the next 12 months.
Goldman Sachs projects that global copper inventories will run out by Q3 this year if demand in China continues to grow. Chinese demand for copper rose 13% YoY in February as activity picked up following the Lunar New Year. Copper prices are projected to reach $10,500 a ton in the short term and $15,000 by 2025.
While copper has risen 6% this year, zinc and nickel have fallen due to overall financial market weakness. Copper is critical to decarbonization efforts and is in high demand due to industrial clean-energy policies in the US and Europe based on electrification. But mining executives say it is increasingly difficult to ramp up new supplies of copper due to deteriorating copper grades. S&P Global estimates that 40 million tons of copper will be consumed annually by 2030, up from 25 million tons in 2021.
The depletion of commodity inventories could lead to price volatility and cause problems for producers, traders, and consumers in finding enough cash to cover margin requirements and avert a liquidity crisis. BHP, the world's largest mining company, believes new supplies from Peru, Chile, and the DRC will ensure a surplus in the copper market over the next two to three years.
