Copper Prices Set to Rebound Amid Green Energy Demand and Anticipated US Rate Cuts
Copper prices, which reached a record high of $11,105 per tonne in May, are expected to climb again in the third quarter of 2024. This anticipated rise is linked to potential US Federal Reserve rate cuts and the metal's critical role in electric vehicles, wind power, and solar energy, analysts say.
According to BMI, a unit of Fitch Solutions, copper prices have been on an upward trend since the start of the year, except for June, when prices fell to $9,515 per tonne due to concerns over the Chinese economy and a weak US dollar. However, prices have since recovered to $9,944 as of July 5, with the current three-month contract price at $9,915 and the cash price at $9,762 on the London Metal Exchange.
The Australian Office of the Chief Economist (AOCE) reports that copper prices averaged about $9,700 per tonne in the June quarter, a 14% increase since the start of the year, driven by strong global demand. The World Bank's Commodity Outlook also highlights that copper prices reached a two-year peak in the first quarter due to supply concerns and signs of increased global industrial production.
Investor sentiment has been buoyed by the anticipation of US rate cuts and hopes for stimulus announcements during the Chinese Communist Party's third plenum in July. These factors have contributed to the positive outlook for copper demand, particularly for applications in energy transition technologies like EVs and solar panels.
Supply constraints are also influencing the market. The AOCE notes that while global copper mine output is expected to grow in 2024 due to new mining projects and a rebound in production in some countries, refined copper production growth will slow due to concentrate supply constraints. This could tip the copper market into a deficit, tightening supply and supporting higher prices.
Global copper demand is projected to increase modestly this year, reflecting subdued global GDP growth and challenges in China's real estate sector. However, the steady demand from energy transition technologies is expected to continue driving growth. BMI expects Chinese copper demand to grow by 3.5% year-on-year in 2024, compared to a 5% rise in 2023, with the construction sector remaining a critical factor.
Analysts forecast that LME copper prices will average about $9,500 per tonne in 2024, rising to $9,970 by 2026. BMI has raised its 2024 copper price forecast from $9,200 to $9,600, reflecting positive investor sentiment and expectations of a US Fed rate cut in the third quarter of 2024.
