Copper Bull Run Predicted to Continue Amid Global Supply Challenges and Surging Demand
Industry analysts are forecasting a robust continuation of copper's bull run for at least the next three years, driven by persistent global supply challenges coupled with soaring demand due to energy transitions and advancements in artificial intelligence technologies. This optimistic outlook is underpinned by the metal's critical role in a range of technological applications, from electric vehicles (EVs) to data centers, which are expected to increasingly require copper.
This sentiment is set to be a central theme at the upcoming CRU World Copper Conference in Santiago, Chile, from April 15-17, where industry leaders will gather to discuss market dynamics. The conference highlights come at a time when Chile, despite being the world's top copper producer, has seen faltering outputs in recent years.
Copper, essential for its superior electrical conductivity, is heavily utilized in motors, batteries, and wiring. The metal is often referred to as "Dr. Copper" due to its ability to gauge the global economic health. Additional demand for copper is anticipated with the rise of electric vehicles, which use four times as much copper as traditional internal combustion engine vehicles.
Citi analyst Maximilian Layton predicts a significant demand-supply mismatch, with an expected shortfall of 1 million metric tons over the next three years, potentially leading to "explosive price upside." Current projections by Citi and Bank of America anticipate copper prices reaching $12,000 a metric ton by December 2026, significantly up from Wednesday's trading price of approximately $9,378 a metric ton.
The forecast also considers recent production difficulties faced by major mining operations, including First Quantum, Ivanhoe Mines, and Anglo American Codelco, among others. Issues such as electricity supply disruptions in Zambia, Africa's second-largest copper producer, are exacerbating supply concerns.
One notable shock to the market was Panama's decision to close First Quantum’s Cobre Panama mine, which provided about 1% of global copper supply. This closure is expected to further tighten the market, with no reopening anticipated until at least 2029.
In the U.S., Rio Tinto's efforts to launch one of North America's largest copper mines in Arizona are hindered by complex legal challenges, adding to the global supply constraints.
The state of the copper industry in Chile, particularly the operations of Codelco, which produces a quarter of the country's copper, will be another focus at the Santiago conference. Recent operational challenges have led to the lowest production levels in 25 years. However, there are signs of improvement in the investment climate under President Gabriel Boric, who has made efforts to enhance relations with the mining sector after initial tensions.
