Recession concerns push copper prices down, despite overwhelming demand

According to research, the predicted supply shortage of copper poses a threat to net zero in 2050.

News analysis

The sharp fall in copper prices in the second quarter showed how the outlook for a global recession could defeat favorable supply and demand dynamics. Multipurpose base metals are Canada’s priority, but some say falling prices can slow production.

Canadian mining veteran Donald Buber, President and Chief Executive Officer Avalon Advanced Materials Inc. and board member Junior exploration firm Copper Lake Resources Ltd. points out that the financial market view of copper is inconsistent when compared to promising economic fundamentals.

“Copper prices have been lowered to well above US $ 4.00 after that significant rise. [per pound]I think this was largely driven by speculation about rising demand, not pure supply and demand fundamentals, “Bubar told The Epoch Times.

Copper fundamentals are far superior to today’s low prices, Paul West-Sells said. President and Chief Executive Officer Canadian mining company Western Copper and Gold

“When we look at copper fundamentals, or inventories, copper inventories are incredibly low, but prices are falling just because everyone is worried about inflation,” he said in an interview. I did. Investment news network July 20th.

July 14th study by S & P Global It points to a large and imminent shortage of copper. Demand for copper is projected to increase from 25 million tonnes (Metric tonToday, it will be about twice that amount by 2035. And by 2050, demand will increase to 53 million tonnes.

Financial markets have priced recession concerns across asset classes such as equities and commodities. Copper “Dr. Copper” represents that its pricing behavior describes the outlook for the health of the global economy.

“Dr. Copper says the economy may be a bit slower in the future,” said Brooksackley, a research analyst at Horizons ETF Management Canada. BNN Bloomberg July 19th.

Copper price, below July 27 US $ 7,600 per tonHas fallen nearly 22% from its most recent high of over US $ 9,700 on June 6 on the London Metal Exchange.It fell down US $ 7,000 Per ton July 15 First time since November 2020.

economist Before each of the last four recessions, we observed that copper hit the bear market (down 20% from its recent highs).

One of the largest copper producers in the world, Freeport-McMoran (FCX)In the second quarter earnings announcement, despite many analysts predicting price increases over multiple years, rising US interest rates, concerns about the global economy and strength in the US caused the second quarter. He said the decline was “rapid.” Dollar.

“Copper was the most vulnerable metal to enter the bear market,” said Daniel, senior commodity strategist at TD Securities. Gari July 5th.

But it may have bottomed out Mid-July And TD Securities ” Updated view Product sales from July 22nd are “lost momentum.”

Increasing demand in the future

FCX said that demand for copper is expected to double in the next 10 to 15 years, “to support new mine supply development where the current price of copper is expected to add to future supply shortages. It’s not enough. “

Therefore, Smart Money Monday editor Thompson Clark advises investors to invest in copper now.

“The long-term supply and demand situation for copper looks solid and prices should start to rise soon,” he wrote to customers on July 25, saying that copper supply could not increase overnight. Stated.

Regardless of the projected future supply and demand dynamics of copper, its earlier notable decline was a credible precursor to an economic slowdown.

July 26, International Monetary Fund The (IMF) has updated its global growth forecast, saying that “the outlook has been significantly darker since April.”

The IMF has reduced global growth in 2022 and 2023 by 0.4% and 0.7 percentage points from its April forecast to 3.2% and 2.9%, respectively.

“The world may soon be on the verge of a global recession, just two years after the last recession,” the IMF said.

Oxford Economics reported on July 22 that the combined leading indicators of world trade have moved into the negative territory in recent months. This means that commodity trade volume may begin to shrink year-on-year in the third quarter.

“There are particularly negative signs from air freight, copper prices and stock prices of shipping companies,” Oxford Economics said.

Another question of Net Zero

copper, “Electrified metal” is the best metal for wiring and circuits, and is widely used in solar panels and energy storage and transportation. It is widely used in all Tesla electric vehicles.

Therefore, copper is an important metal in the 2050 transition to net zero, S & P Global “Unless a large amount of new supply comes online in a timely manner, the net zero emissions target by 2050 will be short-circuited and remain unattainable,” he said.

Given the expected copper deficiency and China’s “world’s copper epic,” the study foresaw “an unprecedented burden on the supply chain,” and “copper deficiency is a disappointment to international security. It can be a stable threat. “

According to the 2021 report by International Energy Agency (IEA)About half of the world’s copper supply is extracted in Chile, Peru and China, but China’s processes, including smelting and refining, make up about 40% of the world’s copper.

S & P Global According to a July 2022 survey, the United States will import 57-67% of copper demand by 2035, and Canada will account for 22.1% of US refined copper imports by 2020.

Canada has three copper mines and three advanced copper projects.

“Canada certainly has the potential. We weren’t very interested in copper exploration because of the high supply and falling prices, but that’s changing now,” Bubar said. Canadian miners added that the recent sharp drop in metal prices has not prevented them.

The IEA also states that “the transition to clean energy means the transition from fuel-intensive systems to material-intensive systems,” but for example, the amount of minerals required for solar and wind power plants is generally He said it was more than fossil fuels. Fuel-based counterpart for construction.

It is estimated that the construction of the copper mine will take about 15 years, the Canadian Mining Association said: July 18 Tweet “As one of the world’s lowest carbon producers, Canada can play a much larger role as a reliable supplier in this area.”

Copper is one of the key minerals to benefit from the new 30% exploration tax credit announced in 2022. Federal budget As part of Canada’s first important mineral strategy.

Rahul Vaidyanath


Rahul Vaidyanath is a journalist in The Epoch Times of Ottawa. His areas of expertise include economics, financial markets, China, and defense and security. He has worked at the Bank of Canada, Canada Mortgage and Housing Corp., and investment banks in Toronto, New York and Los Angeles.