Copper rally, here's why it will rise dramatically in the coming years

The copper it is among the most purchased metals in the last couple of years and boasts largely psitive perspectives, being correlated both to the performance of the economy and to the energy transition. And it is precisely this factor and the supply deficit that will arise from it that is at the basis of the stellar performance achieved so far by copper and expected for the coming years.

Copper has pulled off a nice rally year to date and boasts a increase of 18.9%. The price of copper futures on the Chicago Comex rose faster than the 3-month futures contract traded on the London Stock Exchange (LME), opening up the possibility of further advances on the latter trading place. This morning, the 3-month copper contract on the LME in London trades at 10,198.50 dollars per ton, up 0.65%, while the future expiring in July 2024 on the Comex shows an advance of 0.25% to 4 $.6675.

Here are copper prices in real time

Tensions on the supply side

The rise of copper in recent weeks has slowed due to some profit-taking and conflicting macroeconomic data from the USA and China, but price growth is supported in the short and medium term by theon the supply side.

The latest news concerns the closure of the Cobre Panama mine and the review of production estimates announced by some of the world's most important copper producers. The situation becomes even more difficult in the long term, because it is estimated that old and new mining projects will only be able to cover 80% of demand by 2030.

Demand expected to grow strongly

On the demand front, in the short term, the Chinese demand remains strong and American industry seems to offer clear signs of strength. However, in the long term the prospect of growth in copper demand strengthens considerably, especially considering the energy transition more or less momentum underway in Europe, the USA and various emerging economies.

It must be considered, in fact, that copper is the key raw material for electric mobility, but also for wind farms and solar energy systems, more generally for most renewable energy sources.

According to Goldman Sachs the demand will grow by 600% around 5.4 million tonnes within ten yearsbut with a more convinced adoption of renewable energy we could see growth of as much as 900%.

UBS raises supply estimates

UBS updated its copper price forecast, citing ongoing supply issues and robust demand as key drivers, and expects a 3% increase of global consumption for this year and 3.3% for 2025. The Swiss bank also believes it is likely that Chinese copper smelters will bring forward their maintenance schedules, curbing growth in refined copper demand at 2.1% for this year (from the original 3.5%).

Goldman Sachs optimistic about price growth

Goldman Sachs, in light of the expansion of data centers and artificial intelligence and the resulting increase in energy consumption, predicts a significant surge in copper prices. The metal could record a further increase of 15% until it reaches a price of $12,000 per tonne by the end of the year.

The probability of a decline is very high

Analysts don't think the same way Macquarie, who believe that the recent rise in copper prices is mainly due to investor optimism and increased expectations of a new global economic expansion. However, in light of current economic data, the price increase seems excessive and the probability of a significant decline is very high.

“We expect that i prices of copper will come down from their recent peaks to an average of $9,800 per ton in the third quarter, then rising to an average of $10,500 per ton in the fourth quarter if the expected shortage begins to emerge,” the analysts explain. which left the production estimate for 2024 unchanged and cut the forecasts from 2025 to 2028.

At the same time, analysts have raised their projections for copper demand outside China for 2024, which will be balanced by a lower growth in Chinese demandleading to a decrease in the projected shortage for 2024 from -244 thousand tons to -86 thousand tons.