Focus on: Copper
Commodities are prone to supercycles of scarcity and abundance — with returns responding accordingly. Today, as the world focuses on decarbonization and rising geopolitical tensions, we anticipate an extended era of commodity-pricing strength. Copper, a critical input for the low-carbon transition, may be one of the biggest winners. Entering the next commodities supercycle?
Commodity history attests to periods of supply outpacing demand, following by periods of demand outpacing supply.
Demand for copper is projected to boom. Current major demand sources will expand in scope, while nascent sources like renewables and electric vehicles will surge, consuming millions of megatons per year.
We expect structural constraints, rather than cyclical drivers, to contribute to fundamental tightness. Current inventories are low due to a weak production impulse.
Labor shortages, rising costs of raw materials and existing projects, middling spot prices, and a dearth of new projects owing to pricing and ESG concerns have hampered the necessary production response. Even copper recycling activity remains tepid.
At the same time, demand is rising. Government policies and pledges targeting the low-carbon transition, including the US Inflation Reduction Act, Europe’s REPowerEU, and net-zero commitments from major emerging markets should translate to rising global appetite for copper.
Copper supply deficit expected to widen
Copper is critical for the success of the global energy transition. To close the 6,801 kt supply gap expected by 2030, the world needs a production response. But for that to happen, copper prices must rise.
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