Copper prices on the New York Mercantile Exchange (COMEX), a subsidiary of CME, once hit a record high of 5.1775 US dollars/pound (about 11,414 US dollars/ton) on Wednesday. So far this year, it has risen 28%, up 14% from last week. This wave of gains is closely related to the surge in copper demand and concerns about the supply outlook.

The surge in demand for copper is due to its critical role in renewable energy generation, electric vehicles, and grid infrastructure, which is critical to achieving net zero emissions. Market dynamics and global supply concerns have driven up copper prices, and leading copper mining companies have also seen significant growth.

Copper price rise and market dynamics

Market analysts attribute the current price trend to speculative buying and real supply restrictions, indicating that copper prices are likely to continue to be bullish. Many copper-dominated stocks are also currently trading at or near 52-week highs, indicating that investors are confident about the future prospects of the industry.

A key event affecting the dynamics of the copper market was the closure of the Panamanian copper mine. The mine is an important source of copper in the world. The closure changed the market's expectations for copper supply from surplus to deficit, driving up copper prices. Furthermore, in March, Chinese smelters decided to cut production due to a shortage of concentrate, which further boosted prices.

The importance of copper in the transition to net zero emissions cannot be overemphasized. Its essential properties, including high conductivity, thermal efficiency, and recyclability, make it critical to the development of renewable energy systems, electric vehicles, and infrastructure. Renewable energy technologies, such as solar photovoltaics and wind turbines, require large amounts of copper to enable efficient transmission and distribution of electricity. Electric vehicles also rely heavily on copper to make components such as motors, inverters, and wires.

Copper plays a key role, but demand for copper is expected to outpace supply growth, raising concerns about potential shortages. Addressing these challenges requires strategic investments in copper production and recycling to support the global transition to sustainable energy and achieve net-zero emissions goals.

Although investors were encouraged by the rise in copper prices, analysts warned that the market needed to verify this trend beyond short-term momentum. Copper's performance may have a significant impact on other companies' profits, especially if the price stays above $4/lb.

Net zero emissions targets boost copper demand and prices

Although more cost-effective alternatives such as aluminum exist, the efficiency and effectiveness of copper remains unrivaled for various applications critical to decarbonization efforts. From household appliances to electric vehicles and renewable energy infrastructure, copper is everywhere. For example, each car contains an average of about 65 pounds (29 kg) of copper, while an average household has more than 400 pounds of copper.

Compared to traditional power plants, solar and wind farms that cover a large area require more copper per unit of electricity generation. According to industry estimates, annual copper demand may need to double to 50 million tons in order to achieve the ambitious net zero target by 2035. Even conservative forecasts expect copper demand to grow by at least one-third over the next decade, driven by significant public and private investment in decarbonization initiatives.

Meeting this growing demand poses a huge challenge. Although copper recycling is increasing, it is not enough, and primary mining is still the main source. Expanding copper mining, however, faces obstacles. Ore grades are declining, and more extensive mining operations are needed to achieve the same yield. Furthermore, environmental concerns surrounding mining activities have dampened investment enthusiasm.

The sharp rise in copper prices has fueled speculation about a potential tight supply. It is estimated that addressing the estimated 8 million tons/year supply gap over the next decade may require investments of up to $150 billion. However, reaching this level of investment may require copper prices to reach record highs.

Market experts further observed that although global demand for copper will rise, growth rates vary greatly from region to region. They emphasized that regional macroeconomic conditions usually affect copper demand.

Factors affecting copper prices in 2024 and beyond

Although uncertainty about economic recovery in many countries still poses a major obstacle to copper prices in 2024, China's copper smelters have begun to cut production to solve the shortage of raw materials. This indicates potential supply restrictions. The Federal Reserve's monetary policy decisions are also receiving close attention, and interest rate cuts are expected to affect copper prices.

Analysts predict that copper prices will rise in 2024 and beyond, driven by the imbalance between supply and demand, the US interest rate cut cycle, and increased demand from the green energy industry. The consulting agency BMI expects the average price of copper to be 8,800 US dollars/ton in 2024, while ANZ Research predicts 8,950 US dollars/ton.

Looking ahead to 2025, analysts expect prices to continue to grow. The BMI is expected to be 9,300 US dollars/ton, while ING predicts around 9,050 US dollars/ton. Long-term copper price predictions are uncertain, but copper prices are expected to remain high as demand is driven by the energy transition (particularly electric vehicles and renewable energy).

As copper increasingly affects global economic dynamics, countries are also competing for limited future supplies, especially given that a large portion of copper ore is mined in Latin America and Africa. This highlights the strategic importance of ensuring domestic production, cross-border procurement, and refining capacity for basic metals such as copper.

As renewable energy infrastructure and electric vehicle adoption continues to expand, strategic investments in copper production and recycling are critical to meeting growing demand and achieving net-zero emissions targets.

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