The copper price is likely to finish 2021 lower than its current level. However, they could yet see some further gains in the year, industry watchers told MetalMiner.
“It’s sentiment-driven,” one analyst said about current prices for the base metal and the prospect for increases in them over the year.
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Copper price roller coaster
Copper could achieve $15,000 for a short while, a second analyst said, but warned that it would not be unsustainable.
Sustained higher prices could also impede rollouts of new electric vehicles. As such, the ongoing “environmental revolution” would precede at a much slower pace, the first source added.
“It would lose so much demand to aluminum in terms of cabling,” which is notably cheaper, the first analyst said about continuing rises in prices.
Copper on the London Metal Exchange (LME) has sharply risen on the year. LME three-month copper reached a high of $10,724.50 per metric ton on May 10. That more than doubled the $5,266 reported on May 11, 2020.
That price has since fallen, however. The copper price finished Monday at $9,868 per metric ton on news that the China’s National Development and Reform Commission warned commodity companies against pushing up prices by maintaining “normal market order.”
COVID impact on copper prices
The COVID-19 global pandemic’s impact on copper mining and production in South America also prompted many mines and refiners on that continent to either curtail their production or completely down tools in Q1 and Q2 of 2020. In turn, that led to supply disruptions and, furthermore, higher prices.
Logistics disruptions also helped to push up copper prices, the second analyst added.
High demand as the global economy recovers from the COVID-19 global pandemic may have also helped to boost prices. Political events in South America could now help them to rise further.
Pedro Castillo, the socialist candidate for Peru’s upcoming presidential election on June 6, has spoken about his plans to raise taxes and royalties. He has also proposed renegotiating contracts with large companies if elected.
Castillo’s potential move is similar to Chile’s Constitutional Convention, which convened in May to rewrite the South American state’s primary legal document and envisions a progressive tax of at least 3% on copper and lithium sales.
Events in South America are not the only determining factor for the higher prices. Several other situations around the world are also boosting prices for the metal.
Glencore sells Mopani stake
Other mines in southern Africa face various issues related to disruptions from the pandemic and for other reasons.
Glencore also sold its 73% stake in the Mopani copper mine to the Zambian government in January. The miner cited the pandemic and low copper prices as being behind the sales. The decision could create operating and supply difficulties, the third analyst believed.
Mopani produced 34,479 metric tons of copper in 2020. That marked an increase of 14.6% from approximately 30,080 metric tons in 2019, Reuters reported.
In Q3 2019, Glencore pulled off stream the Mutanda copper mine, in the Democratic Republic of Congo’s Katanga province. It cited difficulty in sourcing sulfuric acid to extract copper and cobalt.
Operations there are unlikely to restart until 2022, reports indicated.
Meanwhile, US President Joe Biden’s efforts to push through his infrastructure bill for the United States, initially valued at $2.25 trillion, could also help boost sentiment for copper. However, Biden’s most recent counteroffer on the proposal comes in at a reduced $1.7 trillion, which could be bearish for several metals used in infrastructure projects.
Fundamentals set in
Current and future fundamentals paint a different picture on where the copper price is likely to move.
Most copper mining and production operations impacted by COVID are likely to continue ramping up their operations to pre-pandemic levels by the end of 2021, the second analyst stated.
Copper recorded a surplus of 2,200 metric tons in January-March of 2021. That followed a deficit of 954,000 metric tons in 2020, the World Bureau for Metal Statistics reported.
The DRC’s Kamoa Kakula copper mine, a joint venture between Canadian company Ivanhoe Mines (39.6%), China’s Zijin Mining (39.6%), Crystal River Global Limited and the African state’s government, is due to ramp up capacity to about 400,000 metric tons per year by late 2022 after commencing start-up operations in 2021.
Ivanhoe and Zijin each hold a 39.6% stake in the project. The Congolese government holds 20% and Crystal River less than 1%.
Zijin is also undertaking expansion and overhaul work on Serbian copper mine RTB Bor, about 250 kilometers southwest of capital city Belgrade.
Indonesia’s Grasberg copper mine, the world’s second largest, has also undergone expansion plans that will see ore production double year over year to 60,000 metric tons in 2021 and achieve 130,000 metric tons in 2023.
Grasberg is in Indonesia’s Papua Province, on the island of New Guinea.
Other copper projects are also in the pipeline in South America, the third analyst noted.
The environmental revolution
Newer mining and smelting projects are not the only reasons for potentially lower copper prices. In addition, the environmental revolution is yet in its infancy.
Prices for electric vehicles also remain out of many consumers’ reach and likely will remain so, the third analyst said. National governments would have to undertake efforts to make them more accessible in order for them to proliferate and eventually replace internal combustion engines.
“Will it be another China? I don’t think so,” the third analyst said, comparing the environmental revolution to China’s economic rise since the 21st century’s start.
The world’s second largest economy is also now taking measures at the moment to reign in its economy, which could blunt copper demand.
“China’s starting to tighten money supply, and there are some inflation concerns,” the third source added.
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