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Despite the current softness in global copper prices and an expected market surplus next year, a lack of copper mines under development could undermine the pace of the energy transitions, according to top copper industry executives.
Analysts say that increasing copper inventories signal weakening demand amid slowing global manufacturing, and are potentially anticipating recessions in developed economies.
Due to the energy transition push, industry executives and analysts still expect high demand for copper in the medium and long term. But near-term demand and prices could continue to be weak amid an uncertain outlook for the global economy and copper market in China, the world's top commodity consumer.
Weaker prices make the industry more hesitant to invest in new copper mining now, executives said at the FT Mining Summit.
Even if copper prices spike in the future, they may not be enough to incentivize so much new supply to meet the demand in the energy transition, according to Kathleen Quirk, president of the biggest U.S. copper producer Freeport-McMoRan.
“Now it’s not just price. It’s these other factors that really are going to limit how quickly we can develop supplies,” Quirk told the Financial Times.
In its Q2 2023 earnings presentation this summer, Freeport-McMoRan said that a looming gap in copper supply is expected by 2035, as low-carbon technologies would drive a massive growth in metals demand.
Despite a short-term weakness which is set to result in a surplus of about 467,000 tons next year, up from 298,000 t previously predicted in April 2023 by the International Copper Study Group, the long-term prospects for copper demand continue to be bright.
BHP, the world's largest miner by market capitalization, said in August that the long-term prospects for copper are promising as the decarbonization drive will boost demand. BHP added, “We anticipate that the industry is likely to enter the final third of this decade with a low inventory buffer, and therefore elevated prices may endure throughout this period.”
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.