News

Oct 18, 2023

Is a copper price surge imminent?

Late last year, ING Bank N.V. published an article titled “Macro headwinds to keep pressure on copper prices,” predicting fear of recession, China’s economic slowdown and the U.S. Federal Reserve’s

Late last year, ING Bank N.V. published an article titled “Macro headwinds to keep pressure on copper prices,” predicting fear of recession, China’s economic slowdown and the U.S. Federal Reserve’s interest rate hikes will continue to dampen copper’s short-term price outlook. However, ING adds that tightening supply should maintain pricing above $7,500 per ton throughout this year.

“We believe copper prices will remain under pressure until the global growth outlook starts to improve,” ING writes. “Tight supply will then become the key focus for the market, which should support prices above $8,000/t in the last quarter of 2023.”

The bank says it expects copper demand will improve in response to growing demand for renewable energy and electric vehicles (EVs). “In EVs, copper is a key component used in the electric motor, batteries and wiring, as well as in charging stations,” ING says. “Copper has no substitutes for its use in EVs, wind and solar energy, and its appeal to investors as a key green metal will support higher prices over the next few years.”

Andrew G. Kireta Jr., president and CEO of the Copper Development Association (CDA), recognizes copper’s importance, saying, “Copper is and always has been critical to our economic and national security but now to the clean energy transition as well.”

Which is why the CDA, based in McClean, Virginia, is urging for copper to be added to the U.S. Critical Minerals List.

According to a new report from the CDA, copper now meets the U.S. Geological Survey’s (USGS’) benchmark Supply Risk score of 0.4 for automatic inclusion on the U.S. Critical Minerals List. The CDA says the report replicates the USGS methodology used to determine mineral criticality.

Originally created in 2018, the U.S. Critical Minerals List contains minerals deemed essential to U.S. economic or national security that have supply chains vulnerable to disruption. The list by statute is intended to be updated every three years at a minimum, however, the Secretary of the Interior can update it at any time. When compiling the 2022 list, the USGS used 2018 data, which meant copper missed the required 0.4 supply risk score threshold for automatic inclusion, CDA says.

“Because USGS data was considerably out of date upon the release of the 2022 Critical Minerals List, and the risks to copper from imports has increased dramatically, we engaged an analyst to update copper’s supply risk score with the most recently available data to 2022,” Kireta says.

New USGS data show the share of copper consumption met by net imports has increased from 33 percent in 2018 to 44 percent in 2021 and 41 percent in 2022. In the first half of 2022, the net import reliance stood at 48 percent, the CDA says.

The CDA report calculates copper’s Supply Risk score in 2022 as 0.423, while the four-year weighted average score is 0.407. Both figures are above the USGS 0.4 threshold for automatic inclusion on the list.

Despite the red metal’s potential and the vital role it plays within the U.S., copper scrap demand has softened and spreads relative to the terminal market have widened, an executive with a scrap processing company based in Ohio says.

“It’s totally confusing,” a scrap processor based in Chicago says, referring to the swings in pricing and the variability in spreads relative to the terminal market price.

However, he says he also believes in the upward momentum for the metal in the long term, citing a report from Goldman Sachs about a looming shortage and higher pricing to come.

“Everyone would tell you it’s a little slow right now,” he continues, adding that it’s not uncommon to start the year in a lull. However, he says, people are calling in search of copper scrap, seemingly willing to go longer on their inventories than they had been at the end of 2022 and the start of 2023.

Other consumers, however, have backed off a little on their scrap buying because they are worried about moving their existing products. “Any pause is just that—a pause,” the Chicago-based processor says, predicting that copper is poised to jump in pricing in the second quarter of this year.

The executive based in Ohio says scrap flow has remained steady with the mild weather in the Midwest. “Retail flow normally wanes in January and February, but it has held somewhat steady,” he adds.

He says aluminum scrap for primary mills is difficult to move in the spot market as of mid-February, though orders are being placed a month ahead. “Secondary [demand] has gotten better.”