After a disappointing 2022, the copper market is expected to have another volatile year as the base metal finds itself between a global recession, an ongoing clean energy transition and growing demand for electric vehicles, according to some commodity analysts.
Copper started 2022 on a positive note as the market saw rising demand and limited supply. In the first quarter of 2022, copper prices soared to an all-time high of over $10,000 per tonne on the London Metal Exchange, with U.S. high-grade copper futures climbing above $5 per pound.
However, record prices were short-lived, and a sharp decline fueled by growing fears of a recession sent copper prices to nearly a two-year low below $7,000 per tonne or $3.20 per pound. Although copper managed to rebound from its multi-year low.
Looking ahead, many commodity analysts expect copper prices to remain low as central bank tightening and weak demand from China weigh on the market, at least in the first half of the year.
"Recession fears, China's slowdown due to its Covid-19 restrictions, and the Fed's interest rate hiking path will continue to drive copper's short-term price outlook, however tightening supply should maintain the red metal's price support above $7,500/t throughout 2023," said ING analysts in their 2023 outlook.
However, ING also sees an improvement in the copper market in the second half of 2023, with prices above $8,000 per tonne.
Commodity analysts at Bank of America are more optimistic that copper prices will rebound in the second half of the year after a disappointing start. The bank sees that prices could rise above $12,000 per tonne.
Along with Bank of America, Goldman Sachs is also optimistic. In early December, the financial institution raised its 12-month copper price target to $11,000 per tonne from a previous $9,000 forecast.
Goldman Sachs forecasts average copper prices in 2023 to be around $9,750 per tonne, with the average price rising to $12,000 per tonne by 2024.
Commodity analysts at CIBC are less optimistic about copper and believe that the recession will affect demand. The Canadian bank expects copper prices to average around $3.35 per pound in the first half of the year, 11% below their previous forecast. Prices are expected to rise to an average of $3.65 per pound in the second half of next year.
However, not all analysts are optimistic about copper ahead of the new year. Mike McGlone, senior commodity analyst at Bloomberg Intelligence, said industrial metals will not be able to withstand the impending slowdown in economic activity.
For many analysts, copper has become a critical long-term metal as the world upgrades its energy infrastructure and moves towards clean, renewable energy.
Analysts at S&P Market Intelligence said that global demand for copper is expected to double by 2035. The research firm predicts that there will be a significant shortage of copper by 2025.
Copper, the "metal of electrification," is essential to all clean energy transition plans. Deeper electrification requires wires, and wires are mostly made of copper. Technologies such as electric vehicles (EV), charging infrastructure, solar photovoltaic (PV), wind and batteries are very important for the transition to new energy; they require much more copper than conventional fossil-based counterparts.
