Copper record prices fuelled by EV market and renewable energy

JOHANNESBURG – Interactive chart of historical daily COMEX copper prices over the past 5 years shows the current price of copper as of March 04, 2021 is $4.14 per pound. Boosted by speculative interests, LME cash copper prices continued to climb closing up 0.9% to US$9,157/t (US$4.14/lb) on 4 March.

The price of copper is believed to provide a reliable measure of economic health, as changes to copper prices can suggest global growth or an upcoming recession. With high volatility and strong liquidity, copper is attractive to traders. Copper spot price is affected by extraction and transportation costs, as well as supply and demand.

This 30Mt global market, dominated by China, is on the verge a new consumption boom fuelled by electric vehicles (EVs), renewable energy generation (onshore and offshore decentralised wind power), and increasing demand for electricity from the world’s fast urbanising populations, especially in China, India and South East Asia. 

Numerous factors are contributing to the rally, particularly the weakening US dollar, production disruptions, tight scrap in China due to strict customs inspections at ports such as Ningbo, low global exchange inventories, and restocking and stockpiling of cathode in China, where demand has recovered quite quickly from the pandemic.

Global macroeconomic factors point to further support for prices. A new all-time high would certainly solidify the bull case for copper and potentially beget even higher highs. Current supply and demand conditions are favouring commodity prices.

While there are many gradations under close examination, the bullish narrative for copper can be broken down into simpler terms. Supply will likely remain under pressure as stimulus-driven demand bolsters prices.

One reason supply will likely remain under pressure is the amount of time it takes – which is estimated at around 8-10 years per industry experts – to get a copper mine up and running. That said, major physical inventory levels are nearing record lows, with the London Metals Exchange’s current copper inventory level near 15-year lows.

The demand side is equally bullish, driven by government stimulus spending centred around infrastructure, particularly China which is the world’s largest copper importer. Moreover, the world is shifting towards clean energy solutions to add and replace energy consumption.

The green energy push is heavily reliant on metals like copper. In addition, as global economic activity continues to expand coming out of the pandemic, it will likely drag the red metal along for the ride.

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