LME Week: Copper voted as top metal for upside potential by 45% of participants at LME Seminar

Copper was voted the metal with the most upside potential by 45% of attendees at the 2024 London Metal Exchange Seminar in London on Sept. 30.

Copper was also the metal to get the most airtime throughout the seminar, with Rio Tinto CEO Jakob Stausholm saying the miner expected global copper sales demand to roughly double by 2050, reaching 60 million metric tons.

Teck CEO Jonathan Price said he expected a supply-demand gap of around 6.5 MMt by 2035, potenially nearing to 10 MMt by 2040, as copper sat upstream of every technology that was required for the energy transition, and the demand outlook appeared "very constructive."

"On the demand side there are really three main trends driving that," he said, naming urbanization, the energy transition with its high copper requirement for EVs and renewables, and emerging demand from AI and data centers.

The only threats to demand he could see were recycling and some substitution, with aluminum able to be used as a substitute for copper, but only in a small number of applications.

"But we don't see any of those factors even coming close to allow us to close this gap. And then on the supply side of the equation we simply don't have enough known copper resources and projects that are anywhere near ready to go today to begin to capture demand growth here," Price said.

He noted that projects with known resources were deeper and lower grade, and often required high capital to bring online and higher operating costs to run. They also often required new infrastructure and the permitting process was often long.

"In North America it can take more than 15 years to bring a new mine into production through the permitting process. Whereas it only took eight years to put a man on the moon. So, we're not really doing very well in that regard and that is a significant constraint at the moment to closing this supply-demand gap," Price said.

He said that, looking at the current supply and demand fundamentals, prices were insufficient to incentivize the capacity required for the future, but he assumed as the supply-demand gap emerged, prices would react accordingly.

Prices to stay anchored at high level

Morgan Stanley Head of Metals and Mining Commodity Strategy Amy Gower said during the metals debate that a copper price rebound was expected, which was playing out, with prices forecast to remain anchored around the $9,500/t level through the rest of the decade, likely with some volatility.

The LME three-month copper price closed at $9,982.50/mt on Sept. 27, up 17% since the beginning of 2024.

Gower said the market was expected to be in a deficit in 2024 and 2025, despite the inventories that had been built.

"We think this will drive inventory draws into year end, keeping prices on a natural trajectory. This is already starting to play out, and the Chinese stimulus from last week probably helps to skew that risk towards the bull case, depending on how the policy is implemented, as more details are released in the weeks and months to come," Gower said.

She identified three main copper demand drivers: China, new demand drivers, and a lack of capital expenditure.

China's metals demand had been more resilient than sentiment showed, she said, with demand growth still going despite its property sector slowing down.

"Many of the other sectors we track -- grid spend, EV output, appliances, and, of course, EV and renewable installations -- remain in very healthy growth territory," she said, adding that the manufacturing cycle had helped offset some of the property weakness, while exports also played a role.

However, Gower noted that there were more trading barriers, which will likely require China's domestic consumption to step in.

"Here, I think the stabilization of the property market will be a key determinant on whether this is successful," she said.

"But we do think, generally, taking these factors together, we can still support China's demand growth at around 2% to 3% a year. So a little slower than we've been used to, but still a healthy level," she added.

New demand drivers

Gower said there were also some new demand drivers that were likely to bring more volatility to prices and demand growth.

These included EVs, renewables, the subsequent impact on the grid, and more recently, data centers, which would all underpin proper demand growth, some in China and some elsewhere, Gower said.

"We think these have the potential to drive a meaningful impact on proper demand. But as we saw earlier this year, with the data center excitement, this can also bring a lot more volatility," she said.

Projects were also getting more expensive and difficult to deliver.

"It's not new to say that there hasn't been enough capex in copper and that we're approaching an impending lack of supply, but we're coming on to around a decade on from that 2015-16 capex downturn," Gower said.

She said this was impacting projects in the pipeline, while money spent was also going less far, whether it was due to inflation, new jurisdictions, needing infrastructure or long feasibility studies, among others.

"We only see that mine supply grows at around 1.7% through to the end of the decade, down from 2.7% that we saw in the 2010s," Gower said.