Copper times fell to $ 4 per pound on Friday for the first time since 2011, in anticipation of a global economic recovery and a rise in renewable energy sources lifting the metal industry demand outlook.
Copper demand and prices should “continue to benefit from a thriving global economy and [a] moving to “green” energy sources, ”said Brent Cook, geologist and senior consultant for the Exploration Insights newsletter.
Copper for March delivery HGH21,
HG00,
rose 16 cents, or 4.1%, to trade at $ 4.0615 per pound on Comex in Friday’s transactions, ready for the most active contract settlement since September 2011, according to Dow Jones Market Data. Prices trade more than 7% higher for the week and more than 15% a year higher so far.
Supplies of the metal suffered from a slowdown in production as a result of COVID-19 restrictions and although supply should be built in 2021, Cook said, the market may not have enough copper to meet demand in the years to come.
Estimates for supply increases range from 1.5% to 3.5%, while demand is expected to “far exceed supply,” Cook told MarketWatch. It expects the supply shortage to increase over the next five to 10 years “mainly due to a shortage of new copper detections, the timeline for inward investment,” which will give an average of 10 to 20 year for major investment, and that “most of the major investments currently being made are in their ‘golden years’. ”
In a report released in January, with preliminary data from October 2020, the International Copper Exploration Agency (ICSG) said that world ore production fell 3.5% in the period April to May. last year. He said the two months that were most affected by global COVID-19-linked global locks led to temporary mine closures and lower production rates.
ICSG also said that preliminary data show that world-made refined copper production rose 1.5% in the first 10 months of 2020, while estimates for world-regenerated copper consumption rose 2% over the same period, showing an “apparent deficit” of approximately 480,000 meters. tons due to strong Chinese demand.
The need for copper in so-called “green” energy sources is also entering the market, Cook said, estimating that an average combustion car contains about 15 kilograms of copper, but that an electric car uses about 60 kilograms of copper.
However, there are some doubts as to whether the economy is based on a path to recovery, especially in the US
Recently released data showed that U.S. industrial output rose in the fourth straight month, up 0.9% in January. The New York Fed’s Empire State business situation index rose 8.6 points to 12.1 in February, the highest activity level since July.
The volume of regional industrial activity at the Federal Reserve Philadelphia, however, in February fell to 23.1 from 26.5 the previous month. Also, the first two readings of consumer sentiment this month fell 3.5 points to 76.2 in early February and hit a six-month low, according to an index produced by the University of Michigan.
There is a “huge disconnect here,” said Christopher Ecclestone, mining strategy at Hallgarten & Company. “I don’t see a pink economy. ”
He described European economies going back in 1919 to 1921, after the First World War and the Spanish flu as a result of “increased demand,” but then “flopped. ”
“There is no doubt that there will be a huge demand,” but the question is whether this will continue, Ecclestone said.
And with copper prices at such high levels, it may signal a short-term movement in prices.
John Caruso, senior asset manager at RJO Futures, told MarketWatch that copper in the $ 4 to $ 4.20 range was “our target range, so it’s a good day to reap the benefits on the long side. ”
However, it sees “a very bullish economic backdrop for copper,” coupled with an expected infrastructure package out of Washington, DC and strong Chinese demand, thus “long-term supply [and] demand bases are very bullish and could fuel a multi-faceted rally. ”