The Copper Deficit Is Getting Real: Why?

With the growing demand for metals, there is a high risk of “copper reduction” globally. Especially after the global economy reopens, it is likely to soar commodity prices.

Inventories are calculated in metric tons and are currently at the level of 15 years ago. It is “implying that inventory can only meet 3.3 weeks of demand.” prices might rise to $13,000 (or $5.89 per pound). This year and in 2022, the market should experience a deficit.

One of the reasons for the demand increase is that copper is used in electric vehicle production. Thus, the global push for a green economy will raise the prices.

FactSet data show that Comex copper futures rose nearly 1.4% on Monday to $4.53 per pound, the highest settlement price since February 2011.

The amount of row metal might fail to increase as expected. Inventories might decrease in the next three years as well. These will cause copper to face “more severe price fluctuations.” In this case, the “red metal” could soar to US$20,000 per ton or US$9.07 per pound.

At the same time, President Joe Biden’s infrastructure plan still needs to be passed by Congress.

This year’s expected economic growth in the U.S. means that China will no longer be the only source of global solid copper demand.

Concerns about low copper inventories would lead to an increase in mining capital expenditures.

Africa has a considerable resource of copper, and metals needed for the “green revolution” might have geopolitical tensions. Although the U.S. has its supply, import copper is cheaper.

However, although copper is essential for decarbonization, its share of the global economy is “relatively small.”

It’s still interesting how the future could develop and how much it will affect the global economy.