- Copper market deficit narrowed slightly in 2021 to 475,000t according to the International Copper Study Group
- Copper deficit could grow more than 10 times over by 2030 as energy transition infrastructure expands
- ASX-listed copper miners have had a poor 2022 year to date
Copper prices remain circling around record highs, climbing 1.7% overnight to US$10,439/t.
It has been in that sort of territory for close to a year now, having initially been driven to record highs last May as infrastructure investment boomed from countries looking to get over the impacts of the pandemic.
London Metals Exchange stockpiles have been extremely tight, hitting their lowest levels since 1974 last year.
And while copper has not been as volatile as the other base metals since the Russia’s invasion of Ukraine, signs of persistent market tightness are emerging.
Sanctions are likely to have limited impact on copper production, ANZ commodity strategists Daniel Hynes and Soni Kumari said in the bank’s research quarterly today.
But issues with production in South America, particularly world’s largest producer Chile where new tax laws could harm investment in new mines and expansions, will likely keep prices high.
“Copper has hitherto had muted impact from the Ukraine-Russia conflict. Russia produces 4% of the world’s copper, which is mined along with nickel. Russia exported more than 600mt of copper ore concentrate last year, 80% of it sold to China. As China can buy Russian copper, we expect limited impact from the ongoing conflict or US sanctions,” they said.
“Prospects of production in South America should be the key driver, where recent production numbers are still subdued. Cost pressures on miners and processors due to higher energy prices will also keep copper prices supported. We expect copper to trade above USD10,000/t in 2022.”
475,000t deficit: International Copper Study Group
The ICSG says mined production grew 2.2% in 2021 to 21.096Mt with concentrate production lifting around 3.9%, with the world’s second largest copper miner Peru increasing production by 7% after being hammered by Covid-19 a year earlier.
Its output remained 6.5% below 2019 levels, but Chile’s continued to decling by 1.9%, 2.8% below 2019 levels.
That was offset by an underground expansion at Indonesia’s large Grasberg mine, which saw that country’s production climb 49% with DRC (+12%), Panama (+61%) and China (+10%) all ramping up.
Refined production increased by about 1.4% thanks to a rise of 4.5% in China, offsetting a 2.4% fall in Chile, with China also driving a 6% increase in refined copper production from scrap. Overall refined copper production hit 24.855Mt against a capacity fo 30.077Mt.
But copper usage was far higher at 25,330t, indicating a deficit of 475,000t against a deficit of 484,000t in 2020, 390,000t in 2019 and 417,000t in 2018.
Analysts had been expecting an improvement in mined supply in 2022, but longer term the outlook is bleak for end users and bullish for miners.
Rystad Energy in January forecast an incredible 6Mt supply deficit by 2030 as its use in technology and infrastructure for the energy transition like electricity and electric vehicles grows.
Big boy copper miners
Despite the bullish outlook for copper the big pure play miners on the ASX have had a poor 2022 on the bourse.
OZ Minerals (ASX:OZL), which owns the Prominent Hill and Carrapateena copper-gold mines in South Australia is down 8.3% year to date.
Sandfire Resources (ASX:SFR) is off 17% YTD, but has question marks hovering over the integration of its $2.6 billion MATSA copper complex in Spain, which it took over from Trafigura and Mubadala Investments at the end of January.
$1.5 billion capped 29Metals (ASX:29M), which owns the Capricorn copper mine in Queensland and Golden Grove polymetallic operation in WA is down a touch over 6% YTD.
Diversified miners BHP (ASX:BHP), Rio Tinto (ASX:RIO) and South32 (ASX:S32) have all enjoyed big increases in their share prices this year but those are more down to the performance of other commodities like iron ore, coal, aluminium and nickel.
Longer term however miners are placing a major strategic bias on copper. Bill Beament and Nev Power backed US SPAC Metals Acquisition Corp paid US$1.1b for Glencore’s 50,000tpa CSA copper mine in Cobar, New South Wales last week.
Gold miners have also flagged their dreams of increasing exposure to record copper prices, giving them major all in sustaining cost savings, with Evolution Mining (ASX:EVN) paying Glencore $1 billion recently for all of the Ernest Henry copper-gold mine in Queensland and Newcrest (ASX:NCM) announcing plans last year to increase its copper output by 37% by 2030 to 175,000tpa.
Big copper share prices today: