December 27, 2023 | Market Intelligence
Copper today finds applications across diverse industries such as electronics, construction, transportation, and renewable energy, owing to its excellent conductivity and malleability.
However, the global demand for copper has outpaced its mining and production capacities and a looming copper shortage poses a serious threat to manufacturing industries.
In the past decade, heavy industries, especially the basic metals subsector, have faced significant disruptions, exacerbated by the pandemic. The subsector includes copper, aluminum, iron, and steel.
Despite these challenges, the subsector is undergoing a major transformation, with basic metals industry's turnover projected to grow at a compound annual growth rate (CAGR) of around 5% from 2022 to 2030 , driven by rising exports and major infrastructure initiatives.
The copper prices declined by around 6% Y-o-Y in 2022 , due to decreased end-use demand and production.
China has played an important role in influencing copper prices but a weak economic recovery and subdued demand have kept copper in a bearish state.
A notable decline in China's housing market and an industry slowdown continue to pose threats to copper demand, with housing starts down more than 23% year on year in 2023.
The diminishing interest from copper manufacturers, fueled by reduced demand, amid an increased production by around 5% year-on-year in 2022, added to the downward pressure on price.
Additionally, regulatory approvals for new copper mines have hit a decade-low, painting a bleak outlook for future copper production compared to the anticipated demand.
Moreover, the strengthening US dollar has cast a shadow over concerns about tightening metal supplies.
Persistent impacts of rising inflation, technological slowdowns, a renewable energy crisis, and fluctuating exchange rates are affecting the copper market and resonating across end-use industries, contributing to an overall bearish sentiment in the global market.
While declining copper head grades seem irreversible, the copper industry is actively pursuing innovative technologies to enhance production and promote product reuse.
Techniques such as coarse particles, sulfide leaching, and process optimization through machine learning are being employed to address the supply crisis.
While the demand outlook for copper remains promising due to its crucial role in various end-use industries, there's a potential threat of rising prices if key producers struggle to match supply amidst reduced mining levels causing subpar production, and continued disruptions in the supply chain.
However, proactively establishing a strong and adaptable copper supply chain through investments in exploration, diversification of supply sources, and the adoption of emerging technologies represents pivotal measures to mitigate the anticipated turbulence.