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Shortages of copper and declining inventories could drive prices to levels beyond current record highs
unless scrap supplies increase — scrap accounts for about a third of the roughly 30 million tonnes of
annual global copper supplies.
As copper prices rise, the flow of scrap accelerates as the market attempts to cover the gap between
demand and supply.
Copper for delivery in July was up 0.9% Tuesday afternoon, with futures trading at $4.7620 per
pound ($10,476 a tonne) on the Comex market in New York.
“The copper market is tight, inventories are trending lower. There is a risk that prices of the red metal
spike to $13,000,” said Bank of America analyst Michael Widmer.
Bank of America expects a deficit of 186,000 tonnes this year and a shortfall of 369,000 tonnes in
2022, followed by surpluses in the two years after.
China
China’s massive physical purchases of refined copper have been the primary driver of the post-
pandemic price rebound, but the Chinese impetus may be fading.
The country imported 4.4 million tonnes last year, up 1.2 million tonnes from 2019.
The previous copper record was set in 2011, around the peak of the commodities supercycle sparked
by China’s rise to economic heavyweight status — fueled by massive amounts of raw materials. This
time, investors are betting that copper’s vital role in the world’s shift to green energy will mean
surging demand and even higher prices. Copper futures rose as high as $10,440 a ton in London on
Friday.
What’s the big deal about copper?
Through human history, copper has played a critical role in many of civilization’s greatest advances:
from early monetary systems to municipal plumbing, from the rise of trains, planes and cars to the
devices and networks that underpin the information age.
The reddish brown metal is mostly unrivaled as an electrical and thermal conductor, while also being
durable and easy to work with. Today, a vast array of uses in all corners of heavy industry,
construction and manufacturing mean it’s a famously reliable indicator for trends in the global
economy.
The copper market was one of the first to react as the Covid-19 coronavirus emerged in Wuhan, with
prices slumping by more than a quarter between January and March last year. Then as China’s u ..
But it’s not just China driving the rally. While the country accounts for half of the world’s copper
consumption and has played an integral part in copper’s surge, demand there has actually softened
this year. Yet prices continue to drive higher.
But investors have also been piling into copper on a bet that global efforts to cut carbon emissions are
going to mean the world needs a lot more of the metal, putting a strain on supply. New mine
production may be slow to arrive, as mines are hard to find and expensive to develop.
Electric vehicles contain about four times as much copper as a conventional car, and vast amounts of
copper wiring will be needed in roadside chargers to keep them running. Bringing electricity from
offshore wind farms to national power grids is also a copper-intensive exercise.
Governments around the world have announced ambitious infrastructure investment plans, much of
which involves construction, green energy, or both.