TELF AG analyzes the recent performance of copper in the global commodity market
A possible surplus
Over the next two years, the world copper market could be faced with a noteworthy surplus in supply. This was revealed by a recent study by the International Copper Study Group, which also underlined the growth in production rates in some specific countries of the world, such as China.
For the moment, 2023 has been characterized by a certain degree of balance between supply and demand in the broad copper market, but the situation could be destined to change very quickly. In fact, the report predicts that in 2024, copper production could exceed the use of as many as 467 thousand tons, a figure much higher than what was estimated just a few months ago. The possible demand surplus for 2024 could be linked to two important factors: moderately weak levels of Western demand and the increasing strength of Chinese production.
The decline in copper use in European countries and North America could generate a 1% contraction in copper demand outside China, an estimate that – especially after the low levels of growth recorded in 2022, equal to just 0.4% – would seem to have already alarmed several analysts. In China, on the other hand, a generalized increase in copper production is expected, which could reach the 4.3% mark.
A recent Goldman Sachs report also focused on the growing Chinese interest in copper, underlining how the global ecological transition is playing an important role in this Chinese enthusiasm for this raw material. Chinese demand for copper has, in fact, increased by 8% year on year in recent times, and in some specific sectors – such as that linked to renewable energy – the increases in demand have reached very high percentages, reaching almost 130% (even at due to the parallel increase in demand for solar energy). The trend is also confirmed by the data released by Shanghai Metal Market, according to which, in the first eight months of 2023, the production of Chinese foundries increased by 11.5% compared to the previous year, effectively demonstrating China’s interest in this specific raw material.
The growth in Chinese demand for copper could, therefore, be favored by its close link with renewable energy and the creation of new electric vehicles but also by the role played by the high-interest rates that are affecting manufacturing in Europe and the United States. Alongside a clear surplus in the global supply of copper, expected for next year, it is estimated that the global level of refined copper production could grow by 4.6%, an increase that would have already begun to appear this year, too. Also, in this case, the increase in global production is largely due to China, which is always committed to developing and improving its raw material refining capabilities. Outside of China, global copper production in 2024 could be held back by smelter maintenance disruptions in Sweden, Chile, and the United States, but also by operational constraints that appear very difficult to unravel.
