“Capital discipline” is an industry slogan. And mining firms, burned by the commodities bust of the early 2010s, have focused more on paying out dividends than on investing in new supply. It takes two to three years to expand output at an existing copper mine and a decade or more to develop a new one. In the oil market, shale production can ramp up if prices warrant it.īut copper supply is far less flexible. The response in agricultural products is simply to grow more crops.
And high commodity prices are often their own nemesis.
Without a boom in China, there cannot be a supercycle. Policymakers in China, the world’s largest consumer of raw materials, are already putting the brakes on. Goldman reckons that will reach 5.4m tonnes by 2030.įor some people, the case for another commodity supercycle has more holes in it than Swiss cheese. At present, annual “green” demand for copper is 1m tonnes, or just 3% of supply. Copper goes into the cabling for EV charging stations, and into solar panels and wind turbines. It takes four or five times as much copper to build an electric vehicle as a petrol-fuelled one. As a pliable, cost-effective conductor of heat and electricity, copper is a vital input to green tech. The spur to rapid demand growth will come, not from China, whose urbanisation lay behind the supercycle of the first decade of this century, but from the greening of richer countries. A recent note from Goldman Sachs, a bank, predicts that prices will rise to $15,000 per tonne by 2025, from $10,000 today, as the red metal undergoes a new supercycle, a longish period in which demand outstrips supply. Some analysts believe that the current copper shortage will prove to be a structural feature. A market in steep contango signifies a short-term glut. The opposite condition, in which futures prices are above spot, is “contango”. It is a telltale sign of physical shortages. So backwardation is a prompt for stocks to be run down to meet immediate demand. In a backwardated market, the marginal benefit of adding to copper stocks is low. In theory stock levels should respond to the spread between cash and future prices. The market for copper and other commodities, including oil, is currently in “backwardation”, a state in which futures prices are below cash prices (see chart). Here Dr Copper may offer some uncomfortable lessons.Ĭommodity prices are subject to wild swings, reflecting periodic gluts and shortages. A bigger question-mark hangs over the supply response. Plans for fiscal stimulus in America and Europe lean heavily towards greening the economy, which in turn favours copper demand. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.įusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.Amid excitement about a new commodity “supercycle”, copper has one of the stronger bull cases. It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes.
#COPPER PRICES TODAY PROFESSIONAL#
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