In light of surging demand for copper due to increasing requirements for electric vehicles, wind turbines, and power grids as part of the global shift towards decarbonization, copper prices have reached historic heights. The red metal, which serves as a reliable indicator of economic health, has climbed more than 25% this year, hitting a record $5.02 per pound on Wednesday on the New York Mercantile Exchange (NYMEX).
According to analysts at Bank of America, demand for copper from electric vehicles and the transportation sector is projected to increase by approximately 5% in 2024. Furthermore, as the worldwide economy transitions to cleaner energy sources, copper’s importance as a crucial component in the manufacture of wind turbines and power grids will only continue to rise.
Data centers have also played a significant role in driving demand for copper, particularly as the proliferation of artificial intelligence (AI) applications leads to a greater requirement for these facilities. Copper is essential for numerous electrical applications in data centers, including electrical connectors, busbars, and power cables. The International Energy Agency predicts that power consumption from data centers will more than double, rising from 460 terawatt-hours (TWh) in 2022 to over 1000 TWh in 2026.
The International Copper Study Group (ICSG) has revised its forecasts for copper supplies in response to lower-than-expected mine production levels. For 2024, copper production growth projections have been reduced to 0.5% from a previous estimate of 3.7%. This decrease is largely attributed to slower-than-expected ramp-ups in production, delays in commissioning projects, and updated output guidance from major mining companies.
Last year, First Quantum Minerals temporarily shut down operations at the Cobre Panamá, one of the world’s most significant copper mines, following a Supreme Court decision and widespread protests sparked by environmental issues. Anglo American, a significant producer, announced plans to reduce copper output in 2024 and 2025 while attempting to cut expenses. As a consequence, analysts at Citibank anticipate that copper will climb to $10,500 per tonne in the near term as indications of anticipated physical shortages sustain the current surge in pricing. The current 3-month copper contract on the London Metal Exchange (LME) is valued at $10,185.50 per tonne.
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