Copper Price Surpasses $10,000... Riding the Supercycle

Photo by Mining.com

[Asia Economy Reporter Yujin Cho] The price of copper, a representative industrial metal, has surpassed $10,000, soaring to its highest level in 10 years. With strong demand continuing due to the post-COVID-19 economic reopening, there are forecasts that it will soon hit an all-time high.

On the 29th (local time), copper prices closed at $10,008 per ton on the London Metal Exchange (LME), reaching the highest level since February 2011 ($10,190). Copper prices have risen nearly 30% this year alone and have more than doubled compared to the March low.

The rise in copper prices is attributed to the recovery of the real economy and expectations for U.S. infrastructure investment. Bloomberg reported that the U.S. infrastructure plan, low interest rates, and the economic reopening after COVID-19 are driving the upward trend in copper prices.

The Biden administration plans to invest $2.25 trillion over the next eight years in traditional infrastructure such as roads, ports, and bridges, as well as in building ultra-high-speed internet networks, housing supply, and promoting electric vehicles.

Considering that copper is included in most of the infrastructure projects promoted by the Biden administration, if this investment plan materializes, the upward trend in copper prices is expected to accelerate further.

Earlier, Barron's noted that "half of global copper demand comes from building and infrastructure construction," and predicted that among non-ferrous metals, copper would be the biggest beneficiary of the U.S. stimulus plan (infrastructure investment) and the economic reopening after COVID-19.

Source: Bloomberg

The transition to a low-carbon economy is also fueling the rise in copper prices. Major countries worldwide are competing to advance green technologies such as batteries, electric vehicles, solar panels, and wind turbines in response to the COVID-19 shock, which is driving global demand. Glencore forecasted that global demand for copper will more than double over the next 30 years.

Copper is considered the most efficient material for storing and transporting renewable energy due to its excellent electrical conductivity. Goldman Sachs described copper as "the new oil of the decarbonization era," stating, "There is no decarbonization without copper."

Calamos Investments expects that in the global push for 'carbon zero,' copper consumption will increase about fivefold for renewable energy transitions and about fourfold for the shift from internal combustion engine vehicles to electric vehicles.

Supply is insufficient compared to this surge in demand. Nick Niziolok, Chief Investment Officer (CIO) at Calamos Investments, said, "Copper supply has only increased by 1% over the past three years," adding, "Since mine development takes several years, expanding supply to keep up with growing global demand will be difficult for the time being."

With the surge in demand and supply constraints overlapping, breaking the all-time high is imminent. Tai Wang, head of metals derivatives trading at BMO Capital, predicted, "Copper prices will soon surpass the 2011 peak." Wenyu Yao, senior commodity strategist at NG Bank, also said, "With large-scale stimulus and rapid vaccine rollout combined, the outlook for the U.S. economy is bright," adding, "The copper rally will continue for some time."

There are also prospects for copper entering a long-term boom (supercycle). Forbes stated, "The paradigm shift to green infrastructure and electric vehicles, along with environmental, social, and governance (ESG) investment trends, are major drivers of copper demand," and predicted, "Copper prices will maintain a long-term bullish trend over the next decade."

This content was produced with the assistance of AI translation services.