Analysts see short-term strength, long-term ‘generational shift’ in copper prices
Sheets of copper cathode are pictured at BHP Billiton’s Escondida, the world’s biggest copper mine, in Antofagasta, northern Chile March 31, 2008.
Ivan Alvarado | Reuters
Along with experiencing a short-term supply shortage, copper is set to undergo a “generational shift” in demand as decarbonization ramps up, according to BNY Mellon Lead Portfolio Manager Al Chu.
Copper is a leading barometer of global economic health due to its wide-ranging usage, including in electrical equipment and industrial machinery — it had a strong start to the year, given a weakening dollar and investor expectations to see a surge in demand after the reopening of the Chinese economy.
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Short-term supply issues have also emerged alongside a rebound in demand, such as an eruption of protests in Peru, which accounts for 10% of the world’s copper supply.
Copper futures for March delivery settled at $4.1055 per pound on Thursday, after tailing off in recent weeks from the January rally.
Copper prices enjoyed a strong start to 2023 on hopes of resurgent Chinese demand as the economy reopened, but economic uncertainty has since returned.
Although he noted that a Chinese economic reopening and resurgent demand while copper inventories are near cyclical lows would likely lead to a short-term price surge, Chu suggested that the most interesting aspect of the copper outlook is a “secular change” in long-term demand:
“Copper typically is used as a construction metal for wiring for building, wiring for machinery and what not, but if we look at the decarbonization net zero energy transition trend, copper is the new oil,” Chu, who manages the BNY Mellon Natural Resources fund, told CNBC.
“Is it solar power, is it wind, is it EVs, is it any form of renewable energy? Every renewable energy pretty much needs copper, because if you’re talking about electrifying something and transmitting electricity, you need copper.”
Beyond the quantities of copper that are likely to be required to achieve net-zero goals, Chu also highlighted a decline in the grade of the metal over the last 20 years, as well as the length of time it takes to get major mining projects online.
“A lot of these reserves and deposits are found in very, very hard places to produce – Congo, Inner Mongolia – these are not in very developed regions where you say ‘oh it’s really easy, let’s build a mega-mine’,” he said.
“When you look at the long-term secular story, you can just see strong demand. A lot of people focus on lithium as the kind of energy transition metal, but I think we should be much more focused on copper, because I think that is the real pinch point, the real choke point for the energy transition story.”
Citing the old economic adage of “the best cure for high prices is high prices,” Chu said there will always be short-term cyclical volatility, but that the price of copper will likely keep rising until it incentivises much larger exploration cycles or a ramp-up of secondary markets and copper recycling.
“But there’s only so much those markets can do because the incremental demand from renewables isn’t a small bump up in demand, it’s almost a multiyear tsunami of demand coming through that we’re not thinking about, so it’s going to be all hands on deck but absolutely, the price has to go up,” Chu said.
‘Enormous political capital’
Chu’s comments were partly echoed in a Tuesday note from Saxo Bank Head of Commodity Strategy Ole Hansen, who said industrial metals such as copper, aluminum and lithium would undoubtedly benefit from the “enormous political capital” being invested in achieving the “green transformation.”
“In addition, the new geopolitical environment will mean a massive boost for the European defence industry which should see double-digit growth rates close to 20 percent per year over the next economic cycle as the European continent doubles its military spending in percentage of GDP,” Hansen said.
Speculation has also abounded that Beijing — as the world’s top consumer — will ramp up its fiscal support to the economy on a scale similar to that seen in 2003 after its entry to the WTO, in 2009 after the global financial crisis, and following the 2016 currency devaluation.
Hansen suggested that the strong start to the year was primarily driven by “technical and speculative traders frontrunning an expected pickup in demand from China in the coming months.”
“Once the initial rally is over, the hard work begins to support those gains, with an underlying rise in physical demand needed to sustain the rally, not least considering the prospect of increased supply in 2023 as several projects go live,” he said.
“Overall we see copper settle into a USD3.75 to USD4.75 range during the coming months before eventually breaking higher to reach a new record sometime during the second half.”
Copper stocks carrying ‘scarcity value’
After benefiting from the climb in copper prices in January, valuations of copper mining stocks appear “stretched,” according to Morgan Stanley.
The Wall Street giant believes sentiment and supply risks could carry the sector higher in the short term, suggesting a “scarcity value” is driving capital towards miners.
“With global equity capital chasing a shrinking investable copper universe, investors appear willing to overlook operational disappointments,” Morgan Stanley metals and mining analysts said in a research note outlining the sector’s “scarcity value.”
“Outlook updates have been negative across the board as 1) unit costs came in 12% higher on average and up 7% y/y; 2) capex was 8% above expectations; and 3) volume guidance missed by 4%. As investors pursue copper exposure, we note rising valuation premiums.”
Although reluctant to call the peak just yet, as supply risks in Peru and elsewhere keep the market tight and push exposed equities higher in the near term, Morgan Stanley only sees aggregate upside of 6% to 12% using spot/bull price projections.
Wind energy powered 20% of all electricity consumed in Europe (19% in the EU) in 2024, and the EU has set a goal to grow this share to 34% by 2030 and more than 50% by 2050.
To stay on track, the EU needs to install 30 GW of new wind farms annually, but it only managed 13 GW in 2024 – 11.4 GW onshore and 1.4 GW offshore. This is what’s holding the EU back from achieving its wind growth goals.
Three big problems holding Europe’s wind power back
Europe’s wind power growth is stalling for three key reasons:
Permitting delays. Many governments haven’t implemented the EU’s new permitting rules, making it harder for projects to move forward.
Grid connection bottlenecks. Over 500 GW(!) of potential wind capacity is stuck in grid connection queues.
Slow electrification. Europe’s economy isn’t electrifying fast enough to drive demand for more renewable energy.
Brussels-based trade association WindEurope CEO Giles Dickson summed it up: “The EU must urgently tackle all three problems. More wind means cheaper power, which means increased competitiveness.”
Permitting: Germany sets the standard
Permitting remains a massive roadblock, despite new EU rules aimed at streamlining the process. In fact, the situation worsened in 2024 in many countries. The bright spot? Germany. By embracing the EU’s permitting rules — with measures like binding deadlines and treating wind energy as a public interest priority — Germany approved a record 15 GW of new onshore wind in 2024. That’s seven times more than five years ago.
If other governments follow Germany’s lead, Europe could unlock the full potential of wind energy and bolster energy security.
Grid connections: a growing crisis
Access to the electricity grid is now the biggest obstacle to deploying wind energy. And it’s not just about long queues — Europe’s grid infrastructure isn’t expanding fast enough to keep up with demand. A glaring example is Germany’s 900-megawatt (MW) Borkum Riffgrund 3 offshore wind farm. The turbines are ready to go, but the grid connection won’t be in place until 2026.
This issue isn’t isolated. Governments need to accelerate grid expansion if they’re serious about meeting renewable energy targets.
Electrification: falling behind
Wind energy’s growth is also tied to how quickly Europe electrifies its economy. Right now, electricity accounts for just 23% of the EU’s total energy consumption. That needs to jump to 61% by 2050 to align with climate goals. However, electrification efforts in key sectors like transportation, heating, and industry are moving too slowly.
European Commission president Ursula von der Leyen has tasked Energy Commissioner Dan Jørgensen with crafting an Electrification Action Plan. That can’t come soon enough.
More wind farms awarded, but challenges persist
On a positive note, governments across Europe awarded a record 37 GW of new wind capacity (29 GW in the EU) in 2024. But without faster permitting, better grid connections, and increased electrification, these awards won’t translate into the clean energy-producing wind farms Europe desperately needs.
Investments and corporate interest
Investments in wind energy totaled €31 billion in 2024, financing 19 GW of new capacity. While onshore wind investments remained strong at €24 billion, offshore wind funding saw a dip. Final investment decisions for offshore projects remain challenging due to slow permitting and grid delays.
Corporate consumers continue to show strong interest in wind energy. Half of all electricity contracted under Power Purchase Agreements (PPAs) in 2024 was wind. Dedicated wind PPAs were 4 GW out of a total of 12 GW of renewable PPAs.
Read more: Renewables could meet almost half of global electricity demand by 2030 – IEA
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In the Electrek Podcast, we discuss the most popular news in the world of sustainable transport and energy. In this week’s episode, we discuss the official unveiling of the new Tesla Model Y, Mazda 6e, Aptera solar car production-intent, and more.
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The Chinese EV leader is launching a new flagship electric sedan. BYD’s new Han L EV leaked in China on Friday, revealing a potential Tesla Model S Plaid challenger.
What we know about the BYD Han L EV so far
We knew it was coming soon after BYD teased the Han L on social media a few days ago. Now, we are learning more about what to expect.
BYD’s new electric sedan appeared in China’s latest Ministry of Industry and Information Tech (MIIT) filing, a catalog of new vehicles that will soon be sold.
The filing revealed four versions, including two EV and two PHEV models. The Han L EV will be available in single- and dual-motor configurations. With a peak power of 580 kW (777 hp), the single-motor model packs more power than expected.
BYD’s dual-motor Han L gains an additional 230 kW (308 hp) front-mounted motor. As CnEVPost pointed out, the vehicle’s back has a “2.7S” badge, which suggests a 0 to 100 km/h (0 to 62 mph) sprint time of just 2.7 seconds.
To put that into perspective, the Tesla Model S Plaid can accelerate from 0 to 100 km in 2.1 seconds. In China, the Model S Plaid starts at RBM 814,900, or over $110,000. Speaking of Tesla, the EV leader just unveiled its highly anticipated Model Y “Juniper” refresh in China on Thursday. It starts at RMB 263,500 ($36,000).
BYD already sells the Han EV in China, starting at around RMB 200,000. However, the single front motor, with a peak power of 180 kW, is much less potent than the “L” model. The Han EV can accelerate from 0 to 100 km/h in 7.9 seconds.
At 5,050 mm long, 1,960 mm wide, and 1,505 mm tall with a wheelbase of 2,970 mm, BYD’s new Han L is roughly the size of the Model Y (4,970 mm long, 1,964 mm wide, 1,445 mm tall, wheelbase of 2,960 mm).
Other than that it will use a lithium iron phosphate (LFP) pack from BYD’s FinDreams unit, no other battery specs were revealed. Check back soon for the full rundown.
Source: CnEVPost, China MIIT
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