Copper Price Forecast 2024 And Beyond: Is Copper A Good Investment In 2024?
As geopolitical tensions have escalated, gold and copper have emerged as significant play in global energy sector. Unlike gold, copper is one of the common metals used in manufacturing all over the world. While copper prices are much lower than precious metals such as gold and silver, investing in the metal can also be lucrative.
After hitting an all-time high of $10,845 per tonne in March 2022, copper prices have fallen steadily over the past two years due to new restrictions imposed in April 2022 in response to the new COVID-19 outbreak.
Sometimes referred to as “Dr. Copper” for its ability to diagnose the health of the global economy, copper is just as essential to modern society as to ancient civilizations — if not more so. Copper has witnessed price rally since the beginning of 2024, up 29% year-to-date. Now, many people are wondering that whether it is a good time to invest in copper in 2024? In this article, we will analyze copper and give a price forecast for this red metal.
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Factors Affecting Copper Price
Is Copper a Good Investment in 2024?
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What is Copper?
Copper is an industrial or a cheap metal. As a result, its price is much lower than precious metals such as gold or silver. In fact, a ton of copper costs less than $10,000. Despite its low price, copper has many uses. The Copper Development Association divides its uses into four categories: electrical, construction, transport and other. By far the largest sector for copper usage is electrical, at 65%, followed by construction at 25%.
Copper is the heartbeat of the global energy economy. Experts believe that demand for copper will rise in the coming years. Meanwhile, the supply situation is expected to tighten. Then, can copper hit new highs as demand rises?
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Factors Affecting Copper Price
There are many factors that would exert a huge influence in copper price. We will list four major factors below:
Copper supply may face demand challenges in 2024, with some mines facing difficulties in resuming production. This includes the prolonged shutdown of the Cobre mine in Panama, which is operated by Toronto-based mining company First Quantum Minerals. At present, the global copper market is tightening. Production challenges, such as stoppages and declining ore grades in major South American producers, are anticipated to limit copper supply growth this year, though rebound is expected in 2025.
Chinese economy
China, acting as both a significant copper supplier and consumer, holds a pivotal position in shaping trends within the critical metal market. However, there are many uncertainties about China’s economic recovery, especially as the crisis in the property sector deepens, China’s economy is likely to remain a headwind for copper prices this year. In its January outlook, the International Monetary Fund predicted that China’s economic growth would slow to 4.6 percent in 2024 and 4.1 percent in 2025.
Fed Rate Cut
Energy and commodity markets are closely watching when the Fed will begin to ease its monetary tightening cycle. Traders have priced in the possibility of a first rate cut in the second half of the year after fading hopes of an early cut starting in March.
Over the past two years, rising interest rates have led to a stronger dollar, which has weighed on industrial metals. A stronger dollar makes goods more expensive for buyers who use local currencies. If the Fed decides to keep rates higher for longer, it is expected a stronger dollar and weaker investor sentiment will appear, which could lead to lower copper prices.
Copper production capacity in China
According to a Reuters report on March 13, China’s top copper smelters agreed to start cutting production at some loss-making plants to cope with raw material shortages. The exact rate or amount of the cuts has yet to be determined. This comes after Chinese producers competed for copper concentrate due to mine disruptions and global copper smelting capacity expansion. Recently, spot processing and refining costs (TC/RC) has dropped to historic lows.
Sucden Financial’s Effanova expects the refined copper market to post a surplus next year as Chinese production continues to expand due to increased smelting and refining capacity.
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2023 Copper Price Analysis
Over 2022, copper slumped by 13.87% as China’s restrictive zero-COVID policy slowed the country’s industrial activity, reducing demand for industrial metals, including copper.
The lifting of COVID-19 restrictions in China, the world’s biggest copper buyer, in late 2022 helped copper prices get off to a strong start in 2023 at over $8,300/ton at the London Metal Exchange.
In mid-January 2023, due to market optimism about the Chinese economy after the reopening of the Chinese border in early January, the price of copper briefly reached $9,430 per ton, the highest price for the year and the highest price since June 2022.
However, over time, China’s recovery remained challenging due to a prolonged property crisis, weak local demand, and high levels of local government debt. Under the backdrop of China’s sluggish economic recovery, central banks, especially the Federal Reserve, maintained a hawkish interest rate hike stance, putting pressure on copper prices.
The S&P Global report said copper production in Chile, the world’s largest producer, fell 2.3 per cent to 5.33 million tonnes in 2023, the lowest level since 2008, due to tougher mining conditions, poor ore grades, water constraints and delays in copper mining.
In 2023, the LME copper price (international copper price) increased by 2.2% annually, and the COMEX copper price in the United States increased by 2% over the same period last year.
According to S&P Global, the property sector accounted for 30.8% of China’s steel consumption in 2023, 30% of the country’s aluminum consumption and 20% of copper consumption.
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Copper Price Prediction 2024 and Beyond
Ole Hansen, head of commodity strategy at Saxo Bank in Denmark, said in a March 15 note that the expected U.S. rate-cutting cycle this year could prompt companies to restock stocks after depleting them last year to lower funding costs. “We maintain our long-term bullish stance on copper, and with copper miners showing signs of recovery, new record highs in the second half of the year seem achievable,” he said.
Fitch Solutions firm BMI, said in its latest copper price forecast released on Feb. 20 that copper is expected to average $8,800 per tonne in 2024, up 3.2 percent from the 2023 forecast of $8,523, as falling LME inventories have the potential to push prices higher.
TD Securities expected copper to trade at $3.65 a pound by the end of 2024, down slightly from $3.67 in the first quarter of 2024.
S&P Global forecasts that copper demand will double, reaching 50 million metric tons by 2035. The most significant demands are expected to emanate from the US, China, Europe, and India.
Bank of America predicts that a combination of supply shortages and growing demand will propel copper prices to surge to $5.44 per pound by 2026, representing an additional 11% rally from the current price.
The International Copper Association (ICA) forecasts that copper demand will increase from 28.3 million metric tons in 2020 to 40.9 million metric tons by 2040, with a compound annual growth rate of 1.85%.
A new report by Australian bank Macquarie titled Panama hold’em suggests the copper corrections will continue and forecasts average prices in the September quarter of $9,800.
Towards the end of 2024 the copper price should go back above $10,000, says the London-based commodities strategist Alice Fox and analysts from Macquarie’s London, Singapore, Shanghai and Delhi desks.
Goldman Sachs said that the proliferation of AI technologies and the buildout of new data centers to support those technologies is expected to drive up copper demand at rates of 6% per annum between now and 2030.
The Australian Government’s Office of Chief Economist (OCE) projected copper to climb to $8,991 in 2026, and continue rising to reach $9,211 in 2029 from estimated $8,340 in 2024, driven by stronger consumption in copper-intensive sectors such as construction, power sector, appliances and EVs.
It should be noted that analysts believe that copper prices are showing an upward trend, but this does not mean that its price will rise in a straight line. Commodity prices are also more volatile than traditional stock prices.
Overall, analysts expect copper prices to ascend this year on the backdrop of an imbalance outlook in supply and demand, the US rate-cutting cycle, clean energy transition and AI boom.
How to Trade Copper?
If you are interested in copper, there are several options for investing copper.
If you think the price of copper is likely to rise in the future, then the easiest option to invest in copper is to buy the metal. Buying physical copper, however, is inconvenient. After all, copper prices will be around $4 a pound by 2023.
However, you can choose to invest in physical copper ETFs (sometimes called an ETP), which allows you to profit from rising copper prices while being safer.
Another option to invest in copper is to buy shares in copper mining companies. They are dedicated to exploring, mining and selling metals, and their production costs do not fluctuate much. As a result, higher copper prices can bring huge profits.
At the same time, a sharp fall in copper prices would lead to a sharp fall in profits. Besides, if prices are low enough, they can fall below the cost of production and cause losses for these mining companies.
As a result, investing in copper companies usually carries more risk than investing directly in metals, but it also brings more profit.
The final option for copper investment is to buy Copper Miners ETFs, which are less risky than buying stocks directly.
If copper prices rise and industry profits soar, investors would benefit a lot. while with diversified portfolio, investors would not to be over-exposed to any single producer and more risks.
Also, thanks to this type of ETF, we don’t have to spend time analyzing different companies in the industry, but are able to invest our time elsewhere.
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Is Copper a Good Investment in 2024?
Overall, copper is an industrial metal that is absolutely crucial to our current lifestyle. Fueled by its critical role in green energy solutions, copper continues to see growing demand. Just like S&P Global said: “Copper prices are anticipated to ascend in the long term as a result of the clean energy transition, notwithstanding prevailing short-term apprehensions.”
We are already seeing that global copper demand is likely to increase in the coming decades. The development of emerging countries and their urbanization, the mass adoption of electric vehicles, the construction of renewable energy infrastructure or the de-urbanization of developed countries will all make great contribution to growing copper demand.
Under a backdrop of constrained supply, extraordinary demand growth is expected to deepen the structural deficit through the end of the decade. Copper presents a compelling opportunity for investors. The Sprott report notes that copper prices and miners are likely to benefit from the growing supply-demand gap. At the same time, since copper is a real asset, investing in copper can significantly increase inflation protection and diversification in asset portfolio.
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