Dr. Copper | Fairly Healthy Despite Market Challenges

Nickel has made the headlines recently, due to the machinations of the London Metal Exchange (LME). The price and supply of copper has also been influenced by this event and prevalent crises; the Russian / Ukraine conflict and the impact of COVID-19 on mining operations.

According to the International Copper Study Group (ICSG), global mine production grew by around 2.3% in 2021, compared to its average annual growth over 2019 – 2020 which was only 0.3%. In 2021, the world refined copper balance based on Chinese apparent usage indicated a preliminary deficit about 475,000 tonnes. The world refined copper balance adjusted for changes in Chinese bonded stocks indicated a market deficit of about 668,000 tonnes.

The Russian / Ukraine conflict has put a strain on already tight metal supplies. The London Metal Exchange (LME) does not intend to ban metals from Russian producers from its system, it said last week despite calls from some its members to exclude Russia-based companies. Western countries banned wealthy Russian oligarchs and banks connected to the Putin administration but are reluctant to set restrictions on purchasing Russian metals. Exchange copper stocks are close to a 16-year low.

The London copper market rose sharply to a new all-time high of $10,845 per tonne, in response to the margin crisis that culminated in temporary suspensions of the LME nickel market. As of March 28th, the copper price has settled down to $10,280 per tonne. Although total copper stocks held at the major stocks were down at the LME, by 18%.

In a previous report, we identified copper along lithium and vanadium as a green energy metal of high strategic interest as Western nations struggle to become more energy independent from Russia and avoid a global energy crisis. Add to this the increased demand for copper as a key input for electric vehicles and alternative sources of energy storage (e.g., wind and solar). Goldman Sachs projects green copper demand as a percent of total copper demand will rise form 4% in 2020 to 16% by 2030.

The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Capital 10X hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.

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