Despite a 20% year-to-date decline, copper prices remain challenging in the short term.
Rio Tinto, the world's second-largest mining company, said copper prices remained under downward pressure and the short-term outlook for copper demand was affected by supply chain obstacles and high inflation.
Rio Tinto Chief Executive Jakob Stausholm said in a media interview on Tuesday that copper still faces supply and demand challenges in the short term, despite a 20% year-to-date decline:
I don't know where the world economy is going. As it emerges from the pandemic, there are still a lot of supply chain bottlenecks throughout the system and inflation is at levels not seen in 30 or 40 years.
Still, Stausholm's long-term outlook for copper remains positive. It believes the global energy transition will catalyze copper market demand. There is also potential for demand growth in China, the world's largest consumer of metals, unlike the West, which suffers from high inflation.
Copper prices have fallen 20% this year amid Europe's energy crisis and high inflationary pressures. The overall price has been hovering around $7,700 / ton recently.
Fitch Solutions, the research house, had slashed its copper price forecast to $8,400 a tonne next year from $9,580. It sees a small oversupply in the copper market this year. But the supply gap will grow from 2023 onwards. The improvement in copper supply, driven by the energy transition, will not keep pace with rising demand. The overall copper market is expected to show a long-term structural gap, with copper prices expected to return to $10,000 / ton by 2027 and reach $11,500 / ton by 2031.
Goldman Sachs, the standard-bearer for commodities, is also bullish on copper's long-term price outlook.
Goldman Sachs said in a previous report that green demand and power grid construction will increasingly help copper demand recover. Regardless of recent fundamental trends, copper does have a clear structural bull market, with projections of peak copper supply in 2024 and consecutive record copper shortages starting in 2025. International copper prices are expected to exceed $14,000 by then.
