Driven by new energy, will copper be in short supply?

Copper prices, which had been dormant for a long time, became active again. According to the commodity market analysis system, on March 14, 2024, copper prices rose by 4.08% in a single day, breaking through the 70,000 yuan mark and reporting at 71,881.67 yuan/ton, setting a new high since June 14, 2022. The performance has remained strong since then.

So, will the center of gravity of copper prices continue to shift upward in 2024?

There are three reasons behind this surge in copper prices.

New energy stimulation.

Data from the International Copper Research Group shows that global copper consumption will increase by 4.6% year-on-year in 2023, while China’s copper consumption will be 16.1 million tons, accounting for 59% of the world, a year-on-year increase of 9.8%, among them, the new energy industry has driven significant growth in copper demand, increasing. The rate is as high as 52%, accounting for 19% of China’s copper consumption.

In 2024, the drive for new energy will continue, especially cars becoming the focus of trade-in, which is expected to release more consumption potential, thereby indirectly driving copper consumption.

Public information shows that in terms of copper demand, the copper consumption of new energy vehicles is much higher than that of traditional vehicles: the copper consumption of hybrid batteries is 60kg/vehicle, and pure electric vehicles is 83kg/vehicle. The copper consumption of electric buses is 224-369kg/vehicle.

Copper stocks fell.

Copper prices are closely related to inventories. As of March 14, 2024, the London Metal Exchange’s copper inventories were 108,050 tons, a decrease of 34.79% from 165,700 tons at the beginning of the year.

The reduction in inventories has become an important factor in pushing up copper prices.

A general manager said: “Where is the demand for copper? The variable of demand mainly depends on the margin brought by the United States. The supply of copper has always been quite tight. In addition, from the perspective of processing fees, it is also a cash loss. The state of cost, so the upward trend of processing fees may be greater than the downward trend. Generally speaking, I think that the current copper price is in a state of being able to advance and retreat.”

Production cuts are expected.

In fact, copper processing losses have become the norm. The current processing fee is US$15.29/ton, while it will be US$94/ton in September 2023. The difference is visible.


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