Foreign media news: in the 2020’s, global copper demand will achieve the strongest growth in history
Copper price will rise to US $15000 / T in 2025
According to the Research Report of Huaxing factory, the 1920s will be the decade with the highest growth of global copper demand in history.
Goldman Sachs said the key role copper will play in achieving the Paris climate goals cannot be underestimated. If there is no significant progress in carbon capture and storage technology in the next few years, the realization of net zero emission will only rely on emission reduction, specifically electrification and renewable energy.
As the most cost-effective conductive material, copper is the core of acquiring, storing and transporting these new energy sources. In fact, the discussion of peaking oil demand ignores the fact that renewable energy as an alternative to oil would not have occurred without heavy use of copper and other key metals.
According to Gao Shengyan, promoting global net zero emissions remains the core driving force for the structural bull market of commodity demand, with green metals (especially copper) playing a crucial role. The physical properties of copper are very important to be able to convert these energy sources into useful end states, such as moving vehicles or heating homes.
Goldman Sachs said that based on the carbon economics analysis of electric vehicle, wind energy, solar energy and battery technology by stock analysts, we quantified this demand with a bottom-up model. It is estimated that by 2030, under the basic scenario, the green transformation will lead to an increase of nearly 600% in copper demand to 5.4 million tons,
With the active adoption of green technology, the transformation will lead to a 900% increase in copper demand to 8.7 million tons. Analysts at Goldman Sachs estimate that by the middle of this century, the growth of green demand alone will reach (and soon surpass) the increase in demand brought about by China in the 2000s. Coupled with the ripple effect on non green industries, it means that the 2020’s is expected to become the strongest growth stage in the history of global copper demand.
However, the copper market is not ready for this demand environment.
In addition, poor returns over the past decade, coupled with concerns about environmental and social governance (ESG), have led to a reduction in investment in future supply growth in the copper industry, which has brought the copper market very close to the peak supply. In fact, the copper market is reproducing the classic case of “Revenge of the old economy”, just like the situation of the crude oil market during the commodity boom of the 2000s.
Analysts at Goldman Sachs say that the collapse in prices in the mid-2010’s has led to deep trouble for manufacturers that have increased production prematurely, leading the mining industry to remain cautious about production growth. Although copper prices have risen 80% in the past 12 months, no substantial green space projects have been approved.
COVID-19 makes this supply and demand dynamic more complex and brings more uncertainty, which leads enterprises to freeze investment decisions.
Due to the surge of demand, but the lag of supply growth, the current gap between supply and demand expands, and indicates that there will be a large-scale gap between supply and demand from 2025. Analysts at Goldman Sachs now estimate that the long-term supply gap will reach 8.2 million tons by 2030, which is twice the supply and demand gap that triggered the bull market in the early 21st century.
Goldman Sachs expects the price of copper to rise all the way to $15000 a ton. Analysts at Goldman Sachs believe that from now on, the most likely trend for copper prices is to rise to about $15000 around 2025.
Goldman Sachs now forecasts that the average price of copper will be $9675 / T in 2021, $11875 / T in 2022, $12000 / T in 2023, $14000 / T in 2024 and $15000 / T in 2025. In this context, we have upgraded our 12-month copper price target to US $11000 per ton.