(Bloomberg) — BHP Group Ltd. offered a cautious near-term outlook for copper, while sticking to the widely-held view that the energy transition metal is eventually headed for severe shortages and much higher prices.

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The world’s second-biggest copper supplier cut its forecast for Chinese demand this year, and warned of a modest global surplus through the end of 2025, in an overview of commodities markets released with its full-year earnings. But it predicted a “fly-up pricing regime” later this decade, driven by a prolonged worldwide deficit.

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Copper jumped as much as 1.8% on the London Metal Exchange on Tuesday, to the highest since July 18.

BHP’s commentary reflects softening expectations across metals markets as China grapples with slowing economic growth and a protracted property crisis. Copper prices surged to a record in May before retreating as the Chinese demand outlook deteriorated. Consumption there will grow 1% to 2% this year, down from 6% in 2023, BHP said.

“This is a downgrade to our prior expectations, which reflects the ongoing shift in the Chinese real estate market,” the miner said in the overview. There’s likely to be more volatility across commodity markets over the next 18 months, it said.

BHP reiterated its view that, over the longer term, global copper supply will struggle to match a looming wave of demand from renewable energy, data centers and a vast expansion in power grids. The metal has been the subject of eye-watering price forecasts because there are few major new mines in the pipeline.

“With the deficit conditions we anticipate in the final third of the 2020s, it’s possible that we enter into a ‘fly-up’ pricing regime, whereby prices disconnect from the cost curve due to systematic excess of demand over supply amid inadequate inventory levels.”

–With assistance from Mark Burton.

(Updates copper price in third paragraph.)

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