Trafigura: EVs, AI And Clean Energy to Massively Boost Copper Demand

The electric vehicle, Artificial Intelligence (AI), power infrastructure and automation boom will drive at least 10 million metric tons of additional copper demand by 2035, Swiss multinational commodity trading company Trafigura has predicted. According to Graeme Train, Trafigura’s head of metals analysis, one third of the 10 million tons of new demand will come from the electric vehicle sector, "A third is electricity generation, transmission and distribution, and the rest is for things like automation, manufacturing capex and cooling systems within data centers," he said.

A couple of weeks ago, Saad Rahim, Trafigura’s chief economist, projected that AI alone has the potential to add one million tonnes per annum of copper demand by 2030,

“If you look at the demand that is coming from data centers and related to that from AI, that growth has suddenly exploded,” said Rahim. ‘‘That one million tonnes is on top of what we have as 4-5 million tonne deficit gap by 2030 anyway. That’s not something that anyone has actually factored into a lot of these supply and demand balances.” the analyst added.

Copper futures have rallied close to a five-year high at $4.46 per pound ($9,812/t) , and Wall Street is growing increasingly bullish. Citi has predicted that the metal has entered its second secular bull market this century, "driven by booming decarbonization related demand growth, ‘’ adding that "only higher prices will solve these deficits." 

Citi notes that the last copper mega-bull market was in the 2000s when prices increased 5x in three years during copper's bull market of the 2000s, driven by rapid urbanization and industrialization in China. Citi has advised corporate consumers to hedge their copper exposures because there is potential for "explosive price upside" again over the next three years.

Citi says copper prices could hit $10,500/t over the next three months, raising its Q2 and Q3 price average to $10k/t  versus $9.5k/t previously estimated. Copper reached Citi's $9,741/t target on Thursday. Citi's new near-term bull case has copper prices skyrocketing to $12k/t over that time frame, with LME and SHFE copper stocks falling sharply over the next three months.

Meanwhile, Bank of America metals strategists say the copper supply crisis is already here, thanks to the "lack of mine projects becoming an increasing issue for copper. This, along with investment in green technologies and a rebound of the global economy, should lift prices to US$10,250/ton by Q4,’’ 8% higher than their previous view.

Copper supplies are coming under pressure as Chinese smelters approach their regulatory approval to cut output, with supply shortage resulting from disruptions in key mines across major producing regions. Rising U.S. PMIs and supply disruptions, due to drought in Zambia, are also bullish for near-term prices. Adding to the supply disruption, the U.S. and the UK have prohibited metal-trading exchanges from accepting new aluminum, copper and nickel produced by Russia, a move likely to further increase price volatility and supply uncertainty. Russia is a major metals producer, while China is the world's largest producer and consumer of copper.

Copper Stocks Rally

Unlike their lithium peers, copper mining stocks are handily outperforming the market, with Global X Copper Miners ETF (NYSEARCA:COPX) having returned 19.2% compared to 14.4% by the Energy Select Sector SPDR Fund (NYSEARCA:XLE) and 6.3% by the S&P 500 in the year-to-date.

On Tuesday, Phoenix, Arizona-based Freeport-McMoRan Inc. (NYSE:FCX) reported Q1 2024 Non-GAAP EPS of $0.32, $0.04 above the Wall Street consensus while revenue of $6.32B (+17.3% Y/Y) beat by $620M. The company’s consolidated production during the quarter totaled 1.1 billion pounds of copper, 549 thousand ounces of gold and 18 million pounds of molybdenum while average realized prices were $3.94 per pound for copper, $2,145 per ounce for gold and $20.38 per pound for molybdenum. For the second quarter, the company expects to report sales of 1.0 billion pounds of copper, 500 thousand ounces of gold and 21 million pounds of molybdenum, and expects to post consolidated sales of ~4.15 billion pounds of copper, 2.0 million ounces of gold and 84 million pounds of molybdenum for the full year 2024. FCX shares are up 22.4% over the past 12 months.

Shares of Canadian-based First Quantum Minerals Ltd (OTCPK:FQVLF) are on the mend, rallying nearly 40% in the year-to-date as mining giants Rio Tinto (NYSE:RIO), Saudi Arabia's Manara Minerals Investment Co., and scores of Japanese trading houses consider a stake in First Quantum Minerals' Zambia copper mines.

According to Bloomberg, First Quantum is looking to sell a minority stake in its Sentinel and Kansanshi mines in Zambia after it was forced to close its flagship copper mine in Panama last year. The Zambia assets could also attract interest from Chinese miners including Zijin Mining (OTCPK:ZIJMF) (OTCPK:ZIJMY) and Jiangxi Copper (OTCPK:JIAXF), First Quantum's second-largest shareholder. Last year, Zambia accounted for roughly half of First Quantum's copper production and revenue, and also delivered more than $450M in operating profit.

By Alex Kimani for Oilprice.com

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Matt Earle

Matthew Earle is the Founder of MiningFeeds. In 2005, Matt founded MiningNerds.com to provide data and information to the mining investment community. This site was merged with Highgrade Review to form MiningFeeds. Matt has a B.Sc. degree with a minor in geology from the University of Toronto.

By Matt Earle

Matthew Earle is the Founder of MiningFeeds. In 2005, Matt founded MiningNerds.com to provide data and information to the mining investment community. This site was merged with Highgrade Review to form MiningFeeds. Matt has a B.Sc. degree with a minor in geology from the University of Toronto.

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