The copper price is going through the roof. On February 22, it rose to an interim level of USD 8,806 per ton, which is 400 euros more than on Monday a week ago. The price of the red metal has thus reached a level not seen for eight years. But this is not the end. Analysts at the U.S. investment bank Morgan Stanley still see plenty of room for copper to rise.
They expect the industrial metal to become even more expensive in the course of this year, especially in the second quarter. What's more, they even expect a supercycle, i.e. a prolonged phase of significantly rising prices, such as was last seen in the 2,000s. According to Morgan Stanley, this development should also give copper-oriented shares a considerable boost. For example, they believe it is possible that the shares of the Glencore group of companies will rise by around 67 percent. Glencore is the world's largest commodity trading company.
Slump after first lockdown
Copper is considered an economic barometer. If the price of this raw material, which also plays an important role in the construction sector in particular, rises, this suggests a flourishing global economy. But this time there seems to be an exception to this rule. Although in many countries, especially in the western industrialized nations, the corona pandemic is still slowing down the economy, this industrial metal is booming like it hasn't for years. As a reminder, it was only last year that the price of copper collapsed at the start of the first lockdown in March, falling to a four-year low of USD 4,600 per ton. But by the end of 2020, it had already climbed to USD 7,000 per ton.
Vaccinations, the silver lining
The rapid growth in demand for copper is likely to be driven by optimism that the more people who are vaccinated, the faster the global economy will recover, experts say. Another reason for the rising price is that the main consumer of copper, China, overcame the Corona crisis unexpectedly quickly. The economy of the People's Republic is already running smoothly again, and the demand for raw materials, including copper, is high.
But it is not only in China that the signs are pointing to growth. The economy is also picking up again in the USA and in various emerging countries, such as India. The role of climate change should not be underestimated. In order to drastically reduce emissions of the harmful greenhouse gas carbon dioxide (CO2), the global economy intends to rely increasingly on new environmentally friendly technologies. However, these do not come without copper. One example: an electric car requires about three times as much copper as a conventional car with an internal combustion engine.
Almost empty warehouses
This insatiable appetite for copper is matched by a shortage of supply, another reason for the stormy development of the copper price. Many mine operators cut back their production during the first wave of the pandemic. As a result, warehouses are emptying due to rising demand. Even before COVID19 in times of low copper prices, mining companies had hardly invested in the development of new mines. According to experts, however, rising copper prices could prompt companies to expand their production capacities and open up new mining areas.
While copper producers are likely to benefit first and foremost, copper exploration companies should then follow suit. In part, this has already happened, for example, Element 29 Resources (WKN A2QKKG), which is monitored by GOLDINVEST.de, moved up significantly and also Searchlight Resources (WKN A2JRPS), which we just introduced, is already on the upswing. We will definitely keep a close eye on the sector.
Source: https://goldinvest.de/mining/239-element-29-resources-inc/4423-kupferpreis-steigt-rasant