RE:Copper demand from auto industry expected to doubleYes auto industry & infrastructure buildout are the demand side metrics that will be a factor in driving copper prices however I thought these remarks were quite interesting from the perspective of the world's second largest miner BHP, also note the date, check the accuracy of what they predicted back on Aug 24/2020 with copper price trends from that period to present.
Four dollar copper will become the new three dollar floor and it's not just demand that will drive it, many permanent issues on the supply side will insure higher copper prices just as a future operational requirement. Grade declines and resource depletion will effect copper prices. Australian-UK resources group BHP estimates that declining grades will remove around 2mn t/yr of global copper mine supply by 2030, with resource depletion potentially removing an additional 1.5mn-2.25mn t/yr by that time.
"Our view is that the price setting marginal tonne [of primary copper] a decade hence will come from either a lower-grade brownfield expansion in a lower-risk jurisdiction, or a higher-grade greenfield in a higher-risk jurisdiction. Neither source of metal is likely to come cheaply," it said.
Grade decline, resource depletion, increased input costs, water constraints and a scarcity of high-quality development opportunities are likely to result in the higher prices needed to attract sufficient investment to balance the market, according to BHP, which produced 1.72mn t of copper in the July 2019-June 2020 fiscal year and has issued guidance of 1.48mn-1.64mn t for 2020-21.
Subject to caveats on precise timing, BHP thinks that a structural copper deficit is expected to open up in the mid- to late 2020s, which may see some sustained upside for prices.
The London Metal Exchange (LME) three-month copper has recovered strongly to around $6,500/t in late August from $4,600/t in late March, driven partly by Covid-19 disruptions in Chile and Peru, the world's two largest copper exporters.
In the medium term, the expected arrival of new supply from Peru, Chile, central Africa and Mongolia in 2021-24 could temporarily tilt the market into a modest surplus in one or more of those years.
Longer-term demand for copper from traditional consumers is expected to be "solid", while broad exposure to the electrification mega-trend will also provide an "attractive upside".
By Angus Macmillan
Published date: 24 August 2020
https://www.argusmedia.com/en/news/2134947-grade-declines-resource-depletion-to-impact-cu-bhp