The price of copper is falling, which is amazing at a time when the demand for raw materials is only increasing. After the reopening of the Chinese economy, the copper price reached a record high at the beginning of this year. But the most recent figures on the Chinese economy are somewhat disappointing, causing the price of copper to fall.
Calm before the storm, says Benjamin Sprecher, industrial ecologist at TU Delft. ‘Everyone expects the demand for copper and with it the price of copper to rise enormously in the next five to ten years. It is striking that the price is now falling.’ Due to the energy transition, enormous electrification will take place, which will increase the demand for copper enormously, says Sprecher.
Canary
Copper is seen by traders as the proverbial canary in the coal mine. It has a signal function. ‘Like iron, copper is one of the fundamental metals used in the economy. Everything that requires electricity requires copper. This makes the demand for copper a good indicator of how much economic growth there is in general. The fact that the price is now falling shows that the market is focused on the short term.’ That almost looks like “market failure,” says Sprecher.
Acquisitions
However, mining companies seem aware of the future with high copper demand, says Sprecher. For example, the Swiss company Glencore wants to take over a major competitor from Canada. This will make the company responsible for a large part of global copper production. ‘But apparently it is not possible to use those long-term expectations to make investments in copper mining. After all, they are left behind.’
shortages
Chile and Peru in particular are seen as the largest suppliers of copper. However, it is expected that Chile will bring up the same amount of copper this year as in 2020. This will only increase the chance of a shortage of copper. ‘New copper mines are risky and technically complex,’ says Sprecher.
‘With the low spot prices, the market does not dare to make investments, and that leads to shortages.’ According to Sprecher, governments should be able to issue guarantees to these types of companies to ensure that the risks are reduced. “They should make policies that increase demand.”
