Macquarie upbeat on copper prices in 2024 as global supply dial shifts

Simone GroganThe West Australian

Thu, 18 January 2024 5:46PM

Sandfire Resources’ now decommissioned DeGrussa copper mine. Credit: Sandfire Resources

A projected global copper shortage has led Macquarie analysts to take a more bullish stance on prices for 2024, providing some relief to local producers amid a battery metals price glut.

The global bank this week lifted its price outlook for the red metal by about 3.8 per cent to US$8,125 per tonne after a handful of big copper mines cut their expected output for the coming calendar year.

Among the miners slated to produce less is First Quantum Minerals’ and its Cobre Panama mine which is currently suspended because of an ongoing contract dispute with the South American country’s government.

“The team’s revised supply and demand numbers have shifted the outlook for calendar year 2024 to a far more balanced copper market with CY24 prices lifted by (about) 3.8 per cent to US$8125/t,” the Macquarie note read.

“Previously the team expected copper prices to bottom around $US7600/t in 3QCY24, but now expect prices to bottom at $US8000/t . . . before recovering on strong economic growth ex-China in 2025 and improving global sentiment.”

The upgrade comes as fellow battery metals lithium and nickel prices flounder in the face of questions about supply and demand, and closely-watched electric vehicle uptake.

Macquarie’s moderately more upbeat outlook on prices for the year has in-turn lifted the bank’s earnings per share expectations for the likes of BHP — albeit modestly by 1 per cent — which produces copper from Olympic Dam in South Australia and Escondida in Chile.

The Big Australian on Thursday revealed cost cutting at its Nickel West operations and a potential writedown were likely, the latest bad news for many local producers in Australia.

WA-based copper producer Sandfire has been pencilled in for a 31 per cent earnings lift for FY24. Silver Lake Resources is also expected to book a modest increase of 1 per cent for FY24.

IGO is forecast for a marginal earnings lift of less than one per cent following the revised outlook, with Macquarie noting movements in spodumene, lithium and nickel prices presented “the most material risk to our earnings forecasts for IGO.”

Macquarie also noted that there were no major new copper projects likely to start producing before 2027.

BHP is developing the West Musgrave copper-nickel project but that is not expected to start producing until 2026 and not at the 150ktpa rate Macquarie classes as “sizeable”.

It’s often observed that there are a lack of pure copper play stocks on the Australian Securities Exchange.