Source: Global Mining Review 05/01/2022Copper: Consensus view of...

Source: Global Mining Review 05/01/2022

Copper: Consensus view of a surplus market in 2023 is rapidly shifting to one of deficit

Total visible copper stocks are down by 36% YoY – less than a quarter of the average level of 840 000 t at this time of year in the 2015 – 2019 period leading up to the pandemic.

On the supply side, the above-average rate of mine disruptions that gripped the market in 2022 looks set to spill over into 2023 (especially in South and Central America), with numerous pronounced guidance reductions already announced for the coming years by major miners. Moreover, two of the key mine projects set to bolster supply growth next year have slipped significantly behind schedule.

Meanwhile, copper consumption picked up markedly in 2H22 and ERG expects it to continue being supported in 2023, especially in China, by the easing of coronavirus restrictions and roll-out of vast economic stimulus. Visible copper inventories in China already stand critically low at just 101 000 t – down by 51.7% YoY and less than a fifth of the average level of 541 000 t at this time of year in 2015-2019. In the rest of world, copper demand will continue to outperform the broader macroeconomic slowdown, bolstered primarily by rapid demand growth from the green energy sector in Europe (supported by initiatives stemming from the European Green Deal) and in the US (under the American Jobs Plan and the Inflation Reduction Act).

In view of the above dynamics, the market is increasingly shifting away from an outlook of surplus in 2023, to one of deficit. This shift is already well reflected in the annual benchmark premiums for 2023 copper cathode supply, which have risen markedly, indicating a tightening of cathode supply.

Against this tight fundamental backdrop, there is an increasing likelihood of an early Fed pivot, especially as US inflation readings have come in markedly lower than expected for two consecutive months. This should ultimately turbocharge copper prices back towards USD 10 000/t in 2023.