The recent rally in copper price has been driven by potential supply deficit in coming years. Stimulus measures rolled by major economies, such as the US, the UK and China, have put strong focus on green energy. Developments of which are expected to significantly raise demand for copper. Meanwhile, issues in major copper producers, especially Chile and Peru, have intensified the supply outlook, propelling copper price higher.
Use of copper would be critical for a shift of the world economy toward net zero emissions. Goldman Sach’s in its April report projected that demand for copper in wind, solar, EV and battery technology would be six-fold to 5.4M tones by 2030. However, it takes time to for supply to catch up. Normally, 2-3 years are needed to extend an existing mine while about 8 years are needed for development of a new greenfield project. Bank of America forecast that current supply would only be able to cover 3.3 weeks of demand. It also projected that copper deficit would worsen to 185K tonnes this year and then to 369K tonnes by next year, before returning to a surplus in 2023. Similarly, Goldman Sachs projected copper deficit in both 2021 and 2022. Yet, it has warned that a mega deficit would come from 2025 onward as major economies accelerate their green energy projects.