The Covid-19 pandemic has hit global copper demand hard—down by 3%-4% this year by most expectations—but that’s not looking like a long term problem for copper miners.
The analysts are seeing booming Chinese demand as they quickly return to economic health, pandemic hit disruptions from South America, the U.S. and Africa, and low inventory levels are reasons for a more upbeat outlook.
Recent media reports has said China is “panic buying” copper as warehouse levels fall. It reflects a robust bounce back with China’s share of world exports at nearly 20%—up from 13.1% last year—as demand for home tech & electronics soars during pandemic lockdowns.
There’s also reports that mine disruptions could cut 750,000 to 1M tonnes in 2020, “with eight out of the 10 largest miners recording lower output during the first half of the year”.
Nothing quite makes sense these days of course, but the rally was probably to be expected.
The see-saw of supply and demand that drives copper performance has been in constant flux for a few years, with no-one quite knowing where its going. But overall the market has generally been confident that demand will outpace supply in the medium to long term.
A lot of factors are at play. The big one is that new, big, high quality and accessible mines have been in short supply as many of the existing mines face dwindling ore quality. Exploration is key, but that’s taken a hit too.
The other major factor is demand and nearly everyone agrees that copper is in the driver’s seat. Quite literally when it comes to electric vehicles—a new report says there will be 323M electric cars on the roads by 2040—but also for battery storage, clean energy, electrification and a host of other technologies.
Australia looks set to benefit more than most. A recent McKinsey & Company survey showed that we experienced the lowest levels of disruption globally at mining operations due to COVID-19. That means demand & supply—at least from here—are doing well.
Cheers
John Fennell
