Macro commentary by eToro analyst for Romania, Bogdan Maioreanu: Copper prices rise due to high demand for “green energy” and munitions
Copper futures price increased almost 23% from the beginning of the year signalling a growth in consumption in the next period by sectors like power and electric vehicles but also defence. This offsets the projection of low activity and therefore low consumption in China. Copper has a very important industrial role as generation and transmission of electricity, electrical and electronic devices would not be possible without it.
Research from the International Copper Association is forecasting the global copper demand to grow from 28.3 million tonnes (Mt) in 2020 to 40.9Mt in 2040 with a Compound Annual Growth Rate (“CAGR”) of 1.85%. This growth is anticipated to come from traditional demand sectors as well as from new sectors driven by the green energy transition, such as growth in electric vehicle adoption, renewable energy integration, and grid infrastructure expansion and maintenance.
In an interview for CNBC, the billionaire investor Stanley Druckenmiller mentioned that copper is a simple story due to the fact that it needs 12 years, greenfield to produce it, and you’ve got consumption from EVs, the grid, data centres, but also from the production of munitions. As conflicts are heating up around the world supply is slow to catch up, which means that the supply-demand situation will be unbalanced for the next five or six years.
Goldman Sachs also raised its year-end copper price target to $12K/ton from $10K previously, anticipating the world’s mines will struggle to match growing demand. But there are also views that recent growth is based on speculation and expectations for the future and an expensive copper might discourage consumption and lead to a substitution by aluminium which is cheaper.
Copper is not scarce on planet Earth. Roughly 700 million metric tons of copper have been produced around the world and identified deposits contain an estimated 2.1 billion metric tons, which brings the total amount of discovered copper to 2.8 billion metric tons. This would fit into a cube measuring 680 metres on a side. The largest producer in the world is Chile with 5 million metric tons (MT) last year, followed by Peru and the Democratic Republic of Congo with over 2.5 million MT, China (1.7 million MT), USA (1.1 million MT) and Russia (910.000 MT).
Commodities, including metals like copper, gold or silver but also oil, cereal or livestock have been traded on exchanges for thousands of years, from rudimentary clay recordings in Sumer to the online exchanges of today. They are defined as goods of the same kind, standardised, which makes them simple to trade.
Individual investors, people who manage their own investments, are also interested in commodities, globally 28% of them having this asset class in their portfolios, according to the latest eToro Retail Investor Beat survey. The most interested are the Czechs (40%) followed by Poles (38%), Dutch (32%) and German (31%) investors. Romanian and American investors are close with 30% of them having commodities in their portfolios.
Bogdan Maioreanu, eToro analyst and markets commentator, has over 20 years of experience in financial services and investments and a strong background in journalism. He held different Corporate Banking management positions in both Raiffeisen Bank and OTP Bank, before moving to business consultancy roles working for IBM Romania among others. Bogdan is an Executive MBA from Asebuss and Washington University.
About eToro
eToro is a trading and investment platform that empowers people to grow their knowledge and wealth as part of a global community of investors. eToro was founded in 2007 with the vision of opening up the global markets so that everyone can trade and invest in a simple and transparent way. Today, eToro is a global community of more than 35 million registered users who share their investment strategies; and anyone can follow the approaches of those who have been the most successful. Due to the simplicity of the platform users can easily buy, hold and sell assets, monitor their portfolio in real time, and transact whenever they want.
15.05.2024 / Editor, Andreea Dragan
The diplomatic daily newspaper Nine O’Clock does not assume responsibility for the information received and published on the public website. The responsibility for the content lies solely with the issuer of the press release.
The diplomatic daily newspaper Nine O’Clock cannot be held accountable for false information transmitted by the recipients of the press releases/announcements.
The diplomatic daily newspaper Nine O’Clock reserves the right not to publish press releases that contain inappropriate expressions or accusations and violations of the rights of other individuals, guaranteed by the Constitution of Romania.
The content of the website www.nineoclock.ro is intended for public information. Copying, reproduction, recompilation, modification, as well as any form of content exploitation from this website are prohibited. The use of the Comments section signifies your agreement to abide by the terms and conditions regarding the publication of comments on www.nineoclock.ro.
