Looming Copper Shortage Risks Transition

Aaron Foyer
copper coil
Courtesy of Country and Town House

Like the first signs that there are concerning levels of foam coming out of the keg at a house party, the early warning signs are frothing that the copper party is also coming to an end.

What happened: Goldman Sachs just released a report forecasting the world will run out of visible copper inventories by the end of the year if China continues to grow as strongly as it has already this year. Global inventories have dropped to their lowest seasonal levels since 2008.

Stockpiles of copper if present trends continue
millions of tonnes of visible copper inventories

Copper inventory chart
Courtesy of the Financial Times

The shortfall comes down to demand picking up but supply struggling to come online.

Supply shortages: According to Bloomberg, copper production is expected to peak in 2024 as new mines struggle with approvals and future operations rely on poorer quality ores.

  • Copper is currently trading for $9000 per tonne and is the best performing industrial metal so far in 2023. Goldman Sachs expects the prices of the reddish lustery metal to set all-time high prices and could even hit $12,000.

This message is being echoed by copper executives. In a recent interview discussing copper, mining billionaire Robert Friedland told the Financial Times, “We are heading towards a train wreck”.

Why it’s important: Being an efficient conductor of electricity, copper is expected to play a key role in the energy transition, included in everything from electric vehicles to more complex grids.

  • High copper prices risk slowing down the adoption of smart grids and renewables, while a copper shortage would just stop things altogether.

Zoom out: The energy transition means mining. In Canada’s 2023 Budget released earlier this week, the country’s federal government announced it would take steps to accelerate the assessment and approval of new mining projects, recognizing the need for critical minerals like copper.

A possible recession this year would cool down the market for a bit, but the copper bulls are out regardless. Commodities researcher Jeffery Currie from Goldman Sachs proclaimed, “the forward outlook is extremely positive”.

Enjoy your future yacht, Jeffery.

+Additional infographic: The Volumes of Net-Zero Copper Demand