Trafigura: green copper supercycle driving prices to $15,000

The world’s biggest copper trader expects metal to hit $15,000 a tonne in the coming decade with demand from global decarbonisation

Even in the early stages of the covid-19 crisis, Trafigura Group was betting on the rebound that’s seen copper double over the past year to trade at more than $9,000 a tonne. Now the commodities giant sees the metal soaring past record highs above $10,000 as western economies pull out of the pandemic and the green revolution takes hold, head of copper trading Kostas Bintas said in an interview. So far, the rally has been fueled by virus-related supply disruptions and an unprecedented buying spree in China, consumer of half of the world’s copper. «We thought copper would come out of this Covid crisis stronger, and that’s exactly what’s happened,» Bintas said.

«What Covid has done is it has made the rest of the world a major factor in consumption growth, compared to the past, when copper was all about China». Other ardent copper bulls including Goldman Sachs Group Inc. Goldman expects copper to hit $10,500 a tonne within 12 months, while Citi sees it reaching $12,000 next year in its bull-case forecast. «You can’t move to a green economic environment and not have the copper price moving significantly higher,» Bintas said.

Demand surge

Trafigura sold 4.4 million tonnes of copper in 2020, extending its lead over Glencore Plc as the world’s top trader of the metal. Unlike Glencore, Trafigura has steered away from buying mines — it’s even looking to sell some it operates in Spain — and its profits are chiefly derived from activities in physical copper markets. During the pandemic, Trafigura has been polling customers across the industry, and the responses point to a rare surge in demand across Europe and the US, even before green-infrastructure stimulus packages take effect. Trafigura’s bullish call on copper will be welcomed by investors who’ve been piling into the market over the past year, as well as mining companies that are already enjoying bonanza profits.

Stocks depleted

Covid-19 has taken a heavy toll on the supply of scrap and mined copper, leading to a sharp drawdown in global inventories over the past year. With stockpiles approaching critical levels, any further disruptions could start to have an outsized impact on prices, according to Trafigura. «When you’re looking at a repricing of copper in a low-stock environment, what the market is saying is that only the people who really want the copper can have the copper, and they’re going to have to pay up for it,» Train said. Away from futures markets, Trafigura also expects some profound changes in the physical industry as the market moves deeper into deficit.

While that would put severe strain on smelters’ profitability, the tight supply of refined copper will spur a rally in shipping premiums paid by customers. «I’m not sure about the commodities supercycle, but I’m 100% sure about the copper supercycle,» Bintas said.

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Source: Daniel Brightmore | Mining Global

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